Colombian Congress issued a law that eliminates the discriminatory tax system between imported and domestic alcoholic beverages
Previous to the Law 1816, EU spirits were subject to higher taxes and local charges than those applied to local brands. An artificial breakup point was established at 35% of alcoholic content, with the result that most imported products fell into the higher taxation bracket, whereas most locally produced spirits fell into the lower taxation bracket. In addition, the Colombian departments imposed market-access restrictions distorting the competitive conditions in the market to the detriment of EU alcoholic beverages. Through their fiscal monopoly, the entry of imported spirits was subject to the conclusion of ‘introduction contracts’ with the departments containing trade restrictive clauses and imposing maximum values and minimum selling prices, among others.
This was in contravention of Colombia's non-discrimination obligations under WTO rules and under the bilateral Trade Agreement with the EU. Since the Consultations held between EU and Colombia in March 2016 failed to reach a solution to the dispute, the EU requested the establishment of a WTO panel to rule on a dispute concerning Colombia’s discriminatory treatment of imported spirits.
As a consequence of the above the Colombian Congress issued the Law 1816 in December 2016. This law, which came into effect on January 1, 2017, is expected to bring Colombia into compliance with its trade commitments under the WTO and trade agreements with the EU. It seeks to remove the discriminatory tax system as well as the anti-competitive practices conducted by local liquor producers.
Pursuant to Article 20 of the new law, the applicable tariff for consumption tax is $220 for each alcoholimetric degree in unit of 750 cubic centimeters or equivalent ($150 for wine) plus an ad valorem tariff of 25% on the sale price (20% for wine). Additionally, alcoholic beverages are subject to Value Added Tax (VAT) at a special rate of 5%.
At the same time, Article 6 of the Law prohibits departments to produce administrative trade barriers and discrimination between imported and local products.
The EU DEL is monitoring the actual implementation of the Law on Spirits before deciding on future steps in the WTO. In particular, the Law needs to be fully implemented in the departments and the existing departmental legislation (ordenanzas). The law is currently in process to be amended in order to comply with its provisions.