As announced since the end of 2022, when the tax reform promoted by former Finance Minister José Antonio Ocampo was approved, the changes in tax management that were approved by Congress at that time are generating strong pressures on the pockets of Colombians, who in some cases In some cases, they are having to pay more to the Dian and in others they cannot access the same benefits as before.
The income tax return and the reports that must be submitted to the National Tax and Customs Directorate are two examples of this reality, in which experts in the field maintain that the change in the rules of the game is having an impact on deductions, mainly with the change in the limits that can be deducted and the items that are calculated in these reports.
The latest: Labor reform: the objections to several articles before voting on the project
The situation is such that some sectors have stated that this is a “button-up” which was announced at the time and although no one seemed to pay attention to it, it must currently serve as a basis for the discussions that are coming with the Financing Law that the Ministry of Finance is preparing and that seeks to tighten the tax screws a little more to generate close to $12 billion for the Nation by 2025.
Change in deductions
In order to find out what happened and what is behind this pressure that taxpayers are feeling, Portafolio spoke with several experts on the subject, who recalled that everything stems from the reduction of tax benefits of the 2022 tax reform, both in terms of deduction amounts and exempt income; which are being felt by both employees and the self-employed.
Income tax return
Diego Caucayo – Portfolio
First, Carlos Neira, tax and legal services expert at KPMG, explained that the first point is the limits of tax benefits, which went from 5,040 Tax Value Units (UVT) to 1,340 UVT, which means that, While deductions can still be made on the reports, these are minor overall.
“What has been done in tax reforms throughout our history is to limit the tax planning capacity of individuals. This, by limiting the amounts that I can reduce from my taxable base. That is to say that when taking labor income or gross income, there is less and less that can be refined, so that there is less that is reported or has to be paid,” he said.
To better explain his point, Neira noted that previously the tax benefits could add up to almost $180 million and with the changes approved in the tax reform, this was lowered to just over $56 million, so the squeeze is undoubtedly being felt when it comes to filing income tax returns.
Other news: Credit Pact: ABC of the agreement that avoided forced investments
Likewise, for Olga Viviana Tapias, member of the Tax Commission of the National Institute of Public Accountants, it must also be taken into account that the limit of the 25% exempt income to which salaried employees and some independents are entitled was lowered; which went from 2,880 UVT to 790 UVT; remaining at just over $33 million for the 2023 tax year.
Withholding tax
Another of the changes in the tax system that is having an impact on the declaration is in the withholding tax, a point that, according to Carlos Neira of KPMG, began to apply from 2023, but which many people were not aware of. to implement it and today they see how they are having to pay more than projected.
Income tax return
iStock
“They should have asked their employer for verification in the withholding tax procedure. That is, to anticipate what was going to happen in the declaration. All this because there are two withholding tax procedures. One is, I calculate it month by month and it gives me a tax due and it gives me a rate depending on the income level, and the other is the one we all normally have, which calculates the rate based on a historical income of the last 12 months,” said Neira.
In this regard, he stated that when the new liquidation had to be appliedmany of them had this process done with an old purification rate. “What does that mean? That in the first half of last year a rate was being applied that was not going to be enough to cover the tax that is being paid to me now.”
You may be interested in: How a good tax culture would be an alternative way to avoid new taxes
Tax planning
Carlos Giovanni Rodríguez, also a member of the Tax Commission of the National Institute of Public Accountants, joined the debate and argued that there is nothing that can be done to change this reality, since these are laws of the Republic in execution. Because of this, he suggests that it is better to look to the future and think about how to plan personal finances to mitigate the impact.
“It is essential to carry out tax planning that considers the type of income to be received and evaluates remuneration alternatives that are not subject to regulatory limitations, such as: contributions to institutional pension funds, contributions employees and participation in scientific, technological or innovation work, among others,” he said.
Dian
Dian
Supporting this idea, Olga Tapias added that “it is crucial to plan the cash flow taking into account the payment of the tax to avoid surprises when faced with a higher amount to be paid. In this sense, it is advisable to align the withholdings that will be made during the year with the tax that will ultimately be payable.”
These analysts from the National Institute of Public Accountants closed by warning Although these regulatory changes attempt to justify before the Organization for Economic Cooperation and Development (OECD) and other international organizations the existence in Colombia of a system that balances taxation between natural and legal persons, they are being handled from an incorrect perspective, which is only affecting employees.
They also stated that this tightening will undoubtedly lead to a significant decrease in the capacity for consumption and investment, which “will have an impact on the economic growth of our country, since this type of measure discourages formal employment and encourages informality and evasive structures.”
“If a middle-income person does not experience a significant increase in their salary, their purchasing power will be reduced due to the payment of income tax, which will be made progressively. due to the increase in withholding tax and, subsequently, in the annual declaration,” they concluded.
