On May 25, 2019, Colombia´s President approved the National Development Plan 2018- 2022 “Pacto por Colombia, Pacto por la Equidad” (Law 955 of 2019), which includes some modifications to tax matters intended to create tax incentives for Research, Technology Development and Innovation projects and orange economy zones and to include a list of exempted and excluded goods from VAT.

Tax incentives

• Discount for investments made in Research, Technology Development and Innovation projects by micro (very small), small and medium enterprises. The entities may credit 50% of the value invested in the taxable year. Additionally, small enterprises that hire employees with Phd studies who render R&D activities may credit 50% of the salary paid to those employees. The projects are subject to an authorization given by National Tax Benefits Council (CNBT).
• The term to use the deduction for energy- generation investment projects was extended from five to fifteen years. The prior five (5) year term was included in Law 1715 of 2014. The entities might obtain a 50% income tax deduction on the value of their investments. The certificate to obtain the tax benefit will be provided by Unidad de Planeación Minera- UPME.
• The foreign audio-visual projects produced in Colombia and authorized by Colombia Film Promotion Committee – CFPC may use any of the following tax incentives: (i) cash reimbursement of 40% for film services rendered by Colombian entity and 20% for transport and hotel expenses; or  (ii) Certificate of Audio-Visual Investment which allows a 35% income tax deduction (up to) on the value of their investments. The Certificate could be transferred to other taxpayers; in this case, the income earned from this transaction is not taxable.
• The National Development Plan creates the Orange Economy Zones, geographical spaces determined by municipal entities to become economic and cultural centers. The entities and individuals that invest in these zones might receive negotiable instruments to pay up to 50% of the income tax.
• Individuals and companies that sign agreements with Coldeportes to sponsor the educational and living expenses of athletes will receive negotiable instruments to pay income tax. 

Exempt Income: From 2019, exempt income for entities are described in article 235-2 of the Tax Code, while for individuals, contributions to voluntary pension funds and AFC accounts, labor exempt income established in article 206 of the Tax Code and income for diplomatic officials are exempt from income tax.

Withholding income tax on distributions to local entities: The dividend tax on local distributions (7.5%) does not apply if the Colombian companies are part of an economic group or under a control situation which is registered before Chamber of Commerce.

Industry and Commerce Tax: From 2020, the industry and commerce tax must be filed in Single National Form designed by the General Directorate of Fiscal Support of Ministry of Finance. The withholding industry and commerce tax Form has to be modified according to the Single National Form.

Value Added Tax: The sale of gasoline and Diesel is subject to VAT at a rate of 5%; this rule will be implemented on the bi-month period following that in which the law is enforced.  The rice for human consumption was included as exempt from VAT. The following goods are excluded from VAT: (i) Inverter for energy system with solar panels (ii) solar panels; and (iii) charge controller for energy system with solar panels.

Tax Value Unit – UVT: The payments, penalties, fines, rates, stamps that were denominated in legal minimal monthly wages must be estimated in UVT; henceforth, the updates must be calculated based on UVT.