Colombian startups breathe a sigh of relief from tax reform and get a lifeline

Colombia adjusted the equity tax so that the taxable base is taken as the fiscal cost and not the intrinsic value of the shares, which was one of the biggest concerns for startups in the face of the tax reform that Congress has already approved in the first debate.

Colombian entrepreneurs were concerned that the tax reform bill would change the definition of how the value of equity is calculated. According to the startups, this definition would mean that every time a company receives investment, it would become part of its equity.

It would mean that the entrepreneur would have to pay a higher tax, even though the resources go to the project’s development.

Colombian startups raised about US$808.9 million in 2021, according to the ColombiaTech Report 2021 released Thursday by KPMG.

As Bloomberg Línea had advanced, the government and the fintech industry held one-off meetings to address this issue and get the entire startup ecosystem to achieve exclusion.

“An important change for the fintech sector: the taxable base of the wealth tax will be the fiscal cost, not the intrinsic value.

“From the Dian (National Tax and Customs Directorate of Colombia), we will seek that the intrinsic value is reported for informational purposes, but strengthening this sector is the priority,” informed the director of that entity, Luis Carlos Reyes.

The president of Colombia Fintech, Gabriel Santos, celebrated that “the intrinsic valuation of shares is eliminated in the tax reform.

From day one, we have worked with the government to protect the fintech ecosystem. We appreciate Luis Carlos Reyes’ willingness to listen and work”.

Meanwhile, the Endeavor startup community thanked the director of the Dian “for accepting the path of dialogue and listening to the feelings of Colombian entrepreneurs.

“We are willing to continue working together to strengthen our entrepreneurship ecosystem further”.

The Minister of Finance, José Antonio Ocampo, assured that the proposed reform would enable additional resources for US$22 billion to finance some of the government’s social projects for next year.

The bill contemplates a surtax of 5 percentage points on income for the financial sector and mining and oil companies.

It also establishes an income tax rate of 35% for companies and contemplates lower benefits for pensioners with higher pensions.

The proposal contemplates a 20% rate for dividends and establishes a series of healthy taxes that toughens the tax treatment of ultra-processed foods and sugary beverages.

With information from Bloomberg

For the full picture, see our Brazil Tax Reform: Complete Guide.

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