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Tax treatment in the export of services

Tax treatment in the export of services

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On April 27 of this year, the “Legal Matters” website published information on the tax treatment of the export of services and related economic entities. Let’s see: 

1. Export of services and VAT exemption

According to article 481 E.T., services exempt from VAT are those “rendered in the country and used exclusively abroad by companies or persons with no business or activities in Colombia.” 

To have a related party in Colombia does not entail the loss of exemption. Moreover, the DIAN, in Official Letter 0542, warns that the economic link is not a determining factor affirming that the exemption assumption is not met because the beneficiary of the service has business or activities in Colombia.   

What is crucial is that the service is truly exported and that it is not understood to be used, directly or indirectly, in the country, by the same related party. 

3. Subsidiary in Colombia by foreign companies

The above is very important for foreign companies intending to incorporate a subsidiary in Colombia so the latter can provide services to its parent company. Thus, it will be evaluated that the service is rendered in the country by the subsidiary, that the contracting foreign parent company consumes it entirely abroad, or that the beneficiary of the service is abroad. 

No. Contracting between related parties does not entail the disregard of the VAT exemption, as long as the service rendered in the country is clearly not being used in the national territory, and the compliance with the formal requirements to apply the exemption is evidenced. 

Source: Asuntos Legales 27/04/22

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