Income tax return: treatment of tax discounts

Tax discounts correspond to those amounts that can be subtracted from the amount assessed as income tax. It is considered that a tax discount is better than an exempt income or an income that does not constitute income or occasional gain because it directly affects the tax payable.

“Tax discounts are a mechanism used by the State to stimulate certain economic activities through the reduction of taxes”.

Tax discounts are a mechanism used by the State to stimulate certain economic activities through the reduction of taxes. Likewise, it refers to the part that the taxpayer subtracts directly from the income tax and that the State assumes for the granting of such benefit. The main elements to be taken into account with respect to this type of tax benefit are its limitations, non-transferability and concurrence.

Regarding the limits to tax discounts, it is necessary to note the provisions of articles 258 and 259 of the Tax Statute -ET-. In the first one, it is indicated that the deductions mentioned in articles 255 (investments in control and conservation of the environment), 256 (investments in technological development and innovation) and 257 (donations to RTE entities) of the ET, taken together, cannot exceed 25% of the income tax payable; while article 259 of the ET establishes that in no case such discounts may exceed the value of the basic income tax. Likewise, the determination of the tax after the respective discounts may not be less than 75% of that determined by the presumptive income system on the net worth before any tax discount.

The second characteristic is stipulated in Article 260 of the ET, which indicates that it is not possible to transfer the discounts obtained by an entity to its partners or other similar figures.

Finally, there is the concurrence defined in Article 23 of Law 383 of 1997, according to which the same economic fact cannot generate more than one tax benefit.

Tax discounts can be classified in three groups. In the first, there are those that avoid double taxation; in the second category are those contemplated in the law, which seek to encourage certain activities that the Government considers useful for the development of the country, or that are of social utility and, finally, there are those that promote the generation of employment.

In the case of discounts that avoid double taxation, it is necessary to address the provisions of Article 254 of the ET (before being amended by Article 81 of Law 1943 of 2018), which refers to the discount for taxes paid abroad. Said article -which will be in force until the taxable year 2018- contains the formula to be used to obtain the value to be treated as discount; it is also established that said benefit, as well as the excess of the deductible tax, may be imputed within the following four periods under certain conditions.

In the second group, i.e., in the category of discounts to encourage useful or socially useful activities, are the following:

– Taxdiscountfor VAT paid on the liquidation and importation of heavy machinery for basic industries, contemplated in Article 258-2 of the ET – in force until the taxable year 2018, before being repealed by Article 122 of Law 1943 of 2018.

– Article 249 of the ETindicatesthat the taxpayer may deduct in income a certain amount for investments in shares of agricultural companies.

–Certainamount of investments made in research, technological development or innovation may be treated as a tax deduction.

–According toarticle 257 of the ET, modified by article 105 of Law 1819 of 2016, donations to entities of the special regime and to those indicated in articles 22 and 23 of the ET may be treated as tax discount.

Finally, there are the discounts for employment generation, which include the rebate to parafiscal contributions and other payroll contributions when hiring employees under 28 years of age; displaced persons, in the process of reintegration or in condition of disability; heads of household of levels 1 and 2 of the Sisbén; women over 40 years of age and low-income persons.

Discount for donations

Article 257 of the ET, added by Article 105 of Law 1819 of 2016, establishes that donations made to entities of the special regime and to non-taxpaying entities indicated in Articles 22 and 23 of the same Statute (the latter in turn modified by Articles 144 and 145 of the aforementioned Law), may not be treated as a deduction, but as a tax discount, which will correspond to 25% of the value donated in the taxable year, taking into account the limits provided in Articles 258 and 259 of the ET. In addition, numeral 3 of article 258 of the ET, modified by article 106 of Law 1819 of 2016, establishes that if an excess in the discount referred to in article 257 of the Statute in question is generated, the same may be taken in the period following the period of the donation.

Taxpayers eligible for this benefit.

According to the answer provided by the Dian in numeral 2.2 of the Dian Unified Concept 0481 of April 27, 2018, individuals and legal entities taxpayers filing income tax returns may opt for this tax benefit, provided they comply with the requirements stipulated in the current regulations. Under such pronouncement, it is understood that the entities of article 23 of the ET, despite being declarants, could not treat the donations made as a tax discount, since they are non-taxpaying entities.

Source: Actualícese