VAT: How did it look for the simplified regime in 2018?

During 2018, the same criteria that applied in 2017 to belong to the simplified VAT regime will continue to apply, since there were no new tax reforms, special regulations, or rulings of the Constitutional Court that altered such criteria.

Individuals who during 2018 intend to continue exercising activities taxed with VAT, as well as those who plan to start such activities during 2018, may do so under the simplified VAT regime only if they meet all the eight requirements that are still required in Article 499 of the Tax Statute, which did not undergo any changes throughout 2017 (since there were no new tax reforms, special regulations or Constitutional Court rulings that altered such requirements).

Article 420 of the ET, the activities taxed with VAT involve the sale of movable and immovable property (real estate) that are not fixed assets; the sale or assignment of rights over intangibles associated with industrial property (for example: the sale of a trademark or a patent); the rendering of services (not including salaries or direct meeting fees) and regardless of whether they are rendered within Colombia or from abroad, but in favor of persons or companies with residence in Colombia; and the performance of games of luck and chance other than lotteries.

Below we highlight some of the particularities of each simplified VAT regime that must be taken into account during 2018.

Basic characteristics of the simplified VAT regime during 2018

During 2018 may continue to belong to the simplified VAT regime (liability 12 in the RUT), or may register for the first time in such regime (if only during 2018 they plan to start any activity that will make them liable for VAT), natural persons (not including illiquid successions) who develop activities taxed with VAT but who comply with all of the following requirements:

“The above would mean that they would start to be for the first time a VAT liable person in the common regime and therefore obliged to collect and declare VAT on a bimonthly basis during the rest of 2018.”

It should be clarified that, if during 2018 a natural person complies with all of the above 8 requirements and therefore can belong to the simplified VAT regime, but at some point during the same year fails to comply with any of the requirements 2, 3, 4, 6 or 8 above, in that case he/she must register in the common regime from the beginning of the following period. The above would mean that it would start to be for the first time a VAT responsible in the common regime and therefore obliged to collect and declare VAT on a bimonthly basis for the rest of 2018 (see paragraph of article 600 of the ET, modified with article 196 of Law 1819 of 2016, and paragraph 1 of article 24 of Decree 1794 of August 2013, which was compiled within article 1.6.1.1.6.3 of DUT 1625 of October 11, 2016).

On the other hand, those who were already in the common regime before the beginning of 2018, must keep in mind that the rule contained in article 505 of the ET remains intact, which indicates that they must remain in such regime for at least 3 years before being able to think about changing (or returning) to the simplified regime.

It should also be noted that article 17 of Decree 1794 of August 2013, compiled in article 1.3.1.15.4 of DUT 1625 of October 11, 2016, provided that natural persons who are producers of agricultural exempt goods mentioned in article 477 of the ET (modified with article 188 of Law 1819 of 2016 and which still include, for example, cattle farmers who produce and sell live animals of the bovine species), may belong to the simplified sales tax regime as long as they comply with all the necessary requirements set forth in article 499 of the ET; with the aforementioned, they are saved from not appearing as producers of exempt goods (liability 19 in the RUT) having to invoice, keep accounting records and always file bimonthly returns forming balances in favor with the VAT value of their costs and expenses. Therefore, if the producer of these exempt goods wants to form balances in favor and ask for a refund, he/she must in that case register as responsible for the common regime and comply with all the obligations that this entails.

Individual traders may continue to adhere to the Dian concept 15456 of February 2006 (which is still in force), which indicates that since they belong to the simplified VAT regime they would not be obliged to keep accounting records, at least for tax purposes. In addition, all those under the simplified VAT regime (both traders who do not keep accounts under the Dian’s doctrine and non-traders who are not obliged to keep accounts), would still be obliged to keep the Tax Book of Registration of Daily Operations, which is mentioned as an obligation still in force for those who belong to the simplified VAT regime. However, the Dian in Concept 46572 of December 1999, states that it cannot penalize those who do not keep the daily operations tax book or have it late.

On the other hand, although during 2018 those responsible for the simplified VAT regime will not be obliged to issue sales invoice or document equivalent to sales invoice, those who are their buyers and need to have a fiscal support for the purchases made to them, must continue to prepare the equivalent document referred to in Article 3 of Decree 522 of 2003 (compiled in Article 1.6.1.4.40 of DUT 1625 of October 11, 2016).

“although persons under the simplified VAT regime are exempted from the obligation to issue sales invoices, they may in any case issue them voluntarily with the fulfillment of all formal requirements, including that of the invoice numbering authorization.”

It should be noted that, although persons under the simplified VAT regime are exempted from the obligation to issue a sales invoice, they may in any case issue it on a voluntary basis with all the formal requirements fulfilled, including the invoice numbering authorization. In addition, if the individual is a typographer who prepares invoices, even if he/she belongs to the simplified regime, he/she is obliged to issue a sales invoice with all the requirements.

It is important to highlight that the sanction contained in numeral 2 of article 658-3 of the ET, which applies to those responsible for the simplified VAT and INC regime who do not comply with exhibiting in a visible place of their establishment the proof of their registration in the RUT, was modified with article 291 of Law 1819 of 2016. Therefore, as of January 2017 such sanction no longer consists in closing the establishment for 3 days, but in a fine in money equivalent to 10 UVT (about $332,000 during 2018).

Finally, it should be noted that article 307 of Law 1819 of 2016 amended article 771-5 of the ET and provided that as of 2018 the rule contained therein, which sets a limit to the costs and expenses that end up being covered with simple cash for tax acceptance, will start to be applied. Therefore, as from 2018 it will be necessary to monitor the form of payment to third parties, including those who belong to the simplified VAT regime, since all costs and expenses that are covered with simple cash will be accepted for tax purposes only up to a certain limit.

Registration, updating or cancellation in the RUT

In order for those responsible for the simplified VAT regime to comply with the process of registering for the first time in the RUT, updating it or even canceling it, they must take into account the instructions that in this regard are still contained in Decree 2460 of November 2013 (which was subsequently compiled between articles 1.6.1.1.2.2 through 1.6.1.2.24 of DUT 1625 of October 2016). In such process, it is no longer required to have to have a bank or savings account.

In addition, if you are a merchant who must first register in chamber of commerce, in that case you will have to follow the instructions of Dian Resolution 052 of June 21, 2016.

Source: Actualícese