Colombia publishes new guidance on the tax incentive for mega-investments

By Cindy Simbaqueva, transfer pricing manager, BaseFirma Colombia, Bogotá

On August 21, the Colombian tax authority published guidance aimed at clarifying the mega-investment regime.

The mega-investment regime is a Colombia tax incentive program available to companies that intend to generate direct jobs (minimum 400 jobs) and investments with a value equal to or greater than 30,000,000 UVT (approximately USD 289,880,597) within the national territory.  Industrial, commercial, or service activities will qualify for the Colombia tax incentive, except extractive activities.

Investments must be made in property, plant, and equipment that are productive or have the potential to be so. Taxpayers accepted into the regime receive special tax benefits for 20 years at reduced income tax rates and exemption in the payment of other taxes. 

New Decree 1157 regulates article 235-3 of Colombia’s tax statute, adding a new chapter to the Unique Regulatory Decree on Tax Matters and defining the key concepts of the tax statute for the application of the mega-investment regulations.

The guidance describes the technical concepts that qualify a new investment project as a mega-investments, addressing tax stability contracts, tax residence, and the investments required for the determination of mega-investment. Included are definitions of mega-investment, mega-investor, direct employment, and realization of the mega-investment.

Mega-investments must be developed within a maximum period of five taxable years that will start from the year in which the Ministry of Commerce, Industry, and Tourism notifies taxpayer about the technical concept that recognize the mega-investment.

The guidance also clarifies particularities of the regime, such as mega-investments in the free trade zone, the aeronautical sector, the hotel sector, and the acquisition of assets through financial leasing.

Finally, the guidance defines the procedure for the study, approval, and qualification of mega-investment projects and the signing of tax stability contracts.

— Cindy Simbaqueva is transfer pricing manager at BaseFirma Colombia, Bogotá.