The favorable balances in the Value Added Tax (VAT) declaration of the absorbed company can be offset in a merger.

The DIAN (National Directorate of Taxes and Customs) in Concept 1788 of 2023 distinguishes between two factual scenarios that may occur in a business merger:

firstly involves the filing of tax declarations by an absorbed company related to taxable periods preceding the perfection of the merger.
Another one is related to the possibility of allocating or offsetting a favorable balance liquