Through Resolution No. 319 of 2022 (the “Resolution“), the Mining-Energy Planning Unit (“UPME“) repealed Resolutions No. 196 and 203 of 2020 and established the procedure that will now regulate the granting process of certifications of the tax incentives provided in Act 1715 of 2014 (the “Act 1715“).
- The tax incentives provided by Act 1715 are the following:
- Income tax: (a) Special deduction of the 50% of the total investment, in a period not exceeding 15 years, counted from the fiscal year next to the one in which the investment has begun operations, subject to limitations; (b) accelerated depreciation up to a global annual rate of 33.33% for machinery, equipment, and civil works required for the pre-investment, investment, and operation of the projects described in following numeral ii.
- VAT: domestic and imported goods and services destined for pre-investment and investment of the following activities are a VAT excluded:(a) the generation or use of energy from non-conventional sources, (b) measurement and evaluation of potential resources, (c) actions and measures for efficient energy management, which are in the PROURE (Rational and Efficient Energy Use Program)
- Custom duties: machinery, equipment, materials, and raw materials to be used exclusively for the investment and reinvestment in new projects described in numeral ii, which are not produced by the national industry, will be exempt from custom duties.
The incentives mentioned above shall apply to (i) energy generation projects from non-conventional sources, ii) efficient energy management actions or measures, and iii) green or blue hydrogen projects.
The goods and services eligible for tax benefits are listed in Annex 1, “List of goods and services FNCE”; Annex 2, “List of goods and services GEE”; and Annex 3, “List of goods and services green or blue hydrogen” of Resolution 319 of 2022.
- Procedure for the issuance of certificates:
The procedure to apply for the issuance of a certificate and be eligible for the tax incentives is composed by the following steps:
- Apply: the interested party shall provide, through the UPME web portal, the documentation required in section 5 of the Resolution.
- Preliminary review of the application: The UPME will have ten (10) working days as from the filing of the appliance date to review whether the information provided is complete or not or if the application was rejected. If not, the interested party will have one month to provide or clarify the information. If it is complete, the UPME will notify the interested party that it will proceed with an in-depth review.
- In-depth review: the UMPE will perform an in-depth review. This process may take between 20 to 40 working days, depending on the type of project. During the review, it may request clarifying the information for one more time, which will suspend the review term. Once the clarifications are received, the UPME will have ten (10) additional working days to decide.
- Results: the result of the review will be informed, that could be favorable or un favorable case in which could be appealed.
- Transition:
- It will not be necessary to request modifications, or a re-issuance of the certificates issued from July 10, 2021, to August 5, 2022. Therefore, they will be valid to be availed with the tax incentives provided by Act 1715 of 2014.
- If the taxpayer requested the certification before the Resolution entered into force, their process will be governed by Resolutions 196 and 203 of 2020.
