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Colombia Publishes Final Decree Regulating Mega-Investment Project Incentive — Orbitax Tax News & Alerts

Colombia has published Decree 1157 of 21 August 2020, which regulates the mega-investment project incentive regime that was first introduced by Law 1943 of 2018 and reintroduced by Law 2010 of 2019. The regime is available for qualifying investments in industrial, commercial, and/or service activities and provides for a reduced 27% corporate tax rate and tax stability contracts for up to 20 years, as well as exemptions from dividends tax and wealth (equity) tax, and accelerated two-year depreciation. For qualifying legal persons with hotel service income, however, such income is subject to tax at a 9% rate.

The main conditions for the regime include:

  • A minimum investment of 30 million tax value units (UVT) in property, plant, and equipment of a productive nature and/or that have the potential to be, or a minimum investment of UVT 2 million for the national aeronautical sector, which is based on the UVT value for the year in which the project is approved;
  • The creation of a minimum of 400 new direct jobs, or 250 for investments in technology sectors and e-commerce;
  • The investment and creation of new direct jobs must be realized within 5 years;
  • A premium for tax stability contracts must be paid for each year of the investment schedule equal to 0.75% of the investment made in the previous year, which may not be less than 0.75% of UVT 30 million, or 0.75% of UVT 2 million for the national aeronautical sector; and
  • Projects must be approved, and contracts signed before 1 January 2024, or 31 December 2021 for the national aeronautical sector.

If an approved project subsequently fails to meet the conditions, the benefits are subject to recapture.

Further to the conditions above, it is also provided that projects related to the evaluation, exploration, and exploitation of non-renewable natural resources, such as the exploration, development, and construction of mines and oil fields, may not qualify for the mega-investment regime.