Understanding that the emergence of collective rights, also known as third-generation rights (due to their temporal location relative to other rights), initiated a whole line of thought regarding the environment, distinct from what had previously prevailed – and which was developed since industrialization, consisting of the production of goods and services without measuring costs other than economic ones. In this context, various States began a common search to protect the environment, elevating it to a Human Right and also proclaiming it as a source of duties for States and individuals[1].
Now then, our country has not strayed from this trend and has implemented different regulations for the proper exploitation of natural resources[2] and has articulated the National Environmental System for the proper functioning of surveillance, control, and execution in environmental matters. In accordance with the foregoing and focusing on the subject of this writing, we encounter the aforementioned tax benefits in environmental matters, which aim to promote among national taxpayers the care and promotion of the environment through benefits for investments in the sector and intended to improve it. Due to the administrative decentralization of the national territory, it is worth mentioning that each territorial entity has the authority to provide incentives in its territory regarding the care and preservation of the environment, but by extension, we will exclusively review the national incentives that arise from or are related to the Tax Statute.
(…) each territorial entity has the authority to provide incentives in its territory regarding the care and preservation of the environment (…)
When conducting the regulatory review, we find that both the national government and the legislature have sought to incentivize environmental protection. The first benefit that can be observed is Article 125 of the Tax Statute, as substituted by Article 31 of Law 488 of 1998, which excludes from income tax the total donations made by non-profit associations, corporations, and foundations whose “corporate purpose and activity correspond to the development of health, education, culture, religion, sports, scientific and technological research, ecology and environmental protection, defense, protection, and promotion of human rights and access to justice, or social development programs, provided that they are of general interest.” (Bold added). Complementarily, Article 125-1 clarifies that its status as a non-profit organization must have been previously recognized and be subject to State oversight; likewise, it must have filed the income and wealth tax return or income tax return for the year prior to the donation, and as a final requirement, it must condition its income from donations to its holding in investments or deposits in authorized financial institutions.
Article 157 ibidem authorizes the deduction from income tax of the total value of investments by natural or legal persons in new plantations of different species, irrigation and drainage works, wells and silos for the treatment and benefit of agricultural products, as well as for legal or natural persons who invest in companies whose purpose is these activities. It should be clarified that the latter companies must be recognized by the Ministry of Environment and Sustainable Development. Regarding this article, there is an interpretation suggesting that it was tacitly repealed by Law 939 of 2004, and therefore Article 1 of that law is applicable. I do not adhere to that interpretation because the purpose of the two regulations (Tax Statute and Law 939) is different, and their objectives are directed toward different ends. However, for the reader's further information, if one subscribes to the thesis that denies the validity of Article 157 of the Tax Statute, Law 939 of 2004 should be applied, which granted the income tax exemption only until 2014.
Further on, Article 158-2 provides the right to a deduction from income for those who invest in research, technological development, or innovation. The important thing here is that its fourth paragraph requires that the processes take into account the environmental impact. The deductible value is “one hundred seventy-five percent (175%) of the value invested in such projects in the taxable period in which the investment was made.” But it may not “exceed forty percent (40%) of the net income, determined before subtracting the value of the investment.”
Article 157 ibidem authorizes the deduction from income tax of the total value of investments by natural or legal persons in new plantations of different species, irrigation and drainage works, wells and silos for the treatment and benefit of agricultural products, as well as for legal or natural persons who invest in companies whose purpose is these activities(…)
On the other hand, Article 253, partially tacitly repealed, states in its current paragraph that the Forestry Incentive Certificate “created by Law 139 of 1994, may also be used to compensate the direct and indirect economic costs incurred by an owner for maintaining within his property natural forest ecosystems that are little or not intervened, as recognition of the environmental and social benefits derived from them.” The government must regulate this incentive, and it will be the Regional Autonomous Corporations (CARs) that manage it. The foregoing implies that whoever maintains natural forest ecosystems that are not affected in their ecological and scenic function may request a certificate that is redeemable in money under pre-established conditions and terms.
Finally, we encounter what I consider to be the three most relevant articles regarding environmental care, and therefore they have a significant impact at the tax and environmental level: Articles 158-2, 207-2, and 428, literals f) and i) of the Tax Statute:
- The first as a benefit for legal entities that make investments in environmental control and improvement, subject to prior certification by the respective environmental authority[3] (Today the National Authority for Environmental Licenses - ANLA[4]) of the benefits obtained environmentally. The tax benefit lies in the deduction of up to 20% of the net income determined before subtracting the value of the investment. It is clear that the investment cannot be the product of a mandate issued by a competent authority for the mitigation of the impact caused by a work or activity subject to an environmental license, but rather by the will of the taxpayer investor.
- The second (Article 207-2) exempts from income tax – totally – various activities, among which the sale of electric energy generated from wind resources, biomass, or agricultural residues for a term of 15 years, ecotourism services, and the use of forest plantations and timber trees stand out. All subject to prior certification or investment requirements.
- The third, Article 428, excludes from sales tax imports that have been made with prior certification from the competent authority (ANLA) of f) machinery not produced in the country for the purpose of recycling and processing garbage, treating water and atmospheric emissions, and solid waste. Also, i) machinery and equipment intended for the development of projects or activities that are exporters of carbon emission reduction certificates and that contribute to reducing greenhouse gas emissions and therefore to sustainable development.
In conclusion, it is clear that in tax matters, the Colombian State has shown its interest in the preservation and care of the environment, having prerogatives that show real benefits. Likewise, it should be noted that depending on the specific case, the benefits will not be cumulative.