How electronic invoicing works in Colombia

Electronic invoicing has a long history in Colombia. As early as 1995, the government granted it the same validity as paper invoices, making Colombia one of the first countries in Latin America to do so. After several initiatives, 2015 marked a key date in its development in the country when the National Tax and Customs Directorate (DIAN) launched the Electronic Invoicing System (SFE). Since its inception, Colombia's new electronic invoicing system has continuously improved and incorporated new tax documents into its electronic filing scheme. To achieve the adoption of electronic invoicing and new tax documents, DIAN has established various mandatory mass adoption schedules for taxpayers in a staggered manner.

For all these reasons, electronic invoicing in Colombia is in constant evolution and is the main driver of the digital transformation of the country's tax system. In this article, we analyze the functioning of electronic invoicing and the main developments in Colombia's electronic tax system.

Electronic Invoicing System – SFE

The Electronic Invoicing System of Colombia follows a pre-validation model. Electronic invoices, as well as other electronic tax documents, must be declared to the DIAN for validation prior to their issuance. Once validated by the DIAN, these are sent by the issuer to the client.

The Electronic Invoicing System of Colombia includes:

• Electronic sales invoice.
• Report for the validation of invoice booklets or paper invoices issued due to the issuer’s technological issues.
• Electronic Payroll Support Document.
• Support Document for Acquisitions from non-obligated parties.
• Registration of Electronic Sales Invoices as a Negotiable Instrument (RADIAN).
• Equivalent documents.

Electronic Sales Invoices

Of all the tax documents that make up the electronic invoicing system, the electronic sales invoice is the most widespread. The electronic sales invoice is mandatory for the following taxpayers:

• Legal entities that sell goods and/or services.
• Natural persons who sell goods and/or services with gross income exceeding 3,500 UVT
• Natural persons who are state contractors with gross income exceeding 4,000 UVT, or natural persons other than retailers, artisans, farmers and ranchers with income below 3,500 UVT who:
  - Have more than one commercial establishment.
  - Exploit intangibles.
  - Are customs users.
• Deposits and investments exceeding 3,500 UVT.
• Taxpayers who opted for the Simple Taxation Regime (RST).

The electronic sales invoice includes credit invoices, debit invoices, and export invoices.

New Draft Resolution to Amend Resolution 0165 of 2023

The National Tax and Customs Directorate (DIAN) of Colombia has released a draft resolution aimed at modifying certain aspects of Resolution 000165, issued on November 1, 2023. Below, we outline the main proposed changes and their impact on the electronic invoicing process in the country.

Main Changes in the Draft Resolution

1. Generation of the Electronic Equivalent Document for Airline Tickets: A maximum period of 48 hours is set, starting from the reservation made in the Global Distribution System (GDS), for generating the electronic equivalent document.
2. Intermunicipal Transportation Documents: Intermunicipal transportation companies may issue physical tickets temporarily, with the requirement to transmit the information in XML format to the DIAN within 48 hours.
3. Contingency for P.O.S. Issuers: During contingency periods, issuers using P.O.S. systems may issue paper sales documents and must record and transmit these equivalent documents within 48 hours after the issue is resolved.
4. Paper Billing for Taxpayers without Internet Connection: Taxpayers in municipalities without internet coverage may issue invoices in paper or checkbook format, provided they comply with certain established requirements.
5. Graphical Representation: Taxpayers will be allowed to present invoice information in different languages and currencies. They may choose to display the information in Spanish and Colombian pesos, or in another language and currency.
6. Equivalent Document for Domestic Public Services (SPD): Utility companies in specific rural or urban areas with fewer than 1,000 users and inadequate internet coverage may issue equivalent documents on paper, provided they comply with the specified requirements.
7. Extension for the Electronic Equivalent Document “The Extract”: The mandatory issuance of this document is postponed until November 1, 2024.
8. Additional Invoice Information: The obligation to report additional information in the electronic sales invoice is included, particularly in transactions involving the purchase and sale of foreign currency and traveler's checks.

Consultation Period
The draft resolution will be open for public consultation until July 18, 2024. During this time, DIAN will accept comments, observations, and suggestions on the proposed changes.

