Why Seek Tax Advisory Services in Colombia?

Colombia is considered one of the most attractive countries in South America to invest and to do business in. However, with an ever-changing tax landscape, it is essential for companies and business owners to engage with a trusted tax advisory services provider.

We outline the most important reasons why you must seek tax advisory services in Colombia when doing business in the country.

Colombian tax system is complex

Woman using her calculator to calculate her taxes. In her desk, there is a document about tax advisory services in Colombia.
In Colombia, registration processes at the national level are different from those at the municipal level.

As we explored in our article “How to file taxes as a corporation in Colombia”, companies operating in the country are expected to comply with tax regulations on a national, regional, and municipal level. This multilayer of corporate compliance requirements might be challenging for those who are not expert in the field.

For example, businesses operating in Colombia should be aware that registration processes at the national level are different from those at the municipal level. Most companies are assigned a National Tax ID number or RUT (Registro Único Tributario) during the national incorporation process.

However, they must register before the municipal tax authorities that supervised the territory where they operate. This is to request a municipal Tax ID or RIT (Registro de Información Tributaria). This requirement is commonly overlooked and may cause fines and penalties. To avoid this, you must count on a local tax advisory services provider.

Constantly changing tax regulations

Colombia is now famous in Latin America for its constant fiscal reforms. A total of 5 reforms have been made in the last 4 years. These changes can make complying with tax regulations difficult without specialized advice.

In addition, the country is preparing for a new tax reform that will be approved by the plenary session in the last quarter of 2020. Foreign executives must keep track of this reform to take advantage of the possible benefits.

These constant tax reforms create different effects of the law that apply to different tax periods. This means that taxpayers must be aware of this situation to avoid applying the wrong provisions.

Unwritten compliance conditions

Young man in his room using his computer to research about tax advisory services in Colombia.
Each municipality in Colombia can have its own tax landscape that taxpayers must comply with.

Due to Colombia’s culture, there may be unwritten rules to be met by taxpayers. These ‘unspoken conditions’ may not be clear for those operating in Colombia for the first time. Especially, when complying with regional and municipal tax regulations.

Likewise, municipal tax authorities in Colombia can issue local tax codes with compliance provisions in different jurisdictions. This means that each municipality can have its own tax landscape that taxpayers must comply with.

Risks management

The Colombian tax system structure punishes even well-intended taxpayers for possible mistakes made unknowingly or unaware of the applicable regulation. Having a trusted tax advisor by your side will help you manage and reduce penalties and avoid risks and exposition to tax authorities.

It is vital to stay in compliance with the withholding provisions according to Colombian law. These amounts carry a special condition that makes any infraction severely sanctioned with more taxes or penalties.

Optimization opportunities and tax benefits

Despite its complexities, Colombian tax environment offers companies a large set of opportunities and tax benefits, aiming to optimize businesses operation and revenue stream. Particularly, in sectors of national interest as the well-known ‘orange economy’, alternative energies, and environmental activities.

Companies sometimes overlook these tax benefits thinking that acquiring them can be too complicated. Nevertheless, engaging with a trusted tax advisory services provider can ease the process.  

Lower operative costs and comprehensive approach

A tax advisory services provider will constantly identify and analyze cost reduction opportunities. Overall helping to reduce operative costs. Furthermore, having access to tax advisory services will help you make better decisions, which will help reduce liabilities and long-term exposure.

Understand Colombian tax system with the help of Biz Latin Hub

Tax compliance in Colombia requires great attention to detail and to be up to date with the dispositions issued at the national, regional, and municipal level. At Biz Latin Hub, our team of tax advisory providers have broad experience in Colombian tax regulations and are ready to guide through the local tax environment.

With our full suite of market entry and back-office services, we are your single point of contact to reduce your overall tax load and ensure the good standing of your business before local authorities. Contact us now to learn more about ‘Why engage with an Accounting and Tax Advisory Provider in Colombia‘ and get personalized tax advisory services.

Learn more about our team and expert authors.

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