The Court Strikes Down Regulation With Which the Government Intended to Collect More Than $4 Billion

Tax attorney Juan Carlos Valencia was interviewed by El Tiempo about a recent decision from Colombia's Constitutional Court that affects the country's tax reform. The court struck down a paragraph that prohibited the deduction of royalties from the income tax base of companies dedicated to exploration and exploitation of non-renewable natural resources. Mr. Valencia highlighted the implications of the ruling for these companies.

"Before the tax reform, the producer that paid its royalties in money included the state's income, but at the same time took it as deductible, that is, its effect was neutral," he said. "If the rule had been maintained, you would have to include that income that does not belong to you, but you would not be able to deduct it, so you end up paying taxes on fictitious, not real, income that actually belongs to the state."

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