The automatic refund as an ICT tool for the strengthening of the Tax Administration in Colombia

The Colombian Tax Administration considers the need to have the cash flow required for taxpayers and businesses, with the firm purpose to support the revival of the country. As a result of the conditions in economic matters that have been derived by the COVID-19 pandemic, In record time, we have technologically implemented a procedure for automatic refunds, which are the speedy recognition of credit balances determined in income tax and complementary tax returns and sales tax (VAT).

Thus, the refunds of balances in favor were established automatically, for applications corresponding to Income Tax and Sales Tax, of those taxpayers who do not represent high risk and who bear their costs, expenses, and/or taxes discountable through the Electronic Invoicing System with prior validation in more than eighty-five (85%) and their total billing.

On July 7, 2020, the automatic refunds procedure was regulated through Decree 963 of 2020, which provides that the Special Administrative Unit of the National Taxes and Customs Directorate-DIAN, will automatically issue the respective administrative act that grant the refund within fifteen (15) business days following the date of filing the request in due form. Refund requests that do not meet the requirements established to be entitled to the automatic return, will continue with the regular process (20, 30 or 50 business days).

From July 18, 2020, the version through which validations are made to determine if an application meets the conditions established for the automatic refund procedure, generating this way a huge technological advance in terms of refunds for the DIAN, in consideration that, for this procedure, only human intervention is required for the signature of the administrative act that approves the refund.

The technological development of this operation is immersed in the IT Service of Refunds, therefore, in order to understand how the implementation of this advance was carried out, we need to mention the experience that DIAN had with the IT Service (hereinafter IT) of Refunds that came into operation in 2012 and that is constantly updated. This works as an interface system that feeds on all the Computer Services of the Administration, both tax and customs. The accuracy of the Refund Service depends on the correct functioning of all the DIAN Services.

The IT Refunds Service is a system that works through the interoperability cross with all the other services of the DIAN, therefore, the technological advancement of the Tax Administration in their systems has a direct impact on the functioning of refunds, starting with the registration and identification of the taxpayer; it is as well as, the proper functioning of the Single Tax Registration number (TIN), enables the IT Refunds to use the information to classify and determine the compliance of the taxpayer’s formal obligations, as well as the requirements applicable to the applicant in an automated way.

On the other hand, the enormous progress that DIAN has made in the implementation of tax returns in a digital way, as well as the recent implementation of digital signatures for taxpayers to submit their returns through the Computer Service of Filing, has increased the usability of the IT Refunds Service and more precise results are given in the validations carried out by the system to guide officials in the tasks they must perform. It is worth quoting Marcio F. Verdi, of the Inter-American Center of Tax Administrations (CIAT), with reference to the implementation of ICT as tools of tax administrations “there is no public policy possible in the absence of a strong economic policy, there is no economic policy in the absence of a strong fiscal policy, there is no fiscal policy in the absence of a strong tax administration”, and that is precisely what the IT Refunds Service generates with its horizontality, a strengthening of the Tax Administration.

In general terms, the DIAN IT Refund Service is fed with the following services:

  • Single Tax Registry: To classify applicants and determine compliance with formal obligations.

  • Tax Returns: To verify the correct completion of the declarations object of application and determine what refund requirements must be fulfilled, according to the type of taxpayer.

  • Customs Declarations: To assess compliance with the requirements established by law in Sales Tax refunds involving foreign trade.

  • Risk Profiling: To decide the need for investigation in refund requests and determine the origin of the balance in favor.

  • Current Account: To verify the existence of overdue obligations borne by the taxpayer that must be previously offset with the balance in favor.

On this working scheme, the processing of automatic returns is built, which involves the adhesion to a new service, electronic invoicing. Based on the pre-existing law requirements for returns, this interoperability began to be implemented in such a way that today the IT Refund Service is able to verify if the taxpayer has more than 85% of the costs or expenses in the Income Tax or Discounted Taxes in the case of VAT, supported with electronic invoicing in real-time and automated form, from the moment the taxpayer sends his request to the Refund Service.

In addition to the above, we implemented the mechanism of electronic notification of the administrative acts to be issued from the IT Refund Service, generating in this computer service the interoperability of a new service developed by the DIAN. This is the electronic notification. In that order, we can conclude that, with the start of the automatic refunds and the developments that it has brought in the Computer Services of the DIAN by horizontality, the Tax Administration in Colombia has hugely progressed in the field of technology, which brings the following benefits:

  • Eligible taxpayers will be able to access resources more quickly to meet their cash flow needs.

  • Reduction in the levels of fraud in improper refunds, due to the processing of data that allow to verify automatically in a large percentage of cases, the origin of the balances in favor.

  • Greater effectiveness in the processes of the Tax Administration, allowing officials to have greater precision when selecting the population subject to audit and investigation.

Finally, we invite the country to make use of electronic invoicing and file their tax returns in a virtual way to be able to access the benefits that come with the filing of refund requests through the IT Service, which contributes to the transformation of the DIAN and increases the proximity with the citizen.

Disclaimer. Readers are informed that the views, thoughts, and opinions expressed in the text belong solely to the author, and not necessarily to the author's employer, organization, committee or other group the author might be associated with, nor to the Executive Secretariat of CIAT. The author is also responsible for the precision and accuracy of data and sources.

Leave a Reply

Your email address will not be published.

CIAT Subscriptions

Browse through the site without restrictions. Consult and download the contents.

Subscribe to our electronic newsletters:

  • Blog
  • Academic offer (Only in spanish)
  • Newsletter
  • Publications
  • News alert

Activate subscription

CIAT Members

Representatives, Correspondent and Authorized staff (TA)