In brief
The Office of the Attorney General has initiated more than 20,944 criminal investigations against company executives who act as withholding agents and failed to transfer funds to the State. These actions are based on complaints filed by the National Tax and Customs Directorate in recent months.
Although the Criminal Code does not establish direct criminal liability for legal entities, legal representatives, administrators, and any individual responsible for tax payments acting on behalf of a company may be considered active subjects of tax crimes. This framework implies that corporate decision-makers assume personal criminal risks, including imprisonment, arising from the tax conduct of their organizations.
Criminal legislation, which seeks to regulate all aspects of human behavior, has also identified the need to implement general and specific preventive measures against tax evasion, establishing three offenses that may be committed by any individual, but particularly by company executives.
Key points
- The offense of Failure of the withholding or collecting agent is committed by withholding agents, self-withholding taxpayers, VAT and national consumption tax taxpayers, and collectors of contributions and fees. This offense consists of failing to transfer the amounts collected to the Tax Authority, and it is punishable not only when the tax is not collected but also when it is not timely paid over.
- If a criminal proceeding is initiated, a legal strategy must be developed to either demonstrate compliance with the tax obligation—thereby proving the absence of a criminal offense—or to pay the outstanding taxes in order to achieve early termination of the proceedings without a conviction.
- It is possible to conclude the criminal investigation by paying the outstanding taxes, up to two times.
In detail
Colombia has three tax-related criminal offenses. This note focuses on the offense of Failure of the withholding or collecting agent, as it is the one for which the National Tax and Customs Directorate and the Office of the Attorney General have joined efforts to initiate criminal investigations:
Failure of the withholding or collecting agent
How does this offense work?
This offense penalizes individuals who, acting as withholding agents, self-withholding taxpayers, VAT or national consumption tax taxpayers, or those responsible for collecting public fees or contributions, fail to collect the tax or fail to remit it in a timely manner.
Based on the legal provision, four possible perpetrators of this conduct can be identified:
- Who are withholding agents, as defined under tax regulations, and who are required to withhold tax at source and subsequently remit it to the Tax Authority within the legally established deadlines.
- Individuals who have requested to be recognized as self-withholding agents, in accordance with the applicable tax rules governing this status.
- Any taxpayer responsible for VAT or the national consumption tax, who must collect these taxes in a timely manner and remit them to the Tax Authority within the prescribed period.
- Those who, by law, are required to act as collectors of public contributions or fees.
What happens if any of the above parties is a legal entities?
Criminal liability is subjective; therefore, criminal responsibility falls on the individual who has full knowledge of the facts and acts with intent (mens rea). While the Office of the Attorney General typically initiates criminal proceedings against company executives or legal representatives, liability is ultimately determined based on intent. For this reason, having clear policies regarding withholding, self-withholding, and tax collection processes is essential to protect corporate executives.
With respect to the object of the offense, this will vary depending on the scenario. In the case of a withholding agent, it will be the withholding tax. For taxpayers responsible for collecting the national taxes mentioned above, the object will be VAT or the national consumption tax. Finally, in cases involving collection, the relevant contribution or fee will constitute the material object of the offense.
This offense essentially sanctions two types of conduct:
Failure to remit the tax to the corresponding Tax Authority in a timely manner
Failure to collect the tax
This offense is of significant national importance. According to official statistics from the Office of the Attorney General, 4,351 new cases of Failure of the withholding or collecting agent were recorded in the first six months of 2024.
It is important to note that the payment or offsetting of the amounts owed to the corresponding Tax Authority constitutes a mechanism for early termination of the criminal proceedings.
Recommended actions
Clearly define, in internal policies and manuals, who is responsible for fulfilling formal obligations before the Tax Authority.
If another employee is designated to assume these responsibilities, promptly notify the relevant Tax Authority.
Implement diligence and compliance programs in tax matters, particularly when handling funds that must be remitted to the Tax Authority.
If a criminal proceeding is initiated, develop a legal strategy to either demonstrate compliance with the tax obligation (and therefore the absence of a criminal offense) or ensure payment of the outstanding taxes to achieve early termination of the proceedings without conviction.
The tax criminal regime is currently in a consolidation phase, with expectations of increased effectiveness in deterring tax evasion. Limiting the possibility of extinguishing criminal liability through payment to only two instances seeks to prevent such payments from becoming a “license to offend,” establishing stricter consequences for repeat violations.
Gabriela Mesa, Junior Associate, has contributed to this legal update.