In May 2020, the Dirección de Impuestos y Aduanas Nacionales – DIAN (National Tax and Customs Directorate) issued Resolution 47 establishing Form 350 that the monthly Source Withholding Return will be made to comply with the tax obligations for the year 2020 and beyond.
The aforementioned resolution introduces modifications related to Decree-Law 568 of April of the same year regarding the Source Withholding of the solidarity tax established due to the sanitary emergency produced by the COVID-19.
Concerning this, the article briefly explains the return, the subjects required to it, and the means to perform it.
Purpose of Source Withholding
The facilitation and ensuring of income and complementary taxes levying and some cases of Value Added Tax (TAX) by the National Government.
What does the Resource Withholding consist of?
In the case of Income Tax, the following assumptions must be met:
- There must be a transaction in which there is a purchase of goods or services rendering, which according to law are subject to withholding.
- The person who is withheld must be considered as a taxpayer of the income tax.
- There must be a withholding agent, according to law, who pays for a purchase or service rendering to the withheld one.
With respect to the Value Added Tax, the withholding shall be performed in a percentage of the tax of payments or credits in account for purchases, which shall depend on the withholding rate to be applied.
Who are Withholding Agents?
According to Article 368 of the Tax Statute, the following are withholding agents:
- Public law entities.
- Investment Funds.
- Equity Funds.
- Retirement and Disability Pension Funds.
- Consortiums.
- Organized communities.
- Temporary unions.
- Natural persons.
- Legal persons.
- Successions.
- De facto companies.
What are the obligations of a Withholding Agent?
Withholding agents have obligations such as perform the withholding at the source indicated above, filing the respective returns for each period, depositing the amount withheld, and issuing the corresponding withholding certificates for each taxable year.
In the case of certificates, these may be issued for salaries, which is called certificate of income and withholdings, and other concepts different from this one.
In the latter case, the certificate must contain the taxable year, name or corporate name, TIN of the withholder, address of the withholding agent, data of the withheld person, concept, and amount thereof.
What items are subject to withholding?
According to article 383 of the Tax Statute, the subject ones to income security withholding are the following:
- Labor income with rates from 19% to 39%.
- Dividends and participations.
- Fees, commissions, services, and rentals paid or credited to account by legal entities and de facto companies.
- Financial movements, such as interests, discounts, benefits, profits, utilities and in general the related to capital yields.
- Fixed assets sales of individuals, with a fee of 1% on the value thereof .
How is the Withholding Return made?
The Source Withholding Return will be made by means of Form Nª350 that declares the income and complementary tax and withholdings on VAT and national stamp.
As for the withholdings made for VAT, the corresponding ones are declared for purchases and/or services to persons responsible for the simplified system, those made for services to non-domiciled persons, and those made by persons responsible for the common system.
The Return must have the digital signature of the declarant and the public accountant.
Do I incur a fine for filing the Return out of the deadline?
According to Article 641 of the Tax Statute, a penalty must be paid for each month or fraction of a calendar month of delay, equivalent to 5% of the total withholding subject to the tax return for the untimely filing thereof, without exceeding one hundred percent (100%) of the withholding.
