Written corporate income tax opinions in Colombia

The questions that reach this desk

Income tax is the broadest front of the practice, and it almost never arrives as an abstract question. It arrives attached to a concrete fact: a contract about to be signed, an item the statutory auditor flagged, a benefit somebody told the company it could claim. The opinion is built on the documents of the case, not on the general wording of the rule.

• Recognition of income, costs and expenses for the period, starting from the company's accounting policy and the contracts behind them.
• Deductibility of a specific item and whether the supporting documentation actually holds it up.
• Rates and taxable bases applicable to the case, including withholding and self-withholding.
• Determination of the tax basis of assets and its effect when they are sold.
• Treatment of business collaboration contracts and commercial trusts under the fiscal transparency rules.
• Withholding on payments abroad and application of double taxation treaties.
• Requirements and suitability of the simplified tax regime compared with the ordinary regime.

Tax benefits: the question is not whether they exist

Special deductions, credits and exempt income exist and are published. The useful question is a different one: whether the company meets the requirements, what it must evidence, before whom and at what point, and what happens if the benefit is claimed and the support later fails to appear. We test the specific case against the applicable requirements and say plainly when the position is solid and when it is defensible but arguable.

Where the benefit depends on a certificate, a prior registration or a ruling by an authority, we say so before the company builds it into its forecast. A benefit claimed without the prior requirement is not a saving: it is an exposure that grows over time.

What was decided in earlier years

Much of what surfaces in an audit was decided years earlier, in a badly characterised contract or an expense without support. That is why the review does not stop at the return currently being prepared.

• Reading of the returns for years not yet time-barred and of the items where the risk concentrates.
• Identification of positions repeated year after year, which is where a small difference ends up being material.
• Assessment of whether to correct voluntarily, hold the position, or change it going forward while recording the reasoning internally.

How we work

1. Scoping. We agree in writing what is being asked, for which year and on what documents. A badly scoped question produces a useless opinion.
2. Document review. Contracts, accounting support, invoices and supporting documents, returns filed and, where it exists, earlier correspondence with the tax authority.
3. Analysis. We identify the possible readings of the rule applicable to the case and the risk attached to each.
4. Written opinion. With the scoped question, the facts, the answer, its basis and the caveats. Where more than one reasonable reading exists we say so, and explain which one we support and why.
5. Follow-through. If the matter moves towards action by the authority, the defence rests on a document that already exists rather than on a later reconstruction.

What the client receives

• A written, dated and signed opinion that the finance team and the board can file and use as support for the decision.
• An express statement of the factual assumptions it was issued on, so it is clear when it stops applying.
• Where relevant, a list of the support that must be kept and of who inside the company has to produce it.
• Scope and fees agreed in writing before we start, and confidential handling of everything received.

Typical situations we handle

• The company is about to sign a contract whose tax treatment changes with how the subject matter and the price are drafted.
• The finance team and the statutory auditor disagree on the treatment of an item and a third written reading is needed.
• A commercial adviser offered a tax benefit and the company wants it verified before claiming it in the return.
• A payment to a foreign supplier is due and it is unclear what withholding applies or whether a treaty exists.
• The company is about to sell an asset and needs its tax basis before setting a price.
• A group reviews its open years before an investor comes in or the statutory auditor changes.