The City Council of Bogotá has issued Act 65 of 2002 (Acuerdo 65 de 2002) by means of which it has passed an industry and commerce tax reform. The Act includes reforms related to taxpayers, taxable base, tax withholdings, and an increase in the applicable rates that had been proposed by the city mayor since last year. The most relevant aspects of the reform are outlined below.
The Act unifies and simplifies the definition of taxpayer of the industry and commerce tax, and provides that it is the individual or entity performing industrial, commercial or service activities within the District's jurisdiction.
Taxpayers can deduct from the taxable base any income obtained from the performance of commercial or service activities outside Bogotá. The territorial origin of this income must be proved by means of invoices, accounting items, and other suitable documentary evidence.
Industrial activities are taxed in the place where the industrial plant is located, as long as the sale of the products is the final phase of the production process.
Industry and commerce tax withholdings must be performed by:
- state-owned entities;
- entities that are classified as major taxpayers by the National Tax Office;
- entities that are appointed as withholding agents by the Bogotá Tax Office;
- intermediaries performing activities related to land transportation of people and merchandise;
- agents performing a mandate; or
- consortiums and temporary unions.
The industry and commerce tax withholding rate is equal to the tax rate for the corresponding activity, and is applied on the total value of the transaction. Should the withholding rate not be determined, it will be the highest rate in force during the taxable period, and the transaction will be subject to that tax rate.
Entities that issue credit and debit cards must perform industry and commerce tax withholdings to the beneficiaries of payments made with such cards, at a rate equivalent to the lowest in force during the taxable period, and at the time of payment or accrual.
The tax rates were increased 20% from July 2002, and 15% from January 1 2003. The rates in force for the year 2002 range from 0.36% to 1.2%, and the rates in force from January 1 2003 range from 0.414% to 1.38%.