Decree 3119 of 1997 regulated, for taxation purposes, the amounts allowed as deductions from net income when associated with articles imported massively as contraband.
The list of foreign articles classified as massive contraband articles include TV sets, sound reproduction equipment and record players, refrigerators, washing machines, cigarettes and alcoholic beverages.
Advertising expenses relating to those articles cannot be deducted from income for taxation purposes, if they exceed 15% of the sales of the articles imported legally during the taxable year. Provided a special permit is obtained from the National Tax and Customs Division, the percentage may be raised up to 20%.
When the expenses exceed 15% (or the exceptional 20%) no expense can be deducted for income tax purposes, and there is a fine for inaccuracy for a fraudulent income tax return of up to 160% of the highest amount assessed as tax payable.
Taxpayers cannot request deduction of expenses relating to articles which have been illegally introduced into Colombia.
In the case of initial advertising campaigns, all related expenses may be allowed as deductions with respect to articles imported legally, including those on the list of massive contraband, always provided that market surveys are made and that revenue is projected to forecast potential sales in Colombia. For the deduction to be recognized, the importer must follow certain special procedures to obtain authorization from the National Tax and Customs Division.
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