“A clear conclusion of the reform analyzed in El Botalón is that the criterion of double taxation that originated from the payment of dividends to shareholders from the profits of companies that had already been affected in their taxes is over. However, it became clear that the shareholder’s utility comes from the same source, it is different from that of the same company, so this concept no longer has a place”.
DAILY OF THE HUILA, BOTALÓN
In the gathering last Tuesday, the exercise of analysis of the Tax Reform of the current government was concluded. The guest, Dr. José Hilario Araque, complemented his analysis of the first part dedicated mainly to the treatment given by the reform to legal persons who, despite what was mentioned eight days ago about the priority of the reform to natural persons, also see their income tax rate has been increased significantly (rises to 35%) and their exemptions have been reduced.
Also, the role of free zones as taxpayers is clear; something novel due to the very characteristic of this figure that was always seen outside the national scheme even if they were in Colombian territory (hence its name).
Objective of the reform in terms of Collection
The Tax reform for equality and Social Justice plans to collect 19.7 billion in 2023 and in the following three years 20 billion on average each year, that is, it would collect 80 billion in these four years. According to the Minister of Health, Carolina Corcho, a third of this tax collection in 2023 will be for her sector and the remaining resources will be allocated to other government social programs such as the fight against hunger and poverty, education, protection of the environment, the energy transition, productive development and the sustainability of public finances.
The case of Free Zones
Legal persons located in free zones that do not export will have to pay 35% tax, the same as any company. If they export, they will continue to pay 20%. Free zones were made to promote exports by reducing import costs, especially VAT.
But successive changes in its regulations ended up generating tax treatments that have made it lose its initial objective. The South Colombian Free Trade Zone is currently deciding to eliminate its figure from its activities, going on to consider it as an Industrial Park, hindering, in the future, the fulfillment of Huila’s export goals that, truth be told, have not depended, unfortunately of this important tool.
Taxes on hydrocarbons
According to Fedesarrollo, quoted by the newspaper La República, the Effective Tax Rate of the oil companies would rise to 70.3%, but the Ministry of Finance estimates it at 46.8%. As President Petro has always stated, the extractive industries are the ones that will contribute the most to this reform: 11.16 billion in new taxes. As the expert José Hilario Araque clearly stated, royalties will not be deductible and the norm imposes income surtaxes of 5% or 10% for coal extraction and 5%, 10% or 15% for oil, depending on prices. international.
Companies pay a 35% rental rate, but with the new taxes, oil companies will have an additional 15% rate at times of high prices, so their income tax could reach 50%.
In the case of oil, by 2023, the surtax will be 5% if the price is higher than US$67 per barrel; 10% if the price exceeds US$75; and 15%, if the Brent reference crude is greater than US$82.
Benefit to the small shareholder (Dividends)
One of the characteristics of this Tax reform was that all income should be treated equally. This meant that the dividends would enter the table of marginal income rates that range from 0% to 39%, depending on income, but a 19% discount was applied to them, with a maximum rate of 20% to maintain progressivity. That way, the small shareholder would not pay additional taxes on dividends. And the cap will only reach 20%.
The end of the Double Taxation Concept
In this regard, a clear conclusion of the reform analyzed in El Botalón is that the criterion of double taxation that originated from the payment of dividends to shareholders from the profits of companies that had already been affected in their taxes is over. However, it became clear that the profit of the shareholder, even if it comes from the same source, is different from that of the same company, so this concept no longer has a place. However, dividends for small shareholders, as already noted, will not pay tax.
Other new taxes
Under the name of “Healthy Taxes”, the tax reform included taxes on sugary drinks and ultra-processed foods, except for bakeries and neighborhood stores. The so-called “Green taxes” were also included, since carbon was incorporated into the carbon tax and a tax will be applied to single-use plastics with a rate of 0.0000 UVT for each gram of the container, packaging or packaging; It will come into effect in June 2023. The destination of the carbon tax will finance 80% of environmental projects and the remaining 20% of the comprehensive national program for illicit crops.
As the guest himself noted, but understanding the complexity of the subject, the attendees were very well aware of the implications of the current government’s tax reform.