National Government Insists to the Court That Oil Companies Cannot Deduct Royalties

Tax attorney Juan Carlos Valencia was cited in an Asuntos Legales article about a case before the Colombian Supreme Court concerning an element of the country's tax reform that affects the deductibility of royalties for oil and gas companies. Under current law, the cost associated with the royalties allowed a reduction in the base for calculating income tax. With the tax reform, this cost will no longer be deducted from the fixed base and, because of that, will increase the taxes for companies that exploit natural resources. Mr. Valencia commented on the controversy surrounding this provision's constitutionality.

"The exaggerated TET (Effective Tax Rate) levels violate the sector capacity and reveal a confiscatory effect, all of which would create a series of doubts about the constitutionality of this law," he said.

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