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The Resolution imposes new reporting and filing requirements on foreign service providers. As a result of the Resolution, foreign service providers may be required to collect VAT on services rendered to Colombian residents. These foreign service providers should ensure they comply with the Resolution.

On October 19, 2018, the Colombian Tax Authority (DIAN) issued Resolution No. 51, which provides value-added tax (VAT) rules applicable to foreign service providers (FSPs) rendering services to Colombian customers. This regulation does not apply when the Colombian recipient must collect the VAT via the "reverse charge mechanism." (Generally, Colombian companies collect VAT via the "reverse charge mechanism" on payments to nonresidents.) Resolution No. 51 follows the draft Resolution issued in June of 2018 and Decree 1415 of 2018, which provided the rules regarding the registration with the Colombian tax registry for FSPs (see Tax Alert 2018-1654).            

VAT registration

Resolution No. 51 establishes that FSPs must register in the Colombian tax registry as the VAT responsible party, request a Colombian Tax ID and request a digital signature mechanism. The FSPs may register through the "requests/PQSR" section on the DIAN's web page, or through any other electronic mechanism that could be implemented by the DIAN.

VAT return

The Resolution requires FSPs to file the VAT return every two months on the dates set by the Colombian Government. If an FSP does not have any transactions with Colombian recipients within the relevant period, the FSP will not be required to file the VAT return.

The DIAN is expected to issue a special VAT return form for FSPs to file. This form will be available both in Spanish and English. Such form has not been released yet.

When transactions are carried out in a currency other than the Colombian peso (COP), the FSPs should add the income and VAT for the two-month period in US dollars and convert it into COPs at the official exchange rate on the date of the VAT return filing.

The Resolution allows FSPs to pay the VAT indicated on the VAT return through a foreign bank account that will be set up by the Colombian Government for these purposes.

Documentation

The Resolution allows FSPs to use their current invoices and documents for the transactions conducted with Colombian customers. This provision will apply until the Government issues regulations on the Colombian invoice or equivalent document FSPs must issue.

The FSPs must inform Colombian recipients of the amount of Colombian VAT levied on the services rendered when the services are offered or at the time the purchase order or payment is confirmed.

FSPs obliged to file a VAT return must keep the supporting documentation for the transactions until the statute of limitations has elapsed. In addition, FSPs must keep a record / ledger of sales and purchases for the services rendered to Colombian recipients.

When the service recipient is the responsible party for collecting the VAT via the "reverse charge mechanism," the FSP should receive a copy of the service recipient's Colombian tax registration and not charge VAT on the service provided to the Colombian recipient.

Payments for services

To determine whether the service should be deemed as rendered in Colombia, FSPs must consider whether the payment comes from a debit/credit card issued in Colombia, or from a Colombian bank account. Additionally, the FSPs must require that payments for services be made: (1) via a credit or debit card issued in Colombia, or (2) from a Colombian bank account, when: i) the IP address of the device used by the service recipient refers to a location in Colombia; or ii) the Mobile Country Code (MMC) of the mobile service used by the client refers to a location in Colombia. The Resolution establishes a six-month period for the FSPs to request that their clients use these "Colombian payment methods."

FSP election to be subject to VAT "withholding tax system"/ "reverse charge mechanism"

The Resolution allows FSPs to elect to be subject to the VAT "withholding tax system" / "reverse charge mechanism." Until such withholding tax system is established for these types of transactions, and the VAT withholding agents start to collect the VAT, however, the FSPs will be required to collect the VAT and file VAT returns from the period in which they started to provide services subject to VAT to Colombian recipients.

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