Subsequently, Law 1955 of 2019 established that taxpayers may claim the special deduction over a period of 15 years, starting in the tax year after the project begins to operate. This increased the benefit initially granted, since, the deduction previously could be claimed for just five years.
In addition, Law 1955 and Legislative Decree 2106 of 2019 authorized the Colombian National Energy Authority (UPME) to certify that investments are eligible for the incentives. Previously, environmental authorities also had to certify investments in renewable or efficient energy projects.
However, on June 10 , 2020, Decree 829 was issued, which gives a greater scope to the benefits, and establishing the requirements and approvals by the regulatory bodies in the same way.
The scope of the incentives is as follows:
- Investments that qualify as renewable energy investments have been expanded to include plant expansion activities and process improvements.
- The required legal studies have been added to the list of activities that are valid investments.
- Included within the concept of efficient energies, and subject to the benefit of the special deduction, are project examples such as the change from fossil fuels to renewable energies in the transport sector, or the substitution of traditional fuels with biofuels in the industrial sector.
- With respect to VAT once the taxpayer receives certification from the UPME, the exclusion of VAT will apply at the time the goods are imported, as well as when local purchases are made. When the certification is issued after the importation of goods or the acquisition of local goods and services, the updated regulations allow the investor to request a refund of the VAT paid.
It is worth noting that, before granting these tax benefits, the tax administration and the environmental regulatory bodies must establish:
- Payment of a fee to the UPME in order to assess that the investments are eligible for the incentives, at the time they are submitted for certification.
- If the project has the potential to produce energy of more than 1 MW, the taxpayer must register the project with the UPME in the energy project registry before the taxpayer submits the application for the tax incentives.
- The UPME will issue a resolution that establishes the procedure for claiming the incentives within three months from the date the decree becomes effective (June 10, 2020).
- Verification by the tax authorities that the holders of financial leasing contracts exercise the purchase option at the end of the contract.
- Project assets are not sold before their useful life is completed.
- In case the taxpayer does not meet all the legal requirements for the deduction incentive, a recapture of the incentive is recognized in the tax return.
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