Industry trade body Colombia Fintech brings together over 250 innovation companies; 70% of which are Fintechs and the remaining 30% being firms that integrate the Fintech value chain through consulting, market research and traditional finance/tech services. Based in Bogota, Colombia Fintech hosts events, releases publications and works towards expanding the Colombian Fintech industry.
Although traditional banking and digital banking have the same backbone, there are laws and regulations that adjust the characteristics of each one to provide a process of greater transparency and control. Colombia has, however, been one of the most proactive LATAM jurisdictions for Fintech regulation. It was the first country to offer a ‘regulatory sandbox’, offering start-ups the chance to experiment under relaxed conditions.
These are the relevant regulatory and tax rules for Colombian Fintechs.
There are several institutions and laws that regulate the Colombian financial system, housed in the Political Constitution; circulars of the Financial Superintendence of Colombia (SFC) and presidential decrees and sanctions which not only allow the expansion of the sector, but aim for more transparency between consumers, financial institutions and the government.
The SFC has been monitoring the technological evolution of the financial system in the country since the early 2000s. With the aim of seeking a balance in the use of digital banking, it established (in sub numeral 126.96.36.199 of Chapter I of Title II of Part I of the Basic Legal Circular – External Circular 029 of 2014) that, for all purposes, the financial services a consumer accesses using a mobile device but through a web browser and without association of the service to a mobile line are also considered as internet banking.
Law 1273 of 2009 further regulates the digital financial system in Colombia. It covers digital banking typifying computer crimes in Colombia, including infractions by and on electronic financial channels.
Subsequently, Law 1735 of 2014 was introduced in the search for greater financial inclusion. This created the Specialised Companies in Electronic Deposits and Payments (SEDPE), aimed at promoting population penetration through transactional financial products, such as transfers, payments, drafts and collection, and which would later be reinforced by Decree Number 1491 of 13 July 2015.
On 2 May 2019, the Colombian Congress approved the fast-track of licences for Fintechs, to make the constitutions of this type of company more flexible.
Corporate income tax
For both traditional and digital banking, a new tax reform (Law 2155 of 2021) lists an additional surcharge or tax that would apply only to financial institutions that have a taxable income equal to or greater than 120,000 UVT (Unidad de Valor Tributario, or Tax Value Unit) – which would be COP4,356,960,000 according to the value of the UVT of the year 2021 (c. US$1,101,128).
More, a special rate will apply between 2022 and 2025:
- General Corporate Rental Rate: 35%
- Surcharge: 3%
- General rental rate for financial institutions: 38%
This surcharge will be collected through a 100% advance, calculated on the taxable basis of the income tax paid by the taxpayer for the previous taxable year, and is due in two equal instalments, according to the deadlines set in the corresponding tax calendar.
Article 65 of the Social Investment Law 2155 of 2021 details all the valid deductions and repeals, and orders the elimination of paragraph 1 of article 115 of the Tax Statute (ET) (which stated that the Industry and Commerce tax (ICA) discount would be to 100% from 2022 for both traditional and digital banking). However, in order to strengthen tax revenues and have a more efficient balance between territorial and national taxes, said ICA tax discount will remain at 50% for the taxable year 2022.
Financial institutions (both traditional and digital banking) settle the sales tax, applying the general rate of 19% to commissions and remunerations, with exceptions defined by law. Commissions and remuneration for banking services, therefore, are taxed at 19%.
On the other hand, commissions for the use of debit and credit cards, interest on credit, sale and purchase of foreign currency, and exchange operations on financial derivative instruments are exempt, in accordance with the national tax statute.
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