Law modifies incentives for certain energy investments

Law 2099 of 2021 enacted and published in Colombia’s official gazette on 10 July 2021 modifies the regulations relating to the incentives available to qualifying companies and individuals for investments in research, development, and the generation and use of energy from nonconventional energy sources (FNCE) and/or the management of energy efficiency. The law is effective as from that date (which for income tax purposes means that the amendments apply for the following taxable period, i.e., the financial year 2022) and the amendments primarily affect the scope of the incentives and some procedures that taxpayers must follow to benefit from the incentives. The tax incentives originally were introduced by Law 1715 of 2014.

• With regard to (i) the VAT exemption for equipment, machinery, and services acquired domestically or imported aimed at investments relating to the generation and use of energy from FNCE and (ii) the tariff rate exemption applicable to the payment of import duties on machinery, materials, and supplies exclusively for investment projects involving FNCE, the new law again expands the scope of the exemptions to include smart metering and power management measures aligned with the action plan on energy efficiency. In addition, it emphasizes that the investment must be evaluated and certified as a generation project or as an action or management measure. The law also clarifies that the VAT exemption applies to services rendered both within and outside Colombia.

Source Deloitte

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