Since 1995, when Colombia presented its first electronic invoicing regulations, the country has continued to update its requirements and expand the scope of domestic transactions and businesses the mandates apply.
E-invoicing became mandatory for all businesses in 2019, and the country’s model is similar to those applied in other Latin American countries like Brazil, Chile, and Mexico. Furthermore, all e-invoices require e-signatures generated from an accredited certification authority.
The latest update to Colombia’s e-invoicing rules came on March 29, 2023, via Decree 442, with the major highlight being ecommerce platforms mandated to provide vendors the means to issue digital sales invoices and the extension of the rules to equivalent documents like electronic payroll documents and cash register receipts.
In this article, we provide a deep dive into Colombia’s e-invoicing regulations, including the core requirements, entities the mandates apply to, the penalties for not adhering to the rules, and the most efficient way to issue electronic invoices that meet all the requirements.
Is electronic invoicing mandatory in Colombia?
Electronic invoicing is mandatory in Colombia for all businesses that remit value-added tax (VAT) to the Dirección de Impuestos y Aduanas Nacionales (DIAN), which stands for the National Colombian Tax Authority.
The preclearance mandatory model came into effect in January 2019, first for the largest taxpayers in a phased implementation.
It became compulsory for all taxpayers in November 2020 and for all transactions, including business-to-government (B2G), business-to-customers (B2C), and business-to-business (B2B).
All suppliers must issue electronic invoices, and it’s also compulsory for all buyers to receive the same. The buyer does not need to validate the e-invoice. However, the buyer can accept or reject the invoice.
Additionally, DIAN must clear all invoices before the supplier can send the same to their customers.
Without DIAN’s approval, the supplier cannot issue the receipt or ship the goods. Before mid-2019, this was not the case. The law required businesses to send invoices to DIAN at most 24 hours after issuance.
What are the updated e-invoicing regulations in Colombia?
In recent years, the national tax authority and the Colombian government have been making several changes to electronic invoicing regulations, with the most recent changes coming in March 2023 via Decree 442 and November 2023 via Resolution 165/2023.
The latest approved changes in November came exactly a year after the government published a draft proposal.
The main modifications in Decree 442 are in four categories, namely ecommerce platforms, general changes, expansion of what classifies as an electronic equivalent document, and changes to e-supporting documents related to taxpayers not required to issue invoices.
The major takeaways from Resolution 165 are changes to Technical Annex 1.9 and the introduction of version 1.0 of the Technical Annex on Electronic Equivalent Documents.
We expound on these changes below.
The alterations to Colombia’s electronic invoicing system via Resolution 165/2023 include:
- DIAN now allows credit and debit notes without reference. However, companies must specify the affectation period.
- Buyers can no longer issue invoices with dates preceding the clearance date (initially permissible by 5 or 10 days). Now, you must certify all documents (adding e-signature) on the same date they were issued.
- The Resolution affirmed that there would be strict matching between the data provided in the e-documents, especially the Legal Name and Tax Identification Number (NIT), and the data in the tax registry form (RUT).
- All e-invoices issued for export and in pesos must be issued at the time of sale and must be provided by the entity in the transaction paying VAT or income tax.
- Businesses can only issue credit notes for one month.
- DIAN provides an exception for handling electronic invoices offline for contingency. However, companies must keep proper documentation for such invoices and work towards having the right e-invoicing compliance infrastructure.
- There are two types of equivalent documents: those with POS systems and those without. Transactions on POS systems shall not exceed 5 Tax Value Units (UVT) before taxes. If so, businesses must use an electronic invoice. One UVT for 2024 is COP 47,065 (EUR 10.75) per a draft resolution from DIAN.
- DIAN also released a phased implementation timeline for Annex 1.0 for e-equivalent documents.
The summary of Decree 442 is as follows:
DIAN reaffirms that ecommerce platforms must make provisions for vendors on their platforms to be able to issue e-invoices and for customers to receive the same.
Note that the government places the burden of issuance on the vendors and not the platform.
The general modifications cover the following:
- DIAN extended the types of documents covered under the "invoicing system." In addition to the already established sales invoices and selected electronic equivalent documents, Colombia's tax authority also included all electronic documents relevant to all taxpayers' interactions with the DIAN. Taxpayers can send them electronically if the document serves DIAN's regulatory and controlling activities.
- All documents shall also have the minimum required details articulated in Article 617 of the Tax Code and any other information required based on future regulations.
- The purchaser's obligations are limited to the requirements DIAN stipulated in its regulations.
Modifications to e-equivalent document definition
DIAN redefined what qualifies as an electronic equivalent document to include other documents.
The tax authority also reiterated that these documents must meet the requirements DIAN established.
Decree 442 also emphasized the electronic invoicing process, which follows a preclearance model.
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What is the timeline for the implementation of Colombia's new e-invoicing rules?
The timeline for implementing the changes to technical annex 1.9 for e-sales invoices is no later than 1 February 2024.
