UVT taxable year 2020: It would be set at $35,579.

As the increase in the CPI for the period 2018 to 2019 has been defined, the value of the UVT for 2020 can already be estimated. In addition, according to Law 1955 of 2019, as from January 1 of next year, penalties and fines currently expressed in minimum wages must be restated in UVT.

The Tax Value Unit -UVT- that would govern during the taxable year 2020 would be set at $35,579. Such value is obtained by taking the value of the UVT that has governed in the current taxable year 2019 ($34,270) and increasing it by 3.82 %, percentage that corresponds to the increase that occurred in the average income consumer price index -IPC-, calculated by the Dane in the period October 1, 2018 to October 1, 2019 (see article 868 of the Tax Statute -ET- and pages 1 and 6 of the special bulletin published by the Dane on October 5, 2019.

The 3.82 % increase is also obtained from the variations for the average income CPI contained in a special Excel file published by the Dane at the beginning of October 2019 and performing the following calculations:

(Note: another way to calculate the total percentage variation between the period October 1, 2018 and October 1, 2019 is: value of the indicator in September 2019 (-) value of the indicator in September 2018 / value of the indicator in September 2018; which would be: ((103.31 – 99.44) /99.44) = 3.89 %. Anyway, and because of the exact amount of decimals that the Dane uses in its calculations, the official data that was published as increase in the CPI for the period from October 1, 2018 to October 1, 2019 was 3.82 %).

Minimum penalty during 2020 would be $356,000.

As will be recalled, the UVT is the standard unit of measurement in which all the figures that until that year were expressed in absolute values within the rules of the ET and its regulatory decrees have been expressed since December 2006.

Therefore, with the new value of the UVT for the year 2020, which we have calculated here at $35,579 (but which in any case must be certified by the Dian in a resolution to be issued between October and December 2019), some of the most important figures of the tax rules would be expressed in pesos as follows:

a. The value of the minimum penalty, established in Article 639 of the ET, would be set at $356,000 (10 UVT). In this regard, and in accordance with the second paragraph of Article 639 of the ET, only when calculating the late payment interest or the penalties of paragraphs 1 and 3 of Article 658-3 of the ET (for late registration in the RUT or for late updating of the same), such values may be below the minimum penalty. In addition, and according to what was indicated by the Dian in the answer to question no. 8 contained in its Concept 5981 of March 2017, when taxpayers avail themselves of the reduction of penalties of article 640 of the ET it will not be possible for such reduced penalties to remain below the minimum penalty.

b. The minimum amount to practice withholdings at source for income for the concept of services in general would be $142,000 (4 UVT); and for the concept of purchases it will be $961.000 (27 UVT) (see article 6 Decree 2775 of 1983 and article 5 of Decree 1512 of 1985, compiled in articles 1.2.4.4.4.1 and 1.2.4.9.1, respectively, of the Single Tax Decree 1625 of October 11, 2016; see also items 77 and 78 in the table of article 868-1 of the ET).

c. If the monthly payments purged do not exceed $3,095,000 (87 UVT) in the withholding at source table for salaried employees contained in article 383 of the ET (which was modified with article 34 of Law 1943 of 2018, and which also applies to those resident individuals who receive earned income for fees, commissions, services or emoluments without having hired two or more other individuals; see items 1.2.1.1.20.3 and 1.2.4.1.6 of DUT 1625 of October 2016, after being amended with Decree 2250 of December 29, 2017), the withholding shall be zero pesos. In any case, it will become necessary to know the decision that the Constitutional Court will make in mid-October 2019 regarding whether Law 1943 of 2018 is executory or non-executory. In the latter case, during 2020 the table of Article 383 of the ET that existed until December 2018 would have to be used, in which only taxable values exceeding 95 UVT (which in 2020 would be $3,380,000) would generate withholding at source.

d. Individuals who intend to belong to the universe of those not liable for VAT during 2020 (former simplified VAT regime) may not have received in 2019 gross income from VAT taxable transactions that have been above $119,945,000 (in this case the calculation is obtained from: UVT of 2019 x 3,500 UVT, that is, $34,270 x 3,500 UVT; But, in addition, during 2020 they may not enter into contracts for sale of goods or provision of taxable services that exceed $124,527,000 (3,500 UVT x $35,579), and their bank consignments or financial investments made during 2020 may not exceed that same value either.

e. In accordance with the provisions of paragraph 2 of Article 771-5 of the ET, the costs and expenses that are intended to be deductible in the income tax return, and that accumulated in the head of the same third party throughout the tax year are higher than 100 UVT ($3,558,000), must be covered only by financial channels (transfer, checks, debit or credit cards, etc.), otherwise they will not be accepted in the income tax return, and the VAT of such costs or expenses would not be accepted as deductible in the income tax returns.

The value of the tax readjustment for the taxable year 2019 would also be 3.82 %.

On the other hand, it is important to mention that this same increase suffered by the CPI of average income in the period between October 1, 2018 and October 1, 2019 (3.82 %) would be the same percentage that the Government, by decree, shall set as tax readjustment for the current taxable year 2019.

In any case, it is important to warn that the current Minister of Finance, Alberto Carrasquilla, who took office in August 2018 did not want to correctly apply this rule at the close of 2018, and for that reason, with Decree 2391 of December 24, 2018, wrongly set at 4.07 % the tax readjustment for the taxable year 2018 (the same percentage that could only be used as tax readjustment for the taxable year 2017, as it corresponded to the increase in consumer prices from October 1, 2016 to October 1, 2017; see Decree 2169 of December 2017. The true value of the tax readjustment for the taxable year 2018 should have been 3.36 %, which corresponded to the increase in the CPI between October 1, 2017 and October 1, 2018, and which was the percentage with which the UVT for 2019 was obtained). Therefore, it is not known if when setting the tax readjustment for the current taxable year 2019 the minister will again make the same mistake that was made when setting the tax readjustment for the taxable year 2018.

The mentioned tax readjustment is an increase that all taxpayers obliged to file income tax returns (both obliged and not obliged to keep accounting) can optionally make to the tax cost of their fixed assets owned at the beginning of the year or those acquired during the tax year. With this they increase the tax cost of their fixed assets and avoid having a high profit on sale the day they get to dispose of them.

“for the taxable year 2019 taxpayers may apply a 3.82 % increase to the tax cost of all their fixed assets owned since December 2018 and that they continue to own until December 31, 2019.”

Consequently, for the taxable year 2019 taxpayers will be able to apply a 3.82 % increase to the tax cost of all their fixed assets owned since December 2018 and that they continue to own until December 31, 2019. If they were to sell them during 2019, or if they are new fixed assets acquired during the current year and that they keep until December 31, in that case they would apply the mentioned readjustment on a proportional basis.

Source: Actualize