Colombian Court Clarifies VAT Withholding Rules for Foreign Service Providers and Large Taxpayers

• Colombia’s Supreme Administrative Court issued a decision on 22 May 2025 regarding VAT withholding obligations for services from foreign providers.
• The court overruled the National Tax Authority’s requirement for large taxpayers to act as VAT withholding agents in transactions with nonresident service providers.
• Article 437-2 of the Colombian tax code outlines who must withhold VAT.
• Rule 2 requires large taxpayers designated by DIAN to act as VAT withholding agents.
• Rule 3 requires Colombian entities engaging foreign service providers for taxable services to act as VAT withholding agents.
• In cross-border transactions, if VAT is withheld in Colombia, the foreign provider is not required to register with DIAN.
• If VAT is not withheld, the foreign provider must register and submit VAT declarations.
• The Supreme Court ruled that DIAN’s interpretation did not respect legal hierarchy and specificity principles.
• The court clarified that when no Colombian party is liable for VAT, the foreign provider must declare and remit VAT.
• The decision provides clarity for foreign service providers and aligns with statutory principles.

Source: bdo.global

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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