AG 2021 income tax: its advance payment was reduced by Decree 375

Using the powers of Article 808 of the Tax Statute, the Government reduced to 0% the value of the advance payment of income tax for the taxable year 2021 for several taxpayers of the ordinary regime affected by the current economic crisis generated by the COVID-19 pandemic.

Making use of the powers of Article 808 of the Tax Statute -ET-, the Ministry of Finance issued on April 9, 2021 its Ordinary Decree 375 to amend Articles 1.6.1.1.13.2.11, 1.6.1.13.2.12 and 1.6.1.13.2.2.15 of DUT 1625 of 2016 (which currently have the expirations for the income or income and wealth tax return taxable year 2020 of legal entities and individuals) with the purpose of establishing that a significant number of taxpayers of the ordinary regime (between legal entities and individuals) may calculate with 0 % their advance payment to the income tax for the taxable year 2021.

This measure, which seeks to alleviate the financial burden only of those taxpayers of the ordinary regime who are engaged in the 31 economic activities expressly mentioned in Decree 375 of April 9, 2021 (the most affected with the economic crisis generated with the COVID-19 pandemic), is the same that had also been taken at the time during the year 2020 when filing the tax return for the taxable year 2019, issued at an inopportune moment, which authorized to reduce to 0 % or 25 % the advance payment of income for the year 2020).

Therefore, with the measure established in Decree 375 of April 9, 2021, the taxpayers mentioned therein may recalculate the final value of their income tax return for the taxable year 2020, which, in many cases, will no longer show “balances payable” but even “balances in favor”. Furthermore, if they have “balances payable”, and at the same time they qualify as micro and small companies (in accordance with the provisions of articles 2.2.1.13.2.2.2. and 2.2.1.13.2.3. of Decree 1074 of 2015 Sole Regulatory Decree of the Commerce, Industry and Tourism Sector), in such case Decree 374 of April 9, 2021 provided that they will have more time only to cancel the balance payable resulting from their income tax return for taxable year 2020 but not to comply with its presentation.

Note that taxpayers belonging to economic sectors other than those mentioned in Decree 375 of 2021, and who can demonstrate that their income for the first 6 months of the year 2021 was also reduced in the terms mentioned in article 809 ET, have the possibility to exhaust the procedure established in Circular 0044 of June 2009, requesting directly to the Dian that they also be granted to calculate in a reduced form the advance payment for the taxable year 2021.

“those taxpayers that were already liquidated during 2020 should not liquidate advance payment for the taxable year 2021.”

In addition, it should be remembered that those taxpayers who were already liquidated during 2020 should not liquidate advance payment for the taxable year 2021.

Other cases in which it should not be required to calculate advance payment of income tax for taxable year 2021.

Although this time the Government only authorized by decree that some taxpayers may calculate in a reduced form their advance payment of income tax for the taxable year 2021 (those who are considered the most affected by the economic crisis generated by the COVID-19 pandemic), it is clear that there are two other special cases in which the mandatory liquidation of such advance payment should not be required and it should rather be established that such advance payment should only be calculated on a voluntary basis.

The first of these cases, which we have already highlighted in previous editorials, is that of individuals (residents or non-residents) who remain in the ordinary income tax regime (because they cannot or do not want to transfer to the simple regime). In effect, and according to the rules of articles 592 to 594-3 of the ET, such taxpayers, although they have been obliged to file income tax returns for the taxable year 2020, may not be obliged to file returns for the taxable year 2021 (since each year is examined independently and it is possible that just in that following year they do meet all the requirements to be exempted from filing income tax returns again).

In addition, it is possible that they are not interested (or cannot) voluntarily file their ordinary income tax return for the taxable year 2021, since the voluntary return of Article 6 of the ET is only allowed to those who in that following year are still alive (that is, they are still “natural persons” and have not become “illiquid successions”), are also still classified as “residents” and additionally have been subject to withholdings at the source for income or occasional gain.
In a case like the previous one, it is clear that, in order not to lose the value of this “advance payment for taxable year 2021”, the only thing the taxpayer can do is to face the wear and tear of requesting the refund of this amount alleging that he/she made a payment of what is not due.

The second case is that of legal entities and individuals that until the end of the taxable year 2020 belonged to the ordinary income tax regime but just during the year 2021 decided to transfer to the simple regime.

In such a case, as we have already shown in a previous editorial, it is very easy to foresee that the high amounts for “advance payment of income tax for taxable year 2021” will end up causing a significant credit balance in your annual tax return for taxable year 2021 of the simple regime.
In addition, such balance in favor, as long as you decide to continue belonging to the simple regime, cannot be requested as a refund, but can only be used to subtract it within the bimonthly forms of the mandatory advance payment of the following year or within the annual SIMPLE return of the following year. The only way to request it as a refund is if you decide to return to the ordinary regime.

“in the midst of an economic crisis like the current one, it does not make sense to require taxpayers who move to SIMPLE during 2021 to have to settle “advance payments to the income tax of AG 2021”

Therefore, in the midst of an economic crisis like the current one, it does not make sense to require taxpayers who move to SIMPLE during 2021 by having to liquidate “advances to the income tax of AG 2021” in their income tax return taxable year 2020 of the ordinary regime.

Source: Actualize