On June 5, 2019, the Ministry of Finance published Decree 961 as the regulation for the national consumption (excise) tax on real estate. Decree 961 regulates article 512-22 of the Colombian Tax Code and adds additional articles to Decree 1625 of 2016 (DUR).
The consumption tax was created by means of Law 1943 of 2018 (Financing Law) and applies to all alienations of new and used properties different from rural properties destined to agricultural activities, whose value exceeds 26,800 UVT (approximately COP 918,436,000 for 2019).
Decree 961 regulates the following issues:
- Contributions to national companies, mergers and spin-offs that meet neutrality requirements are not taxed.
- The contribution of real estate to trusts, fiduciary and funds listed on the stock market, including those made through fiduciary rights or units of participation in funds that are not listed on the stock market, as well as their restitution, do not cause the tax.
- The tax is applied to the entire value included in the public deed, assignment contract or equivalent document.
- Sellers will be responsible for the tax when they serve as an evasion instrument.
- The person liable to tax is the buyer, who will bear the tax but will also be able to recognize the tax as a higher cost of the asset.
- The tax will be collected through the withholding system. The withholding agents are (i) notaries; (ii) trustee administrators and (iii) fund managers. The withholding will be 100% of the tax.
- In the event that there is no withholding agent, the tax must be declared and paid by the buyer using form 490.
- Those who have carried out taxable operations in the period between the issuance of Law 1943 of 2018 and the entry into force of Decree 961, and have not paid the tax, will have 30 calendar days to pay it to the respective withholding agent.
- Those who have carried out taxable operations in the period between the issuance of Law 1943 of 2018 and the entry into force of Decree 961, and have paid the tax, must keep the receipt of payment, which is considered as sufficient proof of the presentation and payment of the tax.
Decree 961 is part of an important package of regulations for the Financing Law. Other regulations are expected to be issued shortly.
We will be glad to assist in connection with any questions that you may have related with the consumption tax or any other tax issue.