The Simple Taxation Regime

January 18, 2021

The Simple Taxation Regime in Colombia was incorporated in its tax legislation by the National Government through the Financing Law as an optional taxation regime of annual periodicity, whose advance payments of Income Tax are made on a bimonthly basis in a given taxable year.

This article provides information on the main aspects of such a tax regime.

What is the purpose of the Simple Taxation Regime?

To simplify taxpayers’ compliance with their tax obligations, favoring their formalization.

Who can access the Simple Taxation Regime?

Both natural and legal persons may voluntarily access it, as long as they comply with the following:

  • They must be natural persons carrying out business activity or legal persons of a corporate nature, provided that their shareholders are natural persons.
  • The gross annual income of the previous taxable year is equal to or greater than 1,400 UVT (Unidad de Valor Tributario – Taxable Value Unit), but less than 80,000 UVT, considering for such purpose the ordinary and extraordinary income.
  • To be registered in the RUT (Registro Único Tributario – Single Tax Registry).
  • Having complied with their tax obligations within the established terms, as well as their obligations under the Integral Security System.

How to register?

You can check on the DIAN (Dirección de Impuestos y Aduanas Nacionales National Tax and Customs Directorate) website if a particular taxpayer can access the regime with your registered user.

Subsequently, you must enter in the control panel the option “Opt for the Simple Regime”, enabling a questionnaire to verify whether you meet the requirements.

Once you have completed the questionnaire, the system will confirm whether you can access the system based on what you have filled in, and you must confirm the change there of.

What are the benefits of this regime?

Taxpayers belonging to the simple taxation regime have the following benefits:

  • They are not subject to income tax.
  • Withholding tax does not apply.
  • The form of payment of the industry and commerce tax is simplified.
  • The payment of the complementary tax of notices and boards is simplified.
  • Small shops, micro-markets, and hairdressers do not have to comply with formal and substantial VAT obligations.

What is the Unified Tax under the Simple Taxation Regime?

By this regime the unified tax is created, which replaces the single tax, including the following simple taxes:

  • Income Tax.
  • Industry and Commerce Tax.
  • Sales tax, in case any of the activities indicated in article 908 of the Tax Statute are carried out.
  • Consumption tax, in case of beverage and food sales activities.

What is the Unified Tax rate?

The simple consolidated rate will depend on the annual gross income, as well as the business activity of each company:

  • Small shops, micro-markets, and hairdressers: Depending on the annual gross income, a rate of 2% to 11.6% may apply.
  • Commercial activities, mechanical-technical services, telecommunications activities, and others: The rate may range from 1.8% to 5.4%.
  • Consulting Services: The simple consolidated rate may range from 4.9% to 11.6%.
  • Food and beverage vending: The rate may range from 3.4% to 7%.

How do I pay the tax?

As indicated, taxpayers of the simple tax regime must make bimonthly advance payments through an electronic payment receipt. The amount of the advance payment will depend on the activity and the gross income.