The Council of State clarifies the requirements for the application of the VAT exemption for services rendered in the country and used exclusively abroad

In order for exporters of services to benefit from the VAT exemption, they must comply with a number of requirements (section c of article 481 of the Tax Statute) among which are that the services are rendered from Colombia; that their use or exploitation is carried out exclusively abroad; and that the beneficiary does not have any business or activities in Colombia.

In its ruling number 27317 of July 19, 2023, the Council of State has reiterated that a service is understood to be used abroad when the benefit or profit derived therefrom takes place outside the national territory, provided that the activities that constitute the service, whose export is claimed, have been performed in Colombia, the foregoing in accordance with the provisions of paragraph c) of Article 481 of the Tax Statute.

Thus, the requirements for the VAT exemption on the exportation of services are as follows:

• That the service had been rendered in Colombia to a foreign country.
• That the service was used or consumed exclusively abroad.
• That the consumer is one or several persons, individual or business entity, without any business or activities in Colombia.
• That, even if the consumer is national or has ties with Colombia, the service object of the exemption must be used abroad.
• That the other requirements indicated by article 2 of Decree 2223 of 2013 were met which are:

1. To be registered as an exporter of services in the RUT.
2. Keep the invoices, service offers and/or quotations with their respective acceptances, the contract between the parties or the purchase/service order plus the acknowledgement of receipt of the service.
3. To have the certification of the provider or legal representative stating that the service was provided to be consumed exclusively abroad.

The Council of State explained that a difference exists between the acquisition of a service in Colombia and its use abroad. Even if a service is acquired in national territory, if this (i) is provided from Colombia (ii) is consumed exclusively from abroad as, for example, a medical assistance service that is acquired in Colombia to be used outside the territory in case of a contingency (iii) that the service is used abroad by a person without business or activities in Colombia for the specific service as in the case of the traveler and (iv) even if he/she has them, this service is used exclusively abroad because the advantage, benefit or consumption of the same is given outside Colombia.

It is always necessary to identify the final destination of the operation where the service acquired from Colombia is going to be materialized in order to apply section (c) of article 481 of the Tax Statute. The concept of business or activity cannot be confused as all the actions that are performed in Colombia to acquire the service that will be performed abroad, since the previous acts do not prevent the application of the exemption since, in the end, the client must benefit from the service abroad. Nor can the non-exemption be claimed if the consumer of the service abroad has businesses unrelated to the business subject to exemption in Colombia if the activity to be exempted complies with all the requirements of art 481 already referred to.