Colombia Suspends VAT

by Mike Godfrey, Tax-News.com, Washington

29 July 2010

A 30 day "social emergency" has been declared in 37 Colombian municipalities that border Venezuela and the country’s 16% VAT has been suspended in these areas on specified commercial transactions, in order to mitigate economic problems arising from Venezuela's decision to sever all relations with Colombia.

Finance Minister Oscar Zuluaga said that, in accordance with decree 2694, the suspension of VAT will be valid for 120 days from the date of the decree’s publication. According to Zuluaga, the 37 municipalities are located in the provinces of Boyaca, Cesar, La Guajira, Norte de Santader, Arauca and Vichada. VAT is suspended on food, footwear, clothing, construction materials and electrical appliances.

There is also provision by decree for the creation of free trade zones with special incentives for businesses in border areas, but excluding oil, mining and related industries. Two business rallies are scheduled for August in Cúcuta, a city of over 1.2 million inhabitants, which is heavily dependent on trade with Venezuela.

The first rally will take place on August 5 and 6, with more than 50 buyers brought in from Bogotá, Medellín, Cali, Barranquilla and Cartagena to stimulate trade. The second, involving over 30 entrepreneurs from Mexico, Ecuador, Chile, Central America and the Caribbean, will be held on August 23 and 24.

Also Bancoldex, the Colombian micro-credit bank, will be active in supporting local entrepreneurs who need to refinance their debts, arrears, or are seeking to initiate new business projects.

Venezuela recently broke off all trade with Colombia after being accused by the Organization of American States (OAS) of providing a haven for Revolutionary Armed Forces (FARC) and National Liberation Army (ELN) terrorists.

Recommended