Colombia’s tax authority clarifies SEP rules

Wednesday, 29 May 2024
Colombia’s Directorate of National Taxes and Customs (Dirección de Impuestos y Aduanas Nacionales, DIAN) has issued a ruling clarifying the significant economic presence (SEP) rules created by the country’s tax reform.
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As a result of the rules, certain non-residents selling goods or providing digital services may have SEP and so be subject to Colombian taxes. Such taxpayers pay either a 10 percent withholding tax or an annual 3 percent income tax calculated on gross income accrued in Colombia.

The ruling clarifies which activities are included in the scope of the SEP rules. According to DIAN, a non-resident person or non-domiciled entity will have be considered to have SEP in Colombia when it maintains “deliberate and systematic interaction(s) in the Colombian market, with clients and/or users located in the national territory” and if during the previous or current tax year it has a gross income of UVT31,300 or more from “transactions that involve the sale of goods with client(s) and/or user(s) located in the national territory.”

The import of non-digital goods may trigger SEP if it meets the above requirements and two of the location criteria set by the secondary legislation. These criteria include, among other things: client or user’s usual residence or domicile in Colombia; payments made through mechanisms located in Colombia; and client or user’s IP address located in Colombia.

DIAN’s ruling clarifies that digital services taxed for the purposes of SEP are solely those included in the list provided by tax law. Real estate leasing services, if performed by the direct owner of the real estate, are taxed under the income tax rules rather than the SEP rules.

Withholding tax will not be applied under the SEP regime if the non-resident taxpayer or entity has has stated and proved that it does not meet the criteria to be subject to Colombian SEP rules or if it has chosen to file income tax at the 3 percent rate. In the latter case, it is mandatory to register in the Unique Taxpayer Registry (Registro Único Tributario) and declare income and complementary taxes.

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