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It is possible that the proposed tax reform could modify the income tax rates for corporations and individuals. It also could strengthen enforcement by increasing the tax authorities' personnel and expanding the group of offenses that would be criminally prosecuted as tax evasion. Taxpayers should continue to follow any updates on the potential tax reform.

Although Colombia's Government has not officially proposed a tax reform bill, press releases and media appearances by Government officials have revealed some details on what the Government is planning to do.

The tax reform bill is expected to be proposed to Congress by the end of the fourth week of October.

The proposed tax reform is expected to include provisions that would:

• Reduce corporate income tax rates gradually from 37% to 30%
• Eliminate the tax on financial transactions and establish a withholding tax on those transactions
• Modify the thin capitalization rule by limiting it to loans between related companies with a debt-to-equity ratio of 2:1
• Implement BEPS Action 12 recommendations on aggressive tax planning
• Simplify the income tax determination process for individuals
• Modify the rates applicable to individuals according to the level of income
• Strengthen the National Tax Authority by increasing personnel from approximately 9,000 to 17,000, and adopting a platform with data analytics and electronic auditing capabilities
• Create a specialized tax group within the General Attorney's office to purge and speed up the prosecution of tax cases
• Expand the group of offenses that would be criminally prosecuted as tax evasion

In addition to the possible tax reform, the Tax Authority Director proposed the following modifications to the Electronic Invoicing regime:

• Extending the deadline from September 1, 2018 to January 1, 2019, for large taxpayers to start issuing and receiving e-invoices
• Suspending the general deadline to comply with the issuing and receiving of e-invoices originally scheduled for January 1, 2019, and determining the deadline based on the taxpayer's economic sector starting in Q2 of 2019
• Implementing a new software platform with an international standard that allows for additional functionalities, such as factoring capabilities

We will continue to keep you updated on the latest development and on any change in Colombian tax law.

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