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 Authority

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