The South American state of Colombia imposed Value Added Tax on foreign providers of digital or electronic services from 1 July 2018 – although implementation has been patchy. Colombia collects VAT on B2C transactions paid for via credit cards via Withholding VAT which is the responsibility of the payment processors. For other transactions, there is a simplified registration process for electronic services with DIAN (Dirección de Impuestos y Aduanas Nacionales), the national tax and customs authority. There is no VAT registration threshold. No Fiscal Representative if required. For B2B transactions, nil-rating reverse charge applies and the resident business should report the VAT.
The current VAT rate in Colombia is 19%. Follow VAT Calc’s global VAT and GST on digital services blog keeps a live update on how countries are imposing indirect taxes on non-resident providers and electronic marketplaces.
What digital services are liable to Colombian VAT?
Income from the following e-services is subject to VAT:
- Download or streaming music, video etc.
- Online or download gaming
- Online advertising services
- Other digital services
Determining if Colombian VAT is due
Providers should determine if their consumer is resident or ‘enjoyed’ the services in Colombia. They may rely of the following types of evidence:
- IP address of the device that accessed the service
- Billing or payment intermediary address
- Electronic marketplaces VAT obligations
Generally, it is the provider who must take responsibility for any VAT obligations, for example if there is no payment provider effecting a withholding VAT.
VAT registration and compliance
When the provider is responsible for the VAT collections, they must register immediately. There is no registration threshold. They must file to join the “Registro Único Tributario” (RUT) with DIAN.
Invoices may be issued in a foreign currency, but should be settled in pesos. Full VAT invoices are required on digital service sales to consumers. Electronic VAT returns are due on a bi-monthly basis.
Withholding VAT on digital services
Colombia has introduced Withholding VAT mechanism for payments made to non-resident providers of digital services. This applied for payment via credit cards, payment wallets and prepaid cards etc acting as the DIAN withholding agent. DIAN makes public a list of non-resident providers that are not VAT registered and from whom payment providers must therefore withhold VAT.
Central and South America VAT on digital services
|Comments (click for details)||Rate||Date||Threshold||Comments|
|Bahamas||10%||Jan 2015||BSD 100,000|
|Barbados||17.5%||Dec 2019||BBD 200,000|
|Costa Rica||13%||Oct 2020||Nil||Withholding VAT option|
|Dominican Republic||18%||2023?||Nil||Currently withholding VAT|
|El Salvador||13%||2022||-||Replace Withholding VAT|
|Paraguay||10%||Jan-21||Nil||Withholding VAT; 4.5% DST|
|Puerto Rico||10.5%||Jan 2020||$100,000; or 200 transactions||Marketplaces|
|Uruguay||22%||Jan 2018||Nil||VAT and Withholding Tax|