Over the years, the national government has established tax benefits for the purpose of encouraging or promoting tourism activities, recognizing their potential to contribute to the growth of the Colombian economy. For some time, the provision of hotel services has benefitted from different tax incentives that initially consisted of exemptions from income tax and complementary taxes. Currently, this benefit translates into a special income tax rate if the requirements set forth in the tax regulations are met.
Act 2277 of 2022 “the tax reform for equality and social justice” amended paragraph 5 of article 240 of the Tax Code, which established as activities taxed at a 9% income tax rate the services rendered in hotels that were built or remodeled, a benefit that could be enjoyed for 10 or 20 years depending on the size of the municipalities where the hotels were built or remodeled.
The amendment introduced by the tax reform consists in the elimination of the differential rate of 9% in the Income Tax for legal entities that build new hotels or remodel them in municipalities with a population equal to or greater than 200,000 inhabitants and the increase of the differential rate to 15% in the Income Tax for new hotels that are built or hotels that are remodeled in municipalities with a population of up to 200,000 inhabitants.
Notwithstanding the foregoing, Income Tax taxpayers may access the rate established in the previous regulation (i.e. 9%), provided they have previously accredited the conditions to access such differential rate, thus configuring a consolidated legal situation defined by the Constitutional Court in judgment C-119 of 2018 as: “(…) those benefits that have already become effective, under the protection of the law, being incorporated to the taxpayer’s assets.”
In this regard, the last paragraph of Article 96 of the tax reform expressly established a protection to such consolidated legal situations as follows: “(…) taxpayers who have accredited the conditions to access the differential rates and other tax benefits repealed or limited by this law, may enjoy the respective treatment during the entire term granted in the legislation under which the respective legal situations were consolidated.”
Accordingly, if the taxpayer met all the requirements to access the 9% income tax rate before December 31, 2022, the taxpayer will be able to make use of such differential rate, since the taxpayer assumed a legitimate burden for the use of the differential rate, configuring a consolidated legal situation that shall not be ignored by the National Government.