Colombia has confirmed the liability for foreign suppliers to register, collect, and remit VAT at 19% in Colombia - effective since January 1, 2019 - for sales to individuals.Many foreign suppliers of digital services may benefit from an exemption provision for digital content. In-country tax advice is needed to understand if a particular service can avail of the exemption. Foreign suppliers of digital services also need to consider possible implications of income tax obligations which may also apply.
Details of Colombia's digital tax rules
Here are the headline details of Colombia's digital tax rules.
- Threshold: Zero registration threshold for foreign suppliers of digital services.
- VAT returns: Every two months (bi-monthly returns) foreign suppliers of digital services will have to submit VAT returns via DIAN's online portal. DIAN has not yet announced the filing and payment deadlines. If a foreign supplier does not make any supplies to Colombian individuals during a specific two-month period, it will not be required to submit a VAT return.
- B2B supplies: Digital services supplied by foreign businesses to Colombian-based businesses will be subject to existing withholding and/or reverse charge rules. Foreign businesses supplying digital services only on a B2B basis are not required to register for VAT with Colombia's tax authority, Dirección de Impuestos y Aduanas Nacionales (DIAN).
- Payment: Non-residents can pay the VAT due in either US dollars to the National Treasury’s international bank account or in Colombian pesos in authorised banks located in Colombia.
Colombia VAT questions to be answered
An important point to note is that if a foreign supplier does not register, collect, and remit VAT to the Colombian tax authority (DIAN), the government can instruct the Colombian bank card issuers to withhold the tax that is due.
There are still questions about the consequences should a foreign supplier not register. Our understanding is that despite the Colombian authorities having the option to go to the card issuer to withhold future taxes, the foreign supplier will still be liable for the unpaid taxes and interest penalties.
We will, of course, update this blog as we receive more information.