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Legal Bulletin

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The bill includes a comprehensive reform on how corporate taxpayers shall realize all items of income, costs, expenses, assets and liabilities in their income tax returns, introducing new realization and recognition rules under IFRS but still allowing some book-to-tax reconciliations.

Corporate taxpayers shall compute all items of income, costs and expenses taking into account the realization principles of IFRS, except as otherwise provided in the Colombian Tax Code, when a book-to-tax reconciliation is allowed.  

For instance, IFRS-based income derived from temporary differences would not be recognized for income tax purposes. Also, non-tax-deductible expenses would be recorded as permanent differences without triggering tax consequences.

In managing allowed IFRS-to-tax reconciliations, corporate taxpayers would be required to book all the differences as support of the income tax return in an additional subsidiary ledger.