Boletin Non Profit Entities, Tax

New tax law regulations for non-profit-organizations in Colombia, 2018
According to newly adopted Law 1819 of 2016 in Colombia (tax reform) and its regulatory decrees important changes where included for non-profit entities as associations, corporations, foundations or NGOs in order to grant the tax authority DIAN more rights for control.
Now non-profit entities are subject to more and new requirements under the control of the DIAN. Basically they are considered as “institutions of public use” with “intention of public benefit” and only these entities will have the tax benefits. Fulfilling the DIAN requirements non-profit entities can continue to have the status of “Régimen Tributario Especial” which formerly was decided and registered by each entity but now it has to be accepted by the DIAN. The new requirements for the DIAN are:

• To be legally registered, existent and organized
• That the corporate purpose be of general interest, and that the community has access to its activities
• That neither its contributions nor its surpluses be either directly or indirectly distributed during its existence, or at the time of its dissolution or liquidation
  As a first step the non-profit entity is required to update its tax number RUT before January 31, 2018 if it was established during the year 2017 and before April 30, 2018 if it was established before the year 2017.
  The non-profit entity needs to give a yearly report for annual evaluation and control to the DIAN if requirements are still met. Entities with annual revenues in excess of 160,000 UVT (aprox COP 5,097,440,000) must file an Economic Report with the Tax Audit Division,
  von Bila de la Pava Bertoletti••ABOGADOS
  including management, a statement by the legal representative and statutory auditor
  regarding compliance with the RTE requirements, a copy of the income tax return and the
  update of the information on the transparency platform.
  Non-profit entities may still be established in traditional fields such as health activities,
  sport, formal education, culture, technology, ecology, environmental protection or social
  development.
  Donations by private third parties continue to have the tax benefits as before. If increased
  income cannot be referred to exterior donations it will be taxed with normal tax rates
  (transparency purposes).
  The profit of the non-profit entity shall be exempt of taxes if it is directly or indirectly
  allocated, in the year following that in which it was obtained, to programs that pursue the
  corporate purpose and activity of the non-profit entity. Otherwise the income tax rate on
  the excess profit shall be 20%.
  Payments for services, fees, rent, commissions, special bonuses or other items to the legal
  representatives and administrators must be made at average market prices and the
  contracts originating such payments must be registered with the Colombia Tax
  Authorities- DIAN, in order for this entity to determine whether they represent an indirect
  distribution of surpluses.
  The foregoing payments may be made below the average market prices, provided the
  transactions are intended to fulfill and perform the activities of the entity.
  When the non-profit entity has gross annual income in excess of 3500 UVT (aprox COP
  111,506,500), the budget allocated to remunerate, compensate or finance any
  expenditure, through payroll, contracting or commission, to individuals holding directive
  and managerial positions, may not exceed 30% of the total annual expenditure of the
  respective entity.
  If tax law regulations are ignored or violated the organization may be excluded from the
  “Regimen Especial” resulting in losing tax benefits. The non-profit entity may request its
  re-admission to the “Regimen Especial” only after 3 years from its exclusion.