The implementation of Annex 1.0 for e-equivalent documents is phased and in two categories as follows:
For electronic equivalent documents with POS system
- 3 February 2024: The largest taxpayers as defined in Resolution No. 000105, published on 23 November 2020
- 1 March 2024: Taxpayers that declare income tax but are classified as a large taxpayer
- 1 April 2024: Businesses that don’t declare income tax
For other electronic equivalent documents
- 1 May 2024: Public utility services and passenger transport ticket
- 1 June 2024: Flight passenger ticket and lottery receipt or any game of chance or luck
- 1 July 2024: Toll collection documents, documents issued by the Stock Exchange for the operations settlement, and agricultural and other commodities operations documents
- 1 August 2024: Ticket for performance arts and public shows and cinema ticket
Characteristics of Colombia's e-invoicing rules
These are the characteristics of Colombia’s e-invoicing rules:
The standard format for electronic invoices in Colombia is XML 1.8, which follows Universal Business Language V2.1.
Additionally, taxpayers must create a compressed PDF version of a graphical representation (picture or scan) of the invoice for print presentation for businesses that cannot receive e-invoices. The PDF must include a QR Code.
The following is the required information for all e-invoices:
- The details of all parties, including the legal name and tax identification of the issuer and customer
- VAT paid
- Total value of transactions
- Means of payment
- QR code
- The description of products, goods, or services; also, the
- Digital signature of the issuer
- Date and time of issuance
- Price of services or goods; price can be fixed or variable, however, companies must provide a reference price for the latter category
- The Clave Única de Documento Electrónico (CUDE) or Clave Única de Facturación (CUFE) code is another field on the invoice. We’ll explain these codes below.
- Consecutive invoice number provided and authorized by DIAN during the registration as an invoice issuer
Electronic invoice issuers in Colombia can use the DIAN's free portal to submit invoices, but this service is only available to micro and small companies.
Medium to large companies must use one of the few authorized e-invoicing providers to issue, submit, and certify the document's authenticity via a digital signature or secure hash algorithm.
DIAN also provides each e-invoice issuer with a Technical Control Content Key for generating CUFE.
CUFE is a Unique Electronic Invoice Code for each document's identification. CUDE and CUFE are the same, except that the former is for other electronic equivalent documents.
The e-invoicing regime in Colombia applies to all VAT-registered businesses.
Some excluded industries or segments include financial institutions, businesses with income below a threshold (5 UVT), petroleum and natural gas retailers, and more.
E-invoicing also covers both import and export cross-border transactions.
Digital signature or certification
E-invoicing in Colombia also mandates the inclusion of digital signatures.
Digital signatures certify the authenticity of a document. The digital signature can only be generated from a digital certificate authored by an accredited certification provider.
The National Accreditation Body of Colombia (ONAC) certifies suppliers as Technological Service providers (PST).
Storage and archiving
The archiving period for storing an approved invoice is five years. The five years start counting in the year which follows the transaction year. Archiving the documents abroad is also allowed.
What is the penalty for not adhering to Colombia's e-invoicing rules?
The penalty for non-compliance can range from fines to business closures. Potential penalty falls into three categories:
- Submitting e-invoices without the correct format may attract a fine of up to 7,500 UVT.
- Submitting an invoice without the required information may be subject to a fine of 1% of the invoiced amount, not more than UVT 950.
- Failure to issue e-invoices may lead to suspension of operation or, in extreme cases, business closure.
Between January and March 2023, DIAN closed 80 establishments in the city of Medellín for non-compliance.
What should businesses do to comply with Colombia's e-invoicing rules?
With multiple requirements, companies can easily fall foul of e-invoicing regulations. To remain compliant and continuously meet regularly updated rules, here are some of the tips you should adopt:
Keep abreast of regulations
Even if you’re using technical solutions to handle e-invoicing compliance, it’s essential to keep up with the rules as DIAN publishes them.
Even if the rules are still at the proposal stage, you must examine how they may impact your business or e-invoicing process.
Furthermore, reinforce the need for regulatory compliance with your team and ensure that there’s someone responsible for ensuring your business adheres to all established mandates.
Use the right e-invoicing technology solutions
Multiple countries have adopted e-invoicing over the last decade, with many more coming on board.
Manually submitting and ensuring all e-invoices meet all the stipulated requirements will likely lead to errors, especially If you have business operations in numerous countries.
You need a solution that provides interoperability with DIAN’s infrastructure and the tax authorities of the countries where you have operations.
These solutions must also be capable of integrating with your existing accounting system for easy implementation.
Furthermore, they must have features like electronic archiving and management of acknowledgments.
It will help you remain compliant and enable you to issue, submit, and certify electronic invoices that adhere to the rules.
Takeaway: Stay on top of e-invoicing rules in Colombia and beyond
DIAN, the tax authority in Colombia, has continued to release resolutions and decrees aimed at modifying and solidifying the country’s e-invoicing systems.
Its recent modification via Resolution 165/2023 provided a new definition and rules (Technical Annex on Electronic Equivalent Documents 1.0) for e-equivalent documents. The new resolution also modified the preexisting technical annex 1.9.
These rules will come into force on February 1, 2024, in a phased implementation.
With the right e-invoicing solutions like Storecove, you never have to worry about the proper format again, whether the e-invoice is destined for Colombia or other countries.
All you need to do is supply the data, and the system automatically converts it into the local standard of the country you’re sending the e-invoice to, including Colombia and over 50 others.
Contact us today to see how Storecove works and how we can help you comply with the e-invoicing regulations in Colombia.
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