VAT: Activities exempted and excluded for the rest of 2020

With Legislative Decree 789 of June 4, 2020, the Ministry of Finance adopted transitory tax measures on the exclusion and exemption of VAT for certain economic activities.

The above, in order to promote the Colombian economic reactivation after the crisis generated by COVID-19.

As a consequence of the current economic crisis faced by the country due to the spread of COVID-19, the Ministry of Finance issued Legislative Decree 789 of June 4, 2020, through which it adopted transitory measures regarding the exclusion and exemption of VAT for the economic sectors that have been most affected by the pandemic. The above, in order to promote the Colombian economic reactivation and thus facilitate the protection of employment.

Such measures are focused on the reactivation of sectors such as hotels and tourism, public land and cargo transportation, as well as commercial establishments that carry out activities of food and beverage vending in restaurants, cafeterias, self-service stores, ice cream shops, fruit shops, pastry shops and bakeries, developed through franchise contracts.

Now, next, we will analyze what these measures consist of. Let’s see:

VAT exclusion in franchise agreements

Article 2 of Legislative Decree 789 of 2020 states that commercial establishments engaged in the sale of food and beverages prepared in restaurants, cafeterias, self-service stores, ice cream parlors, greengrocers, pastry shops and bakeries, for consumption on site, to be taken by the buyer or home deliveries, developed through franchise agreements, are excluded from VAT until December 31, 2020.

VAT exemption on the importation of motor vehicles.

“Until December 31, 2021, the importation of complete public passenger transport motor vehicles and the chassis with engine and bodywork acquired individually shall be exempt from VAT”

Until December 31, 2021, the import of complete public passenger transport motor vehicles and the chassis with engine and bodywork acquired individually to form a complete new public passenger transport motor vehicle will be exempt from VAT.

As well as the importation of complete public or private service motor vehicles for cargo transportation and the chassis with engine and bodywork acquired individually to make up a new vehicle for cargo transportation of more than 10.5 tons of gross vehicle weight.

However, in order to qualify for this benefit, the following requirements must be met:

–Thevehicle subject to import must have as beneficiary a small transporter owner of up to two public passenger transport vehicles, and which has been the object of replacement of one or two own public transport vehicles.

–Theimported vehicle must have as beneficiary a small transporter owner of up to two cargo transport vehicles, and that has been the object of replacement of one or two of its own cargo transport vehicles.

–Thecertificate of compliance with the requirement of public passenger transportation -Creipasajeros- and/or the certificate of compliance with the requirements of public or private cargo transportation -Creicarga- must be duly issued by the competent entity in accordance with the procedure established in the regulations in force.

–Theimport declaration must include the certificate number (Creipasajeros and/or Creicarga) and the support that accredits the benefit of the exemption. Likewise, the name and identification of the beneficiary transporter must be stated, when this is not the direct importer.

It is necessary to highlight that the importation of the vehicle may be made directly by the small transporter, by the concessionaire, wholesale distributor or the financial entity, as long as the above requirements are met.

VAT exclusion in the provision of hotel and tourism services.

“are excluded from VAT, until December 31, 2020, hotel and tourism services rendered in the national territory.”

In relation to the provisions of Article 4 of the Legislative Decree in question, hotel and tourism services rendered in the national territory are excluded from VAT until December 31, 2020.

However, the paragraph of the article in question states that as from January 1, 2021, the VAT exclusion will only be applicable to the special customs regime zones of Urabá, Tumaco and Guapi, Puerto Carreño, La primavera and Cumaribo and Maicao, Uribia and Manaure, described in numeral 26 of article 476 of the Tax Statute -ET-.

Exclusion of VAT on raw materials

While the state of sanitary emergency lasts, chemical raw materials destined to the production of medicines related to provitamins and vitamins, natural or produced by synthesis; antibiotics; glands and other organs for opotherapeutic uses, dried, even pulverized; human blood; animal blood prepared for therapeutic, prophylactic or diagnostic uses, of tariff headings 29.36, 29.41, 30.01, 30.02, 30.03, 30.04 and 30.06 will be excluded from VAT.

VAT of 5% for airline tickets

Recall that, through Article 13 of Decree Law 575 of 2020, the national government added a numeral to Article 468-1 of the ET to establish that all air tickets will be taxed at the special VAT rate of 5% until December 31, 2021.

Source: Actualícese