DIAN explained why tax provisions are not deductible expenses

Their deducibility is not accepted because it is not expressly authorized by the law. Also, provisions are not “expenses” in substance, and if their deductibility was accepted the payment of the tax would lose purpose


In its Revenue Ruling No. 13734 of June 2nd 2016, the Colombian Tax Authority –DIAN— established that tax provisions are not expenses in substance, because they do not qualify within the activities of management, marketing, research and funding, as established by Section 40 of Decree 2649/1993. By not being actual expenses, tax provisions are not deductible.

DIAN explained that taxes incurred during a taxable period, which runs from January 1st to December 31st, are actual debts incurred by the taxpayer, and therefore are determining factors for the definition of its gross equity, and consequently, they can be subtracted from its taxable base. This does not occur with tax provisions except for those that are considered general and individual portfolio provisions for purposes of income tax to which this rule of non- deductibility is not applicable.