Meeting your VAT obligations in Colombia is crucial to avoiding penalties and reputational harm. Each country has its own VAT rules, and Colombia is no different – you must be aware of your specific requirements.
Compliance is Sovos’ concern. That’s why this overview is your ideal one-stop-shop for Colombian VAT compliance information. Be sure to bookmark the page and revisit it whenever you have a question.
| Periodic VAT return | Bi-monthly Within 25 days of the month following the month in which the payment corresponds |
| Quarterly Within 25 days of the month following the month in which the payment corresponds | |
| VAT rates | 19% 5% |
There are multiple mandates businesses operating in Colombia need to know.
Colombia does not have a threshold for VAT registration, meaning businesses must register for VAT if they sell eligible goods or services. They can register for VAT through Colombia’s DIAN website. To be legally seen as VAT–registered, they need to be registered with the national tax authority and have obtained an NIT number.
However, individuals must register for VAT once their total gross income exceeds 3,500 UVT in the previous or current year.
Colombia has stringent rules in place for invoicing. These include:
There are more factors at play with Colombia invoicing.
There are penalties in place for taxpayers who fail to meet their VAT obligations in Colombia, including:
There are also harsh repercussions for those who are found to have committed fraud related to their VAT returns, both financially and in terms of restrictions on their ability to do business.
The standard VAT rate in Colombia is 19%.
In Colombia, the following are exempt from VAT:
Yes, taxpayers can withhold VAT on the purchase of goods and services for domestic transactions – specifically 15% of the tax due.
VAT reclaims can only be requested by those responsible for the goods and services referred to in Article 481, by the producers of the exempt goods referred to in Article 477 of the Tax Code.
Builders who develop social interest housing will also be entitled to a refund or compensation of the Value Added Tax, VAT, paid on the acquisition of materials for the construction of the same.
A refund is also applicable for gold exporters who meet certain requirements.
Colombia’s tax authority allows tourists to recover 100% of VAT paid on taxed goods, as long as the purchases are covered by an electronic invoice equal to, or greater than, 3 Tax Value Units (UVT).
No, foreign organisations selling goods from or into Colombia are not required to appoint a fiscal representative.
In Colombia, a VAT ID number is a unique identifier that can be obtained from the government when registered for VAT in the country. It’s important to note that this number differs from a tax identification number.
It may seem heavy on resources to meet your business obligations in Colombia, but it does not have to be. Choosing Sovos as your compliance partner allows you to meet requirements while focusing on your core business.
Sovos’ solutions are matched only by our team of regulatory experts, helping you keep on top of tax both now and as regulations evolve over time.
The Colombian electronic invoicing system is reaching maturity level. Since its inception in 2018, Colombia has been steadily consolidating and expanding the mandate to make it more stable, reliable and comprehensive.
As a result of the enactment of the recent Resolution 000013/2021, the Colombian tax administration (DIAN), officially expanded the electronic invoicing mandate to also include payroll transactions. This expansion follows the pattern established by Mexico, Brazil and other countries that already expanded the electronic invoicing mandate to payroll transactions as well.
The Support Document for Electronic Payroll is known locally in Colombia as Documento Soporte de Nomina Electronica or also simply as Nomina Electronica. It is a new digital document intended to support and validate the payroll related costs and deductions of income tax and the VAT credits (if applicable) when businesses make payments resulting from labor, legal, and other similar types of relations (pensions).
In simple terms, labour cost transactions should be reported under this new digital system for them to be valid. This is whenever employers make payments for wages, salaries, reimbursements, pensions etc.
Employers paying wages under a labor relation, where payments are reported as expenses for income tax purposes or as deductible taxes for VAT, need to comply. However, there are important exceptions derived from that legal framework. For instance, public offices, non-for-profit entities or taxpayers under the simplified regime are not currently required to comply. Consequently, they do not need to use such payments for deductions of income tax or VAT.
The DIAN established an implementation schedule based on the number of employees the taxpayer has in the payroll. There are four stages or groups subject to the following deadlines:
| Group | Deadline to start the generation and remittance of the document | Number of employees | |
| From | Up to | ||
| 1 | 1 September 2021 | More than 250 employees101 | |
| 2 | 1 October 2021 | 101 | 250 |
| 3 | 1 November 2021 | 11 | 100 |
| 4 | 1 December 2021 | 1 | 10 |
As the Nomina Electronica is required to be reported monthly, the payments for each month should be reported by the 10th day of the next month as a result. The adjustment notes should be reported within the same deadline, once they have been made by the employer.
There are two basic types of reports that are parts of this mandate: the Support Document of the electronic payroll, and – when necessary – the Adjustment Note.
This electronic document contains the information supporting the payments made to employees as wages and other compensations, deductions and the difference between them made by the employer, as reported in the payroll. The employer must then generate and transmit the document to the DIAN using the XML format established in the technical documentation included in the regulation 000037/2021.
In this mandate there are no credit notes as we know them in the electronic invoice system of Colombia. However, when an employer needs to make corrections to the Support Document of Electronic Payroll reported to the DIAN, it can issue what we know as Adjustment Notes (or Notas de Ajuste) where the employer will be allowed to correct any value previously reported to the DIAN via the Nomina Electronica.
Employers must submit reports to the DIAN individualised for each beneficiary receiving payments from the employers. As a result, the report requires the provision of some mandatory information for the DIAN to validate. This includes the proper identification of the report itself, the reporting party, in addition to the employees, wages or other payments employees, date, numbering, software etc.
Another mandatory information element that is worth mentioning is the CUNE or Unique Code of Electronic Payroll Support Document. This is a unique identifier for each Electronic Payroll Support Document. It will allow exact identification of each report or the Adjustment Notes issued after it. However, there is some additional optional information that can be provided depending on the needs or convenience of the employer making the report.
From a technical perspective, neither the Support Document of the Electronic Payroll nor the Adjustment Notes are based on the UBL 2.1 structure used in Colombia for the electronic invoice. This is because the UBL standard does not include modules for payroll transactions or reports. Therefore, the DIAN has based its architecture in a different XML standard. Each report requires a digital signature. For that, the taxpayer can use the same digital certificate used for signing electronic invoices.
The current regulations do not require that the Nomina Electronica or the Adjustment Notes should be generated by a particular software solution or by a software provider authorized by the DIAN. Taxpayers have the option to generate the report using their own solution. That is a market solution or a solution that the DIAN will provide for small taxpayers. However, all reports should strictly follow the technical documentation issued by the DIAN within the Resolution 000037/2021. The remittance of those documents is electronic, using the webservices specified by the DIAN.
After making the transmission, the DIAN then validates the document. They will then report back the corresponding application response to the taxpayer, indicating its acceptance and validation. Only then, will the amounts reported in the payroll document are valid expenses for the deduction.
Non-compliance with electronic payroll in Colombia will be subject to the same fines and penalties established for not complying with the electronic invoicing mandate, as defined in Art. 652-1 of the Tax Code of Colombia (Estatuto Tributario). But the most important implication of non-compliance is that any payment not reported by the employer, will not be allowed as expenses for income tax or VAT purposes when applicable.
Speak to our experts about your tax requirements in Colombia and keep up to date with the changing VAT compliance landscape by downloading VAT Trends: Toward Continuous Transaction Controls.
