The law modifies the tax benefits for non-conventional renewable energy projects, including the value-added tax exemption, the accelerated depreciation rate and the income tax deduction.
On 10 July 2021, Colombia enacted and published in the Official Gazette Law 2099, modifying the tax incentives applicable to non-conventional renewable energy (NCRE) projects.
The law also establishes provisions on energy transition, revitalization of the energy market and economic recovery. In addition, the law includes tax provisions applicable to NCRE projects.
Specifically, the law establishes that the tax benefits currently available for NCRE projects will also apply to power storage, smart metering systems and power management for NCRE, as well as investments in goods, machinery and equipment used in the manufacturing, storage, packaging, distribution, re-electrification, research, and final use of green and blue hydrogen.
The following tax benefits apply to these types of projects:
- An income tax deduction equivalent to 50% of the investment, over a 15-year period
- Accelerated depreciation rate of 33.33% (the law increased the depreciation rate from 20% to 33.33% rate)
- Value-added tax (VAT) exclusion
- Tariff exemption
Investments, goods, machinery and equipment used for carbon capture and storage, however, will qualify for an income tax credit of 25% of the investment made, a VAT exclusion and the accelerated depreciation (mentioned above). To qualify for the benefits, the law would require carbon capture and storage projects to be registered before the National Registry of Reduction and Emission of Greenhouse Gases and approved by the regulatory authorities.
The tax and tariff benefits would apply for 30 years from 1 July 2021.
For additional information with respect to this Alert, please contact the following:
Ernst & Young S.A.S., Bogota
- Margarita Salas
- Luis Orlando Sánchez
- Josep M. Albert
Ernst & Young LLP (United States), Latin America Business Center, New York
- Zulay Arevalo
- Ana Mingramm
- Enrique Perez Grovas
- Pablo Wejcman
Ernst & Young Abogados, Latin America Business Center, Madrid
- Jaime Vargas
Ernst & Young LLP (United Kingdom), Latin America Business Center, London
- Lourdes Libreros
Ernst & Young Tax Co., Latin America Business Center, Japan & Asia Pacific
- Raul Moreno, Tokyo
- Luis Coronado, Singapore
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.
