Regardless of the tax or return under discussion, the proceedings explained below will be the same. Local tax authorities must also follow such mandatory proceedings when collecting local taxes.i Challenging tax returns
The Colombian tax authorities are entitled to challenge tax returns only during the statute of limitations of such returns. In Colombia, the period of the statute of limitations varies depending on the return and other circumstances.
As general rule, the statute of limitations of a tax return is three years as from the last permitted filing day, or as from the date the return was filed, when filed late. However, if the taxpayer requested a tax refund, said three years will be counted as from the date of the refund filing. If the taxpayer was subject to the transfer pricing regime, the period of the statute of limitations will be increased to six years as from the deadline to file the tax return.
If the tax return assessed tax losses, the statute of limitations will be between 12 and 15 years depending on when such tax loss was offset. A tax return offsetting tax losses from previous fiscal years has a statute of limitations of six years.
The proceeding that the Tax Office carries out when challenging a tax return is as follows.Challenge brief
The Tax Office issues a challenge brief proposing the challenges to the tax return. In this document, which is not yet an official tax assessment, the tax authorities may question any aspect of the tax return (i.e., income, costs, expenses, deductions, tax benefits, tax credits, etc.) and proposes a penalty for inaccuracy equal to 100 per cent of the assessed lower balance in favour or the higher tax.Response to the challenge brief
Three months as from the notification of the challenge brief, the taxpayer is entitled to file a response. This response can be filed by the legal representative of the legal entity, or by the person subject to audit: no licensed attorney is needed at this stage. In responding, the taxpayer should present its arguments and claims, and may file the proof and evidence that supports its position. Note, however, that filing a response to the Tax Office's challenge brief is not a requirement to further subject the controversy to litigation.
The taxpayer also may accept the Tax Office's proposal at this stage. In this event, it will have to pay the proposed higher tax or reimburse the lower balance in favour, plus any lateness interest accrued. The penalty for inaccuracy will be reduced to 25 per cent.Official assessment
Six months as from the deadline to file the response to the challenge brief, the Tax Office must notify to the taxpayer the official assessment. This document can either entirely or partially confirm the proposed challenge brief. At this stage, the Tax Office is not allowed to propose challenges not originally included in the challenge brief.Motion for reconsideration
Within the two months after the official assessment is served, the taxpayer may file a motion for reconsideration. The legal division of the Tax Office reviews and decides on the motion. At this stage, proof and evidence can also be requested or produced by the taxpayer.
If the taxpayer did not file a response to the challenge brief, this motion becomes obligatory to be able to file for litigation in the future. If such response was filed, the motion for reconsideration is voluntary and instead the taxpayer can directly file for litigation.
If the taxpayer accepts the Tax Office's challenges at this stage, it will also have to pay the additionally assessed tax or reimburse the assessed lower balance in favour, plus any accrued lateness interests. The penalty, however, will only be reduced to 50 per cent.Decision of the motion for reconsideration
The tax authority has one year to decide the motion for reconsideration filed by the taxpayer. If the taxpayer is not served with the decision to the motion within a year, the controversy is deemed to be ruled in favour of the taxpayer. In Colombia, this situation is called silencio positivo.
A situation of silencio positivo is likely to be recognised by a tax court, so national and local tax authorities are very careful to avoid it, but there are still occasionally cases of silencio positivo.Litigation
As from the notification of the decision that decides the motion for reconsideration or as from the notification of the official assessment, the taxpayer has four months to sue before the lower tax court. In this phase, representation by a licensed attorney is mandatory. The judicial proceeding has the following stages.Lawsuit admission
The lower tax court analyses whether the lawsuit complies with the general formal requirements for lawsuits, such as the filing date, the power of attorney, its jurisdiction, a proper representation, etc. If it considers that such requirements are met, it will admit the lawsuit.
If it considers that the requirements were not met, it will order the plaintiff to file an amendment to the lawsuit. This amendment must be filed 10 working days as from the notification of the decision requiring amendment.
Because of the current backlog in the tax court, admission of the lawsuit may take approximately two to six months as from the date of its filing.Hearings
After both parties have filed their claims, the tax court will schedule an initial hearing. In such, with the parties' consent, the tax court will decide what will be the main aspects in discussion and also will determine which evidence will be considered for the judicial process. This hearing is always mandatory and it is commonly scheduled approximately one year after the filing of the lawsuit.
