VAT: Latest tax measures in the midst of COVID-19

The three VAT-free days will take effect on June 19, July 3 and July 19 of this year.

Commercial premises that remain closed during the isolation will be excluded from VAT.

The consumption tax, which is 8% of the service, will be suspended.

On May 18, 2020, President Iván Duque, together with the director of the Dian, José Andrés Romero, made important announcements related to VAT and other taxes, as measures to boost trade and relieve the pockets of businessmen of some specific sectors.

Three days without VAT

The entry into force of the three days without VAT, approved through the Economic Growth Law, will take place as from June 19, July 3 and July 19, with the purpose of boosting consumer confidence and reactivating the economy.

The maximum amount of some of the eligible goods was extended, now products with a value of up to 2.8 million pesos will be exempted from VAT.

It should be recalled that the measure covered categories such as clothing, accessories, supplies, household appliances and sports equipment. Additionally, and according to the announcement made by the director of the Dian, bicycles and skateboards (mechanical and electric), cell phones, computers and communication equipment, as well as agricultural inputs will also be covered by the exemption.

One of the changes presented by the measure is that purchases will no longer be required to be made in person, since goods purchased through electronic platforms and homes have been included. Commercial establishments will also no longer be required to have electronic invoicing.

VAT exclusion for commercial premises

Commercial premises that remain closed during the isolation period will be excluded from the VAT charge of 19% on the rental value, until July 31, 2020.

Consumption tax

For the restaurant sector, the consumption tax, which is 8% on the service, will be suspended until December of this year. The measure will apply to restaurants, bars, cafeterias and pastry shops.

Costs of the measures

–Thedirector of the Dian stated that the cost of the above measures will be 1.2 billion pesos in tax collection that will not be made.

–Thethree days without VAT will cost 450,000 million pesos, counting the new products added to the list.

–As forthe consumption tax, the effect on tax collection will be 600,000 million pesos for the remainder of the year.

–Forthe non-payment of VAT on the rental of commercial premises, the cost of the measure, during the two months it is in effect, would be 160,000 million pesos in collections.

Seeking the reactivation of commerce

The director of the Dian has said that, with the measure of the three days without VAT, it is expected that consumption will be reactivated and the economy will move about 2.5 trillion pesos.

“In this situation of isolation and economic freezing, consumption is low and with this measure we hope to reach a normal consumption”, said Romero.

With the above, the national government seeks to stimulate household consumption to, in turn, reactivate the country’s economy, since in the month of April this indicator fell around 5%.

Source: Actualícese