Extended Withholding Tax 

Use

The Extended Withholding Tax solution comes with sample settings for a range of withholding taxes. It also comes with a number of Smart Forms that you can use to print withholding tax certificates.

Features

In Colombia, the main withholding taxes include:

·        Income tax, which is known as impuesto de la renta

·        Stamp tax (impuesto de timbre)

Stamp tax is levied on any documents, public or private, whose value exceeds the amount stipulated by the authorities. The general rate is 1%, but some documents are subject to a 0% rate. If the precise value of a document is not clear when the tax is due, the tax is still calculated at 1%, but you have to record it using a separate tax code so that you can enter it separately on the withholding tax return.

·        Remittance tax (impuesto a las remesas)

This is a tax that is withheld on payments made to businesses abroad, in addition to any other taxes withheld (with some exceptions). It also applies to any profits transferred by a Colombian subsidiary to a parent company, if the parent company is abroad.

·        Industry and commerce tax (impuesto de comercia y industrio)

This is a tax levied by municipalities. The exact tax rates varies depending on the municipality.

·        Value-added tax (VAT, known as impuesto al valor agregado)

When you make a payment that includes VAT, you withhold a portion of the VAT due. This does not apply if both parties are tax agents. Where payments are made to nonresident individuals or businesses, VAT is withheld in full.

The system allows you to handle withholding taxes in accounts payable and accounts receivable. In Accounts Receivable (FI-AR), the system also handles companies that are self-withholding agents: Large companies are entitled to handle their own income taxes (autoretenciones). If you make a payment to a company with such a status, you do not withhold any tax. Instead, the company calculates and remits the withholding tax itself – hence the term "self-withholding."

Activities

Customizing

For generic information about customizing Extended Withholding Tax, see Settings for Extended Withholding Tax: Overview.

Country Version Colombia comes with sample Customizing settings for all of the taxes listed above, including withholding tax types and withholding tax codes.

In addition, you define CIIU codes, recipient types, and income types, which are later used in reporting, and use them to classify your withholding tax codes.

Master Data

Enter the required information in the vendor and customer master data.

Periodic Processing

You use the system to prepare withholding tax certificates for your vendors as required. Sample Smart Forms are provided.