Income tax return: Non-resident individuals and high net worth individuals

Through the answer to question 3.1 of its Unified Concept 912 of July 19, 2018, which was later modified with Concept 915 of July 23, 2018, the Dian interprets the rule of Article 592 of the ET and indicates that natural persons who according to Articles 9 and 10 of the ET qualify as non-tax residents before the Government (and regardless of whether they are Colombian or foreign) must comply with two requirements to be exempted from filing annual income tax returns, namely:

1.that their gross income obtained only in Colombia does not exceed 1,400 UVT (corresponding to $44,603,000 in 2017).

2.That their gross equity held only in Colombia as of December 31 of the respective tax year does not exceed 4,500 UVT (equivalent to $143,366,000 in 2017).

However, the Dian also recognizes that numeral 2 of article 592 of the ET indicates that non-resident individuals are exempted from filing a tax return if all income obtained in Colombia was subject to the withholdings of articles 407 to 411 of the ET.

According to the above, the Dian would interpret that if, for example, a non-resident individual did not obtain any gross income in Colombia (and therefore did not suffer any of the withholdings of articles 407 to 411 of the ET), but such individual has in Colombia at the end of the year a fiscal gross equity of more than 4,500 UVT, such individual would be obliged to file a tax return.

What the Council of State has already said in the past

This doctrine is quite objectionable because in the past the Council of State, in the decision of April 27, 2008 for the file 16027, annulled to the Dian similar doctrines, in which it wanted to force to declare the non-resident legal and natural persons for the simple fact of having high gross assets in Colombia, in spite of not having obtained income in the national territory.

The Dian intended to force them to declare and have their income tax calculated on the presumptive income generated by the assets owned in Colombia. However, the Council of State clarified that owning assets in the country did not oblige them to declare, since the generating fact of the income tax is to obtain income in Colombia, and only when this occurs and the taxpayer is obliged to declare (since the income obtained in Colombia was not subject to the withholdings of articles 407 to 411 of the ET) the taxpayer would have to additionally calculate the presumptive income.

Abiding by that 2008 ruling the Dian had said in doctrines such as Concept 33112 of November 2015 and 22426 of August 2017 that non-residents were not obliged to declare by the simple fact of owning assets in Colombia (regardless of the amount of such assets). However, in the final part of its Unified Concept 912 of July 19, 2018 the Dian says that it revokes all those previous doctrines.

How to deal with the new position of the Dian?

According to all of the above, and if now the Dian wants to change its position and start demanding again income tax returns from non-resident individuals and legal entities that did not obtain income in Colombia but have in the country a gross equity higher than 4,500 UVT, we consider that there is a very simple solution for such phenomenon:

“non-resident individuals and legal entities are exempted from filing a tax return when the gross income obtained in Colombia has been subject to the withholdings of articles 407 to 411 of the ET.”

Indeed, as previously stated, paragraph 2 of article 592 of the ET indicates that non-resident individuals and legal entities are exempted from filing a tax return when the gross income obtained in Colombia has been subject to the withholdings of articles 407 to 411 of the ET.

Therefore, in order for a non-resident legal or natural person that has a high gross equity in Colombia but does not obtain income in the country to be exempted from filing income tax returns, what it must do is to spontaneously carry out during the fiscal year at least one operation that generates a small income in Colombia and ask the person who will make the payment to make the respective withholding at the source of articles 407 to 411 of the ET.

In this way, at the end of the fiscal year the taxpayer may be automatically exempted from filing an income tax return in which the Dian was going to force him to calculate his presumptive income tax generated by the assets obtained in Colombia.

Source: Actualícese