Individuals and Legal Entities: The obligation to keep accounting records

The CTCP issues Concept 917 of 2017 addressing issues such as the obligation to keep accounting by individuals and legal entities, also if the obligation to invoice, their level of income or the regime to which they belong have any relation with such obligation.

Through Concept 917 of 2017 the CTCP resolved some concerns about the obligation to keep accounting; although different concepts have been issued on this topic, which we have analyzed in our portal, such as 622 of 2017, 783 of 2017, among others, it is relevant to review some of the answers issued by this body in order to analyze its orientations and clarify different situations. Below, we mention some of the issues addressed in the concept.

Obliged to keep accounting records

According to Article 19 of the Code of Commerce, one of the obligations of merchants is to keep regular accounting records of their business in accordance with the legal requirements, regardless of whether they act as natural or legal persons, and they must also keep the supporting documents of their business or activities. To define who does or does not act as a merchant, it is necessary to review articles 20 and 23 of the Code of Commerce.

Likewise, traders must hire the services of a professional accountant, since in Colombia the only professional authorized to attest to the financial information of natural or legal persons is the public accountant, certified through the corresponding professional card issued by the Central Board of Accountants (Junta Central de Contadores – JCC).

Regarding the financial information to be issued by those obliged to keep accounting, this must be subject to the guidelines of Law 1314 of 2009 regulated through DUR 2420 of 2015 and its respective amendments, both in terms of technical accounting standards, as well as information assurance standards. It should be noted that Article 2 of the aforementioned law states that these guidelines, in addition to being mandatory for legal and natural persons who are required to keep accounting records, are mandatory for persons who – without being required to do so – intend to assert their information as evidence.

Common regime and simplified regime

There is some doubt among taxpayers and professionals as to whether the obligation of individuals to keep accounting records has any implication on whether they belong to the common or simplified regime. In this regard, the CTCP mentions that the obligation to keep accounting records for individuals does not depend on the responsibilities inherent to the regime to which they belong, but on what was mentioned in previous paragraphs, regarding the activities performed or whether the individual requires or not to use its accounting records as a means of evidence.

“every natural person can be classified in the simplified regime or common regime, while legal entities, by the mere fact of being legal entities, belong to the common regime”.

In order to belong to the simplified regime, which is generally the regime to which most natural person taxpayers belong, the totality of the requirements established in article 499 of the ET, modified through article 195 of Law 1819 of 2016, must be complied with. It is worth remembering that any natural person can be classified in the simplified regime or common regime, while legal entities, by the mere fact of being legal entities, belong to the common regime.

From the aforementioned, and according to Concept 223 of 2015, it should be clarified that natural persons who do not exercise commercial activities, regardless of whether they belong to the simplified regime, are not obliged to keep accounting; in case they execute commercial activities or wish to keep their accounting as a means of proof, they must manage it according to the regulatory framework of the group in which they are classified, which is generally group 3.

What do invoicing and income have to do with the obligation to keep accounting records?

Although regarding invoicing the CTCP did not make any consideration, it is necessary to say that the obligation to keep accounting is not linked to the obligation to invoice, this can be verified by reviewing article 615 of the ET and articles 1.6.1.1.4.1 and 1.6.1.4.2 of DUT 1625 of 2016 in which those obliged and those not obliged to invoice are mentioned. These rules establish that the persons obliged to invoice are, in addition to traders, persons or entities that exercise liberal professions belonging to the common regime and persons or entities that sell goods resulting from agricultural or livestock activity.

“it can be concluded that not precisely the obligation to invoice is linked to the obligation to keep accounting.”

Now, taking into account that in the rules cited above we find cases of those obliged to invoice (such as merchants), who in turn have the obligation to keep accounting; there are other cases, such as persons exercising liberal professions who are not obliged to keep accounting. Therefore, it can be concluded that the obligation to invoice is not precisely linked to the obligation to keep accounting records.

The obligation to keep accounting must be established as mentioned in previous paragraphs; regarding income, it must be said that these are part of the parameters for the classification of a natural or legal person, in order to determine which regulatory framework to apply, either as group 1, 2 or 3. (Review additional parameters for classification in DUR 2420 of 2015, as amended by Decree 2496 of 2015).

Source: www.actualicese.com