Colombia’s SEP Framework: A Modern Alternative to Digital Services Tax

Colombia has made notable progress in its approach to taxing the digital economy, but instead of adopting a traditional Digital Services Tax (DST), it has implemented a Significant Economic Presence (SEP) framework.

Here’s a summary of the most recent developments as of August 2025:

Colombia’s SEP Framework for Digital Taxation

✅ What It Is

• A nexus-based model that taxes foreign companies with a substantial digital footprint in Colombia.
• Applies to businesses with:
  • 300,000+ Colombian users
  • Systematic interaction with the Colombian market
  • Revenue exceeding 31,300 UVT (approx. $313,000)

Tax Options for Foreign Companies

• 10% withholding tax on gross income or
• 3% tax on gross income via direct registration with the Colombian Tax Authority2

Scope of Taxable Services

• Streaming platforms
• Online advertising
• Digital subscriptions
• Data management services
• Commissions from digital platforms (e.g. accommodation listings)

️ Recent Technical Updates

• The Colombian Tax Authority issued Ruling No. 100208192-305 in April 2024 to clarify SEP application rules
• SEP applies even if goods are sold outside digital platforms, as long as interaction with Colombian users meets the criteria

Strategic Implications

• U.S. and global tech firms must reassess their Colombian operations to comply
• Chinese digital firms may benefit from the predictable thresholds and flexible tax options
• Colombia positions itself as a regional digital tax leader, balancing revenue capture with business flexibility

Sources

• KPMG
• ITIF

 

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