VAT Guide for Businesses with Customers in Colombia

VAT Rates in Colombia

The standard VAT (”Impuesto sobre las ventas” (IVA)) rate in Colombia is 19%, with some services exempt, such as medical services, public finance management services, educational services, internet connectivity, and in some cases, energy, gas, and water utilities.

VAT Registration Thresholds in Colombia

• VAT registration threshold for domestic established sellers:
  • Businesses: No registration threshold. Businesses should register if they sell movable property, provide services, or import goods.
  • Individuals: 3,500 UVT in total gross income in the current or previous year.
• VAT registration threshold for non-resident suppliers of Digital Services: No registration threshold. Businesses should either register as a foreign supplier or opt to be subject to VAT withholding by credit card and financial institutions which are appointed as intermediaries to the extra-territorial regime. Tax authorities may also impose for some companies the need for registering as a foreign supplier.

Colombian VAT Number Format

Individuals and companies that are required to register should register with the Registro Único Tributario (RUT), which allows taxpayers to be identified, located, and classified. Once registered, taxpayers should receive an NIT (”Número de identificación Tributaria”). This is the Tax Identification Number in Colombia.

• Individuals:
  • Format: 9 digits. 8 digits from the ID + 1 validation digit
• Businesses:
  • Format: 10 digits. 9 digits assigned by the DIAN + 1 validation digit

Colombia VAT ID Validation

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VAT on Digital Services in Colombia

In July 2018, Colombia introduced special VAT rules for digital services provided by non-residents. These suppliers should either register, collect and remit VAT or request that VAT is withheld by credit cards or financial institutions. Tax Authorities may impose the registration for some companies, restricting the option of using financial institutions as intermediaries for VAT collection.

VAT Rate: 19% VAT applied to the sale of affected digital services

Taxable digital services in Colombia

A digital service should be taxable in Colombia if it is supplied by a non-resident and used or effectively exploited within the jurisdiction. The law indicates a broad approach in relation to digital services that should be in scope for the Colombian VAT, examples including:

• Audiovisual services (e.g. music, videos, movies and games);
• Broadcasting of events of any kind;
• Services provided through digital platform;
• Online advertising;
• Services of long-distance teaching and/or training;
• Use or exploitation of non-tangible rights;
• Other electronic or digital services that are destined and/or delivered to users located within Colombia.

Will your business need to pay VAT on digital services in Colombia in 2023?

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Marketplace & Platform Operator Rules in Colombia

Colombia does not have specific VAT rules for marketplaces or platform operators.

Invoice Requirements in Colombia

The following details should be required on invoices in Colombia:

• Document & general transaction information
  • Document clearly identified as a sales invoice (factura de venta)
  • A number corresponding to a consecutive numbering system for sales invoices
  • Date and time of issuance
  • The digital signature of the electronic biller
  • The Unique Electronic Invoice Code (Código Único de Factura Electrónica or ‘CUFE’).
  • QR Code
• Supplier information
  • Name or business name and NIT of the seller or of the person providing the service
• Customer information
  • Name or business name and NIT of the purchaser of the goods or services, together with the VAT paid
• Financial transaction information
  • Specific or generic description of the goods sold or services rendered
  • Total value of the transaction
  • Form and means of payment
• Additional information that may be required
  • Indication of the status of the withholder of the sales tax, if applicable
  • Name or company name and NIT of the invoice software manufacturer, the name of the software, and the name of the technology supplier, if any

E-Invoicing & Digital Reporting for Colombia

Colombia launched e-invoicing and e-reporting in 2016. Since then, it has become mandatory for an increasing number of taxpayers. From November 1, 2020, all taxpayers registered for VAT should issue an e-invoice for any type of transaction, except for:

• Foreign digital service providers.
• Financial institutions.
• Cooperatives.
• Taxpayers using the simplified scheme.
• Retailers of petroleum fuels and compressed natural gas.
• Entities providing urban or metropolitan public transport services to passengers.
• Those providing public toilet services.
• Natural persons in an employment relationship.
• Natural persons selling goods or providing services who do not reach the income threshold for inclusion in the simplified regime.

Learn more about E-Invoicing and Digital Reporting in Colombia

Governmental Body Responsible for E-Invoicing and Digital Reporting in Colombia

The Directorate of National Tax and Customs (DIAN) is the governmental body responsible for invoicing in Colombia.

VAT Payments and Returns in Colombia

Full VAT Returns

Colombia has simplified VAT returns, Form 325, for non-resident taxpayers supplying qualifying digital services.

Penalties in case of late filings or misdeclarations

In the case of the late filing of VAT returns and payments, the Colombia Tax Administration should enforce the following penalties:

Failing to timely file returns

• Penalty of 5% of the total tax due on the return for each month or part of a calendar month that the return is late, up to a maximum of 100% of the tax. If after a summons from the tax authorities, the penalty should increase to 10% per month or calendar fraction, up to a maximum of 200% of the tax.
• Penalty equal to 10% of their bank deposits or gross income, for the period to which the unfiled return relates, or 10% of the gross income reported in the most recent VAT return, whichever is greater.

Corrected returns

• Return corrected before summons to correct is issued, after the deadline for filing: Penalty equivalent to 10% of the greater value to be paid, or of the lower balance, between the correction and prior return
• Return corrected after the summons to correct is issued: Penalty of 20% of the higher amount payable, or of the lower balance, between the correction and prior return
• Arithmetic correct by the Tax Administration: Penalty equal to 30% of the increase or the decrease in the tax payable, where the Tax Administration makes a correction that results in an increase or decrease tax amount due

Penalties for fraud

• Penalty for fraudulent reduction of balance due or increase in credit, by an amount equal to or greater than Tax Value Unit (UVT) 4,100, should be a disqualification from business for one to five years.
• Fine between UVT 410 and 2,000.
• Same penalty should apply for fraudulent failure to submit a return, provided that the tax determined by the Tax Administration is equal to or greater than Tax Value Unit (UVT) 4,100.