Income tax return for legal entities: micro and small companies

Decree 374 of April 9, 2021 approved that the filing of the tax return shall continue to be made between April 12 and May 7, 2021. However, the payment of the first installment will be due between June 9 and 23, 2021, and the payment of the second installment between November 9 and 23, 2021.

After having announced it since March 2, 2021 as a simple draft decree, the Ministry of Finance finally issued its Decree 374 of April 9, 2021 to establish that legal entities (of the ordinary or special regime) that qualify as micro and small enterprises (in accordance with the provisions of Articles 2.2.1.1.13.2.2.2. and 2.2.1.13.2.3. of Decree 1074 of 2015 Sole Regulatory Decree of the Commerce, Industry and Tourism Sector) will have more time to cancel the balance payable resulting from their income tax return for the taxable year 2020, but not to comply with its filing.

This type of measure, taken because of the economic crisis that many sectors have continued to face due to the COVID-19 pandemic, is the same as the one that had already been taken in the past (but later) with Decree 655 of May 13, 2020, which granted more deadlines for micro and small companies to cancel the balance payable of their income tax return for the taxable year 2019.

Therefore, and in accordance with the provisions of the new paragraph 4 added to article 1.6.1.1.13.2.12 of DUT 1625 of 2016 by means of Decree 374 of April 2021, the aforementioned legal entities must comply with the filing of the income tax return for taxable year 2020 (using virtually form 110 for taxable year 2020, to which more last minute adjustments were made with Resolution 032 of April 9, 2021 ) within the deadlines that still appear in the first paragraphs of the mentioned article and that had been fixed with Decree 1680 of December 2020 (i.e., the due date for filing the return will continue to be between April 12 and May 7, 2021).

But if such return yields “balance payable” instead of “balance in favor” (results that for some legal entities will be affected with the provisions of Decree 375 of April 9, 2021, which allows reducing to 0% the calculation of the advance payment of income tax for the year 2021) , the following must be taken into account: a. If the total balance to be paid is less than 41 UVT of the year 2021 ($1,489,000), it can be said that the term to pay the total of such balance would expire between June 9 and June 23, 2021 (that is, in the new dates fixed to make the payment of the first installment) since article 1.6.1.1.13.47 of DUT 1625 of 2016 (after being amended with Decree 1680 of December 2020) technically establishes that returns showing a balance due of less than 41 UVT cannot be paid by installments. b. If the total balance due is higher than 41 UVT, the taxpayer may pay it in up to two equal installments; the first one will be due between June 9 and June 23, 2021, and the second one between November 9 and November 23, 2021.

Timely payment to obtain the audit benefit.

In connection with the above, if any legal entity that qualifies as a micro and small business decides to avail itself of the provisions of Decree 374 of 2021 by paying its income tax for the taxable year 2020 as late as November 2021, it is important to note that those that comply with timely filing their 2020 taxable year income tax return (between April and May 2021) but do so by complying with all the requirements set forth in Article 689-2 of the ET (among them that their 2020 taxable year net income tax will be at least 20% higher compared to that of 2019 taxable year), may obtain the audit benefit mentioned in said regulation only if they also make sure to timely pay the balance resulting from their 2020 taxable year return.

(Note: remember that the most important tax innovations that must be taken into account to prepare and file the income tax returns and the simple regime taxable year 2020 of legal entities were analyzed by Dr. Diego Guevara in his new Multiformat Guide, prepared on March 19, 2021, entitled Novedades en la preparación y presentación de la declaración de renta y del régimen simple de personas jurídicas año gravable 2020, which includes access to 8 hours of pre-recorded online lectures, plus a virtual book of more than 100 pages, plus access to multiple downloadable and editable Excel templates).

In this regard, the version of the first two subsections of Article 123 of Law 2010 of 2019 689-2 of the ET, after being amended with , states:

Benefit of the audit. For the taxable periods 2020 and 2021, the private liquidation of the taxpayers of income tax and complementary taxes that increase their net income tax by at least a minimum percentage of thirty percent (30%), in relation to the net income tax of the immediately preceding year, shall become final if within the six (6) months following the date of its filing, no notice to correct or special requirement or special summons or provisional liquidation has been served, provided that the return is duly filed in a timely manner and the payment is made within the deadlines set by the National Government for such purpose.
If the increase of the net income tax is at least a minimum percentage of twenty percent (20%) in relation to the net income tax of the immediately preceding year, the income tax return shall become final if within the twelve (12) months following the date of its filing no notice to correct or special requirement or special summons or provisional liquidation has been served, provided that the return is duly filed in a timely manner and the payment is made within the deadlines set by the National Government for such purpose.”

As can be seen, the 6 or 12 months of the finality period starts to be counted from the date of “timely filing” of the return. However, one of the many requirements that must be met in order to obtain such finality is to make all payments within the deadlines set by the national government.

Source: Actualize