Considerations of the income tax return in Colombia

Considerations of the income tax return in Colombia

The deadline to file income tax returns for companies in Colombia is approaching and with it the support of accountants for this important compliance, it is worth mentioning that this process is carried out through an adequate tax planning during the entire accounting period to be presented, in which some of the important points that have an impact on raising the income tax to be paid should be evaluated and in turn mitigated.

Some businessmen ask why the financial information differs from the tax information reflected in the income tax and this is because the tax administration recognizes expenses under certain established conditions or limits some operations performed by the company, let's see some examples of these differences:

Limitation of expenses not supported Electronically:

By electronic invoice: For the year 2021 there is a limitation for those expenses that must be supported with an invoice that must already be electronic, so if in the year 2021 purchases were made with stub invoices the maximum amount would be 20% which will decrease to 10% for the year 2022.

For electronic payroll: The DIAN may reject payroll expenses that were not supported electronically, recently employers who had less than 10 workers were given a deadline to make the transmission of the December payroll.

Loans between related parties: Interest expenses between related companies (thin capitalization) are limited to the result of multiplying by 3 the average amount with respect to the liquid capital of the previous year.

Limitation for cash payments: The control of the operations carried out through the financial system has become for the State an important tool for the fight against evasion, the reason for which it regulates and limits the cash payments accepted for tax purposes, in article 771-5 it says that as from the year 2021 it will be possible to have tax recognition as costs, deductions, liabilities or deductible taxes on the lower value between 40% of what was paid, without exceeding 40,000 UVT and 35% of the total of costs and deductions.}

Colombian legislation provides multiple tax benefits that encourage investment and reduce the amount to be paid in the income tax return, access to them is subject to prior compliance with certain requirements so that proper planning and the support of professional experts becomes essential when requesting and maintaining them.