This draft resolution is part of Colombia's ongoing effort to optimize and modernize its electronic invoicing system, aiming for greater efficiency and transparency in commercial transactions.

New Developments: Resolution 558

The Ministry of Health and Social Protection issued a new extension through Resolution 558 on March 27, 2024, for the implementation project of the reception and validation platform for the FEV in Health and RIPS (Individual Health Service Provision Records). 

This platform, managed by the Ministry, allows unified information flow and validation with processing availability 24/7, issuing the Unique Validation Code (CUV) for RIPS and its FEV in health, a requirement for filing before the ERP and other payers.

The extension is until October 1, 2024, and involves updating project activities and schedules.

Electronic Payroll Support Document

The Electronic Payroll Support Documents have been recently introduced into the Electronic Invoicing System. The use of electronic payrolls is mandatory for individuals requiring this document to support costs, deductions, or deductible taxes in their income tax returns. All companies subject to income tax and VAT that make payments or credits to other individuals due to their employment or legal relationship must issue electronic payrolls.

The electronic payroll issuance process established by the DIAN includes both the issuance of electronic payroll, called Electronic Payroll Support Documents, and adjustment notes for the Electronic Payroll Support Document, which are electronic documents issued to correct or modify electronic payrolls in case of errors.
Both documents must be electronically signed by the companies and sent to the DIAN to support the salary payment process.

Electronic Payroll Issuance Flow

Based on information obtained from the BPO or payroll software, EDICOM's Global Compliance solution generates the electronic payrolls and transmits them to the National Tax and Customs Directorate (DIAN), following the specified legal and technical requirements. The DIAN generates, signs, stores, and sends a validation message with the value "Document validated by the DIAN."

With the obtained validation, the EDICOM platform integrates the DIAN message into the company's BPO along with the graphical representation of the payrolls for automatic forwarding to employees. Additionally, the solution preserves electronic payrolls for the legally established time, guaranteeing their integrity and confidentiality. This issuance flow is equivalent for adjustment notes.

How to Declare the Electronic Payroll Document in Colombia

According to Article 3 of Resolution 000013 of 2021, the electronic payroll support document must be generated monthly, regardless of whether the company or individual in question makes payments in different or shorter periods than bi-weekly payments.

The deadline for transmitting the electronic payroll and adjustment notes to the document is within the first 10 days of the month following the payment or account credit. The electronic payroll cannot be presented on an annual consolidated basis and sent at the end of the tax period.

Registration of Electronic Sales Invoices (RADIAN)

The DIAN (Colombian Tax and Customs Authority) has created a platform for the registration of electronic sales invoices.

For a sales invoice to be considered a negotiable instrument, it must meet a series of technical and commercial requirements, be registered on the RADIAN platform, and be validated by the DIAN.
Invoice management in Colombia is regulated by the DIAN through the RADIAN platform. The registration of the Electronic Sales Invoice must be done through this platform.

This system allows for the registration, consultation, and traceability of electronic sales invoices circulating within the national territory, as well as the events associated with them.

EDICOM, as an Authorized Technology Provider by the DIAN, offers a functional and certified electronic invoicing solution for the issuance and reception of electronic invoices, debit notes, credit notes, and acknowledgment receipts. Additionally, our compliance platform for Colombia provides functionalities such as the generation, transmission, delivery, and registration of events in RADIAN in an integrated and automated manner with your management system.

Equivalent Documents

POs and tickets generated at the point of sale for the payment of a good or service must be issued electronically. The equivalent documents include:

• Ticket from cash registers with P.O.S. systems.

Implementation Calendar

Group 1 - May 1, 2024: Large Taxpayers
Group 2 - June 1, 2024: Income tax filers who are not Large Taxpayers
Group 3 - July 1, 2024: Non-income tax filers and entities not classified as mentioned

Other specific dates for various documents:

• Public utilities: August 1, 2024
• Passenger transportation tickets: August 1, 2024
• Bank statements: August 1, 2024
• Passenger air transport tickets: September 1, 2024
• Gambling instruments: September 1, 2024
• Local gambling documents: September 1, 2024
• Tolls: October 1, 2024
• Securities exchange receipts: October 1, 2024
• Agricultural exchange receipts: October 1, 2024
• Event admission tickets: November 1, 2024
• Cinema tickets: November 1, 2024

Requirements to Issue Electronic Invoices

• Authorization from the DIAN as an electronic invoice issuer.
• A digital certificate issued by a certification entity accredited by the National Accreditation Body of Colombia (ONAC).
• An electronic invoicing software provided by a Technology Service Provider (PST) authorized by the DIAN.