If there is evidence to be shown, another hearing will be scheduled. This will not be mandatory, and if it is not executed it will speed up the judicial process. Also, the parties' concluding arguments can be presented through a hearing whenever the judge considers it necessary. If not, it will require the parties to present them in writing, which will also speed up the process.First instance ruling
Approximately 1.5 years after the closing arguments have been presented by the parties, the lower tax court will issue a first instance ruling. From the initial filing of the lawsuit until a first instance ruling, two to three years may have passed.Appeal
Ten working days as from the date the first instance ruling has been served, parties are entitled to file an appeal. Such appeal will be decided by the Higher Tax Court of Appeals, approximately in two to three years. The decision over the appeal will be the final one.ii Auditing taxpayers that did not file tax returns
The Tax Office is entitled to audit the taxpayers that did not comply with its obligation to file tax returns. This proceeding can be executed by the tax authority within five years of the final due date to file the tax return. The main stages of the proceeding will be as follows.Notice requesting the filing of the return
The Tax Office will issue a notice requesting the taxpayer to file the tax return. In this stage, it will propose a late filing penalty that will depend on the return in discussion and on the taxpayer's situation (e.g., it can be calculated according to the tax due, the gross income, the balance in favour, and the days of delay).Response to the notice
The taxpayer has one month as from the date the notice was notified to file the return or file a response explaining the reasons for not being obliged to make such filing. If the taxpayer files the return at this stage, it will have to pay the total tax assessed, the interests and the penalty assessed.Resolution that imposes penalty and official assessment
If the taxpayer does not file the return, the Tax Office will begin two separate proceedings: the first one imposing the penalty for not executing such filing; and the second one assessing the tax obligation. These proceedings will be carried out as follows.Imposing the penalty
After the deadline to respond the notice, the Tax Office has six months to issue a resolution confirming the penalty for not filing the return. Two months as of the date said resolution has been notified, the taxpayer is entitled to file a motion for reconsideration against this resolution. The proceeding from then on until a final ruling is issued, is the same one explained in Section II.i under the headings 'Decision of the motion for reconsideration' and 'Litigation'.Assessing the tax obligation
The tax authority will issue an official assessment determining the tax obligation due, indicating the taxpayer's tax liability, but it will not impose a penalty.
Hereon, the proceeding carried out until a final ruling is issued, will be the same one as explained in Section II.i under the headings 'Motion for reconsideration', 'Decision of the motion for reconsideration' and 'Litigation'.iii Imposing additional penalties
Regulations also provide other tax-related penalties that can be imposed by the Tax Office. Some examples of such are penalties for the unfair recognition of a balance, not filing the information required by the Tax Office, committing tax abusive conducts, not issuing invoices and the reduction of tax losses, etc.
The proceeding to impose such penalties can be the one explained in Section II.i or Section II.ii under the heading 'Imposing the penalty'.iv Amending tax returns after the due date
Taxpayers in Colombia may amend their tax returns after they have been filed, observing specific deadlines. Once such deadlines have expired, the only possibility to carry out an amendment will be if the taxpayer accepts the Tax Office's proposals in the proceeding described in Section II.i. Note that instead of beginning the proceeding described in such Section, the Tax Office can issue a notice (instead of a challenge brief) claiming the amendment of the return. Under this proceeding, the proposed penalty should be lower: 20 per cent of the higher tax due or the lower balance in favour assessed.v Amendment of tax returns within the due dates
The process and deadlines to amend the returns are as follows.Amendment to increase the tax due or reduce a refundable balance
This amendment may be filed electronically within two years as from the final due date to file the return. Penalties and interest will be triggered. The penalty will be equal to 10 per cent of the higher tax due or the lower balance in favour. Delay interest will be calculated at a 30 per cent annual effective rate (approximately).
This amendment replaces the first tax return filed, but the initial period of the statute of limitations will not be modified.Amendment to reduce the tax due or increase a refundable balance
This amendment may be filed electronically. The deadline is one year as from final due date to file the return. However, the statute of limitations will be modified: it will not be counted as from the final date to file the return but rather from the date the amendment was filed. No penalties should be triggered.vi Requesting tax exemptions
In Colombia, tax reliefs can only be claimed through tax returns. Notwithstanding, some tax reliefs require government clearance before taxpayers can claim them in their returns.