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Red flags in the Colombia tax reform bill

  1. Personal income tax: according to international standards (OECD), tax residents in Colombia contribute very little. The reality is that there are two universes of natural persons: those who pay every penny of their taxes, such as employees, and those who totally or partially evade their taxes, as is the case of many independent professionals, merchants and individuals, dedicated to agricultural activities where informality is total. However, for those tax residents , the elimination of most of the exempt income and deductions (savings in pension funds, severance payments, housing interests, dependents, pensions, AFC accounts) is proposed, while increasing the tax rate, which implies increases in the taxation of middle-income individuals.
  2. Elimination of tax benefits for legal corporations: the need arises to eliminate tax benefits such as: young people under 28 years of age, SENA apprentices, people with disabilities, older adults not benefiting from an old-age pension, women over forty who are unemployed for more than a year.
  3. Value added tax in cloud services. Even though the government wants to promote the use of new technologies. In terms of VAT, we point out that for those who are  cloud services providers from abroad, despite the efforts made by the tax authority to identify that the services of Cloud computing provided from abroad, was considered a service excluded in VAT, will be taxed at the full rate of 19%.
  4. Other modifications. It is proposed the elimination of exempt income for the development of the Colombian countryside, for the sale of electricity generated based on renewable energies, those related to low-income housing and priority housing, for the use of new plantations forestry, by river transport service, by literary creations of the orange economy.
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