Decree 874 regulated tax normalization.

The rule regulates articles 42 to 49 of Law 1943 of 2018, currently sued before the Constitutional Court, which allow making a new normalization and/or tax reorganization with the assets and/or liabilities of the taxpayers of the ordinary regime before September 25, 2019.

Last May 20, 2019, the Ministry of Finance issued its Decree 874, by means of which articles 1.5.7.1 through 1.5.7.6 to DUT 1625 of October 2016, with the purpose of regulating some of the measures contained in the articles between 42 and 49 of Law 1943 of 2018, currently sued before the Constitutional Court, which allow to perform no later than September 25, 2019 a new normalization and/or tax reorganization with the omitted assets and/or non-existent tax liabilities as of January 1, 2019 of the taxpayers of the ordinary regime. Incidentally, it is clear that this normalization will not be of interest to taxpayers who plan to transfer to the new simple regime.

Through article 1.5.7.1, added to DUT 1625 of 2016, and making reference first to article 263 of the ET, it was established which taxpayer should have included in its tax equity the assets contributed to foreign private interest foundations, foreign trusts or any other foreign trust business.

In this regard, and following the instructions of Article 44 of Law 1943 of 2018, it was said that such rights should be included in the tax estate of the founder when the beneficiaries of the trust business were conditioned or did not have control over its assets. But this is something that is justly sued before the Constitutional Court with file D-13168 of March 2019, since when a founder makes irrevocable contributions of assets to a trust abroad it is logical that those assets do not continue to belong to him, and therefore he does not have to continue including them in his tax estate.

In Article 1.5.7.2, added to DUT 1625 of 2015, and also covered by what is stated in Article 44 of Law 1943 of 2018, it was indicated what will happen to those companies to which the assets of the contributors are transferred for a value much lower than their true tax cost. The rule then establishes that the higher value of those assets will be considered as an omitted asset.

Article 1.5.7.3, added to DUT 1625 of 2016, established what will happen with those omitted assets abroad that are normalized for their market value and that are repatriated to Colombia with a vocation of permanence before December 31, 2019. In those cases the normalization tax (13 %) will be calculated only on 50 % of such assets, but for this the requirements established in the rule must be met, which indicates that “it is understood that the assets omitted from abroad are repatriated to Colombia when investments are made in the country of any nature”.

“if any taxpayer settles the tax normalization tax only on 50% of the assets that he was going to repatriate to Colombia and then fails to comply with such repatriation, then he must correct his return.”

Article 1.5.7.4, added to DUT 1625 of 2016, indicates that if any taxpayer settles the tax normalization tax only on 50% of the goods that he was going to repatriate to Colombia and then fails to comply with such repatriation, then he must correct his declaration of the complementary normalization tax and for this he will need to request the Dian to allow him to do so. This would be the only case in which voluntary corrections to such declarations would be allowed, since Article 49 of Law 1943 of 2018 implied that it would not be possible after September 25, 2019.

Finally, article 1.5.7.5, added to DUT 1625 of 2016, regulates what will happen to taxpayers who wish to voluntarily declare a higher tax value to the assets held in their estate as of December 31, 2018 (with which they could reduce the future profit on sale thereof).

This type of tax write-off, contemplated in Article 48 of Law 1943 of 2018, will only be allowed for assets that have been held as fixed assets for more than two years (those that are not disposed of in the ordinary course of business). In addition, if it is a depreciable asset, then the higher tax value declared may only be depreciated in the remaining useful life, but without being able to increase the annual depreciation rate.

The Dian still has not published the final form 445 with which the normalizations and/or write-offs of 2019 will be made.

In relation to this issue it is important to highlight that the Dian still has not issued the final resolution with which the new form 445 would be prescribed for the normalizations and/or write-offs of 2019. The only thing that has been done so far is to publish, on April 12, 2019, the draft resolution.

Source: Update