Colombia
At the beginning of this year Colombia implemented changes to its Significant Economic Presence (SEP) rules for foreign companies. These rules allow for taxation on profits made by foreign companies without a physical presence in Colombia if they have a connection with the Colombian market through a digital presence (e.g., sale of digital services like online advertising and e-books) or interaction with local customers, including e-commerce sales of goods.
Specifically, SEP applies when a non-resident company (or related parties):
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Obtain gross annual revenues of more than 31,300 Tax Value Unit (approximately £226,000) from transactions carried out with customers and/or users located in Colombia.
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Has a systematic and deliberate interaction with the Colombian market, which is presumed to occur if: (i) an interaction or marketing deployment is maintained with 300,000 or more customers and/or users located in Colombia, or (ii) there is the possibility of displaying prices in Colombian pesos (COP) or payment in COP is allowed.
If a non-resident meets these requirements, all income generated in Colombia will be considered Colombian-sourced, and the non-resident will become an income taxpayer in the country.
They will then pay income tax either via:
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Registering with the Columbian tax authorities to file and pay income tax directly – In this scenario they will be subject to an income tax rate of 3% on the gross amount received from the sale of goods and/or services to Colombian customers/users.
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Tax payment via a withholding tax at source – If they do not register as a taxpayer, they will become subject to a 10% withholding tax on the gross amount received. This tax will be withheld by business customers or if the businesses are selling to consumers, by the financial institutions including banks and credit card companies or payment gateways such as PayPal.
Senegal
The Ministry of Finance has confirmed that it will introduce VAT at 18% on the sale of digital services by non-resident providers to local consumers from 1 July 2024.
Currently, foreign businesses providing digital services to consumers in the country do not have to charge VAT on their sales. However, to remove the unfair advantage this gives to non-resident companies over resident providers, the Senegalese government will introduce VAT at 18% on these types of transactions.
Non-resident providers will be required to register for VAT in Senegal through a local Fiscal Representative from their first sale, as there is no VAT registration threshold.
This new tax will apply to a range of electronic services including advertising, streaming games, music, apps, films, e-books, e-journals, software, and internet services.
Sri Lanka
The Inland Revenue Department of Sri Lanka is planning to implement VAT on electronic services supplied by non-resident companies to consumers from March 2025.
Currently, foreign businesses providing digital services to consumers in Sri Lanka do not have to charge VAT on their sales. However, to level the playing field between non-resident and resident providers, the Sri Lankan government proposes a VAT rate of 18% on these transactions.
If implemented, this will apply to a range of electronic services including streaming games, music, apps, films, e-books, e-journals, and internet services.
The above news was kindly provided by Fiscal Solutions (UK), www.fiscalsolutions.co.uk; contact: [email protected].
