Colombia and the significant changes in accounting and tax matters
In the search for a system of international approval, the process experienced by Colombia in all areas presents the best letter of introduction to join the Organization for Economic Cooperation and Development (OECD), reflecting that Colombia exercises good practices and that our companies have adequate corporate governance schemes, information, and management of companies in their standards. After seven years of the previous government’s accession process, Colombia becomes the 37th member of the organization, reflecting that the country has reached high standards in global public policy on 28 April 2020.
On the other hand, the accounting industry needed to be more dynamic and proactive with current accounting and tax regulations. The regulatory framework causes Public Accountants to improve their profiles as professionals and be even more competitive. The companies must keep their teams updated and pay particular attention to the Government and other high-impact entities such as the National Directorate of Taxes and Customs of Colombia DIAN. Since previously there was no route needed to follow in this field, the map was not very clear regarding compliance with Decree 2649 /2650, the provisions of each of the regulatory and control entities.
We must consider that the adoption of International Financial Reporting Standards (IFRS) led us to implement the International Standards on Auditing (ISA) in Colombia. It is a part of the evolution that our country is undergoing since it actively required the development of a globalized framework, making it necessary to standardize a common accounting and financial language to prepare financial statements. (Law 1314 of 2009).
The real challenge lies in the process of transition from the Latin model to the Anglo-Saxon model; determine its proper direction with all the impact that the country may have due to the participation of the States, companies and professionals who exercise independent Fiscal Auditing practices such as accounting firms, which are ratified in Decree 2420 on 14 December 2015. It is mentioned that accountants must venture into greater regulation and under a more international scheme.
It is clear that this tremendous effort for Colombian accountants translates into speaking the same language internationally, which allows us to be competitive not only locally, but also outside our territory. In addition to the fact that we are tax auditors (only applicable in Colombia), we provide higher quality work and rigorous compliance in terms of regulations for Colombian entities.
We must consider that the adoption of the IFRS in Colombia was part of our country’s evolution in the framework of globalization, characterized by free trade agreements, openness, and access to international markets. These are necessary for the standardization of an accounting and financial language to generate an increase in consulting services. Even though it is necessary to mention that this has gradually decreased, currently, only consulting services are performed to support regulatory updates under IFRS. Regarding ISA, Colombia is also starting with the applicability of ISA 705, already advanced for some sectors, given the importance of issuing an opinion including an emphasis on internal control, which could open more business opportunities for other service areas.
The exercise for business presents different difficulties to our country. Considering the current economic and social circumstances and Colombia as a country with greater participation by small and medium-sized enterprises, it is necessary to continue with the progress that has been achieved in accordance with the reforms that the country made to get where it is today. As they have been very important for the growth and development of our economy. Currently, the government has supported more than 34 reforms since 2006, according to the World Bank’s Doing Business 2018. The government continues to offer incentives for foreign investment and legal stability for investors, taking advantage of the free trade zones established in the region, which also have different tax benefits that may be attractive for future investors.
It is also important to consider that Colombia is currently, as part of the economic development program, promoting the areas that were affected by the armed conflict, given that it is in the Development Plan that addresses the primary needs of the country. This plan is designed and executed to achieve continuous growth and competitiveness.
Contributed by Johana Valencia
Alfredo López y Cia Ltda
(An Allinial Global Member Firm in Colombia)
About the Author:
Public Accountant from Universidad San Buenaventura de Cali, with International ACCA – Association of Chartered Certified Accountants accreditation for International Financial Reporting Standards IFRS. Currently, she is doing a Master in Business Administration with the European University of the Atlantic in Spain, has more than 10 years of professional experience in financial auditing, tax review, evaluation of internal controls, implementation of local and international accounting (full NIIF, Pymes and NICSP).
For more information about this article you can contact Ms. Johana Valencia from Alfredo López y Cia Ltda.