In brief
In this edition of our Tax News bulletin, we present four developments that we consider relevant for our clients’ tax planning and compliance. First, the National Government issued Legislative Decree 1389 of 2026, creating a special Works-for-Taxes modality to finance the reconstruction of the territories affected by the 10 August 2026 earthquake, under the State of Economic, Social and Ecological Emergency declared through Decree 1261 of 2026 (as amended by Decree 1348 of 2026).
Second, the Fourth Section of the Council of State ruled on 30 July 2026 on the date that must be used as a reference to compute the one-month term for filing the income tax return upon a change of foreign investment titleholder, and, consequently, the statute of limitations applicable to the National Tax and Customs Directorate’s (DIAN) assessment powers. Finally, DIAN issued Ruling 100208192 – 581 of 2026, clarifying that income tax adjustments arising from the transfer pricing regime do not automatically modify a taxpayer’s creditable VAT.
Regulatory, legislative, judicial and administrative analysis
Below we analyze each of these developments, in the order mentioned above.
Legislative Decree 1389 of 2026: Special Works-for-Taxes modality for reconstruction
Through Legislative Decree 1389 of 9 September 2026, issued under the State of Economic, Social and Ecological Emergency declared by Decree 1261 of 2026 (as amended by Decree 1348 of 2026) following the 10 August 2026 earthquake, the National Government temporarily created a special Works-for-Taxes modality for reconstruction, applicable in the departments of Antioquia, Caldas, Cauca, Chocó, Quindío, Cundinamarca, Risaralda, Huila, Valle del Cauca, Tolima, Norte de Santander, Bolívar, Nariño, Sucre, Santander and Caquetá.
The decree extends the Works-for-Taxes mechanism set out in article 238 of Law 1819 of 2016 and article 800-1 of the Colombian Tax Code to all municipalities and districts affected by the earthquake, regardless of whether they are classified as Zones Most Affected by the Armed Conflict (ZOMAC) or Territorial Development Programs (PDET). To this end, it creates the Reconstruction Works-for-Taxes Project Bank, managed by the Territorial Renewal Agency (ART) and coordinated with the Integrated Public Investment Platform (PIIP), operating under its own timeline.
Eligible projects must be directly related to the response, recovery and reconstruction of affected infrastructure, across 10 investment lines: social and priority housing; education; health; potable water and basic sanitation; energy; road and transport infrastructure; Information and Communications Technology (ICT); rural public goods; sports infrastructure; and disaster risk management. The Superior Council of Fiscal Policy (CONFIS) will set the annual cap and its allocation between the ordinary and special modalities, with at least 35% of the special modality’s cap reserved for projects located in fifth- and sixth-category municipalities.
Notably, the decree allows taxpayers to make advance contributions to the trust against the current year’s income tax, up to 50% of the tax liability determined in the immediately preceding year’s return, to be credited afterwards in the current year’s return. The decree is effective as of its publication date, 9 September 2026.
Council of State: Relevant date for computing the filing deadline upon a change of foreign investment titleholder
In a ruling dated 30 July 2026 (Docket 05001-23-33-000-2017-01893-01, case 29219, Reporting Justice Myriam Stella Gutiérrez Argüello), the Fourth Section of the Council of State held that, for purposes of computing the one-month term to file the income tax return upon a change of foreign investment titleholder, the relevant date is the date on which the transfer of shares is recorded in the shareholders’ registry book, rather than the date reported by the parties to Banco de la República for purposes of substituting the foreign investment.
The Section noted that, under article 406 of the Commercial Code, the transfer of shares is consensual between the parties, but only becomes effective vis-à-vis the receiving company and third parties once recorded in the shareholders’ registry book; that recordal date is therefore the trigger for computing the statutory filing deadline and, consequently, the five-year term available to DIAN to issue the assessment acts under article 717 of the Tax Code.
In the case at hand, since the recordal in the shareholders’ registry book was shown to have occurred on 14 February 2011 (rather than 5 March 2011, the date DIAN had used based on the report to Banco de la República), the Council of State concluded that the assessment and the penalty resolution for failure to file were issued and notified outside the statutory term, and accordingly annulled them for loss of the tax authority’s competence.
This ruling is relevant for taxpayers involved in share transfers, changes of titleholder or substitutions of foreign investment, as it confirms that the filing deadline and DIAN’s statute of limitations should be computed based on the recordal date in the receiving company’s shareholders’ registry book, rather than necessarily the date reported to Banco de la República.
DIAN Ruling 100208192 – 581 of 2026: Creditable VAT and transfer pricing
Through Ruling 100208192 – 581 of 23 April 2026, DIAN’s Regulatory and Doctrine Subdirectorate addressed whether income tax adjustments made under the transfer pricing regime of article 260-2 of the Tax Code automatically modify a taxpayer’s creditable VAT.
DIAN concluded that they do not. Under the proviso to article 260-2 of the Tax Code, the transfer pricing regime only produces effects for purposes of determining income tax; accordingly, adjustments that increase income or reduce costs and deductions for income tax purposes do not automatically carry over to the determination of output or creditable VAT.
As a result, any review of the deductibility of creditable VAT must be conducted independently, in light of the requirements of article 488 of the Tax Code — in particular, that the taxed good or service be computable as a cost or expense under the income tax rules (including the causality, necessity and proportionality criteria of article 107 of the Tax Code) and be allocated to VAT-taxed transactions — and the timing requirements of article 496 of the same statute.
This ruling is particularly relevant for taxpayers with intercompany transactions subject to the transfer pricing regime, as it confirms that income tax adjustments and the analysis of creditable VAT must be addressed independently, without presuming an automatic adjustment between the two taxes.
Conclusions
The developments summarized above illustrate the ongoing regulatory, legislative, judicial and administrative dynamics shaping the Colombian tax landscape in the second half of 2026. On the incentives side, both Decree 1389 of 2026 offer significant planning opportunities for clients with investment projects, or those interested in supporting the reconstruction of the territories affected by the 10 August 2026 earthquake, through Works-for-Taxes mechanisms and legal stability contracts, respectively.
For their part, the Council of State ruling and the DIAN ruling provide practical guidance for managing tax risk: the former, on computing filing deadlines and the statute of limitations in foreign investment transactions; and the latter, on delineating the effects of the transfer pricing regime vis-à-vis creditable VAT.
We recommend that our clients assess the impact of these developments on their particular operations and projects, especially those with investments in the territories affected by the emergency, large-scale expansion plans, corporate restructurings involving a change of foreign investment titleholder, or transactions subject to the transfer pricing regime.
At Baker McKenzie, we closely monitor these regulatory, legislative, judicial and administrative developments, and we remain available to assist our clients in assessing their impact, as well as with related compliance, planning and reporting obligations.