VAT: Refund mechanism for the most vulnerable households

Households in poverty and extreme poverty levels will be identified through Sisbén.

A selection will be made by territorial entities, giving priority to departments and municipalities according to poverty concentration levels, total population and coverage of social programs.

Through a draft decree, the Ministry of Finance seeks to regulate the VAT refund mechanism for the neediest families in Colombia, contemplated in Law 2010 of 2019.

The idea is that the population with lower income obtains a return of what they pay in taxes when acquiring products and thus have resources to buy other basic necessities.

The great concern that has arisen around this rule is that it could become synonymous with corruption and fraud, in addition to the fact that it could get into the hands of those who do not need it or are not entitled to it.

Daniel Bulla, senior tax manager of BDO Colombia, said in an interview with Actualícese that the risk of refunds going to the wrong hands is a latent option, “but experience has told us that the Dian for some time now has been very meticulous in the refunds, being today a process marked by the complex”.

“The Sisbén registry will be taken as a basis for identifying households in poverty and extreme poverty levels”.

For him, the measure must be regulated in a way that combines efforts in terms of third party crossings, electronic invoicing, certifications and previous procedures that guarantee the transparency of the processes.

How will the persons who will receive the VAT refund be identified?

– A selectionwillbe made by territorial entities, giving priority to departments and municipalities according to poverty concentration levels, total population and coverage of social programs.

–TheSisbén registry will be used as the basis for identifying households in poverty and extreme poverty levels.

–TheNational Planning Department -DPN- may also establish other criteria for determining beneficiaries.

–Oncethe list is ready, the National Government will issue a resolution and establish the amount to be delivered, based on budget availability.

Transfer of the money

–Thetransfer system used with programs such as Familias en Acción would also be used for this refund.

–Inno case may a household that is a beneficiary of two assistance programs for the vulnerable population receive double recognition of VAT compensation.

–Ifin a household there are two beneficiaries of social programs and they are included in the list of persons to whom VAT will be refunded, it will be defined to which of the two members of the household the transfer will be made.

Validation of information

– Inaddition tothe cross-referencing of databases with which the list of beneficiaries will be established, there will be a validation scheme to verify whether the beneficiaries maintain the condition under which they obtained the VAT compensation.

–TheDPN will follow up on the refund process, which could have adjustments, if it is observed that it is necessary.

Although the Growth Law 2010 of 2019 only intended to transcribe the rules of the unenforceable Financing Law 1943 of 2018, it ended up modifying approximately 55 new rules.