Colombia - Colombia's New Tax Rules for Digital Services in 2024: What You Need to Know

New rules regarding the taxation of digital services and entities with a substantial economic presence in Columbia were introduced at the beginning of 2024. From January 1, 2024, foreign digital service providers are subject to a 3% income tax rate on the gross amount earned from selling goods and providing services to Colombian consumers or users.

The proposed budget plan 2025 could significantly impact digital platforms providing services in a few specific industries by potentially increasing applicable VAT rates.

Change in VAT Rates

The Colombian government's proposal for the 2025 budget includes a potential increase in the VAT rate for digital platforms. If approved, the rate could rise to 19%, significantly impacting the broader digital economy.

These changes would most affect short-term accommodation rental platforms, such as Airbnb, and online betting and e-gaming platforms. A tiered tax structure of 15-17% on Gross Gaming Revenue (GGR) is currently applied to these platforms.

However, the proposed changes likely affect only domestic digital platforms and create an uneven playing field. Consequently, if adopted, new rules would also put non-resident digital platforms in a more favorable position regarding taxation burdens.

Nevertheless, the proposal to increase the VAT rate for digital platforms was met with resistance and criticism from many, raising questions about what drawbacks could arise if such a proposal is adopted and implemented.

Besides the new VAT rate, one more novelty has already been introduced for the gambling industry: the mandatory transmission of e-invoices through the national e-invoicing system. Information such as an amount wagered and paid out, serial numbers of the machine games, and detailed information about the taxable person, including IP address or internet address if the service is offered and provided online, must be reported on every transaction.

Conclusion

Since online betting and e-gaming platforms play a noticeable role in the Colombian economy and generate more than 150,000 jobs, these changes would significantly hurt this industry. Also, it remains to be seen if these changes will only apply to domestic digital platforms or foreign digital platforms will also be affected.

Source: SBC News, The iGaming Post, Answer Connect