Objectives of the Colombian Government with Electronic Invoicing

• Fiscal control: The Colombian government aims to reduce tax evasion by half using the electronic system. Electronic invoicing is crucial to prevent tax evasion and optimize the collection process. The DIAN estimates that the Colombian government loses $15 billion annually in VAT, approximately 22%, potentially increasing to 40% according to the International Monetary Fund.
• Mass adoption of electronic invoicing: Colombia follows the path of other Latin American countries like Mexico, Brazil, and Chile, leaders in e-administration. Electronic invoicing is key to e-Government and paperless processes. The benefits of incorporating electronic invoicing include:
• Cost savings from eliminating paper, manual processes, and error reduction through automation.
• Environmental benefits from reducing CO2 emissions, paper consumption, and transport energy costs.
• Process agility through operation automation.
• Increased security through authenticity mechanisms like digital signatures.
• Promoting accounting and fiscal transparency.
• Encouraging foreign investment and national competitiveness through fiscal control.

Benefits of Electronic Invoicing for Taxpayer Companies

Implementing electronic invoicing brings numerous advantages for companies, ultimately resulting in cost savings. Investing in the technology required for this system is highly profitable.

• Direct cost savings: Elimination of paper, printing, invoice sending, and storage costs.
• Increased productivity: The administration department can focus on other tasks due to process automation.
• Automation and integration: Electronic document origin allows automatic integration into the system, making invoices ready for payment with minimal human intervention.
• Efficiency and error elimination: Automation and full integration reduce human errors, allowing automatic generation and transmission of invoices from the supplier to the recipient. The main economic benefits come from process automation and integration rather than printed material and shipping cost savings.
• Shorter delivery and payment times: Efficient issuance and reception processes, immediacy, and error elimination reduce invoice payment terms.
• Increased security: Invoices are sent using private networks or specific protocols like AS2, FTPS, WebServices, VAN, etc. Digital signatures ensure the integrity, origin, and authenticity of invoices.
• Secure, legal storage: Original signed documents are stored securely for the legally required period, reducing storage costs and facilitating the retrieval of old invoices.
• Elimination of physical document loss risk: Secure storage and digital retrieval of invoices.

EDICOM as an Authorized Technology Provider by DIAN

EDICOM is an authorized electronic invoicing provider in Colombia. To obtain DIAN authorization, EDICOM met all the criteria established in Article 12 of Decree 2242 of 2015:

• A valid and updated Unique Tax Registry (RUC).
• Responsibility for sales tax and belonging to the common regime.
• ISO 27001 accreditation for information security management systems.
• Financial status certification by a public accountant or fiscal auditor, showing a net worth over 20,000 UVT (Tax Value Unit) and fixed assets over 10,000 UVT.
• Use of the standard XML electronic generation format established by the DIAN.
• Consecutive numbering authorized by the DIAN.
• Compliance with applicable requirements from Articles 617, 512-9, and 512-11 of the ET.
• Inclusion of a digital or electronic signature ensuring authenticity and integrity, according to DIAN's signature policy.
• Inclusion of the Unique Electronic Invoice Code.

Moreover, as a Digital Certification Entity accredited by ONAC, EDICOM issues digital certificates necessary for signing electronic invoices and other tax documents like electronic payrolls.

As an authorized electronic invoicing provider by DIAN and a Digital Certification Entity accredited by ONAC, EDICOM offers the most comprehensive technological solution for electronic document exchange in Colombia.

The EDICOM global e-Invoicing platform meets the requirements set by the DIAN in Colombia and most tax authorities across Latin America, Europe, and Asia. EDICOM has developed e-Invoicing solutions for sending and receiving electronic invoices, adapted to the specifications of the countries where its clients operate. The platform integrates with the company's ERP or internal management system, automating electronic invoicing while complying with legal requirements in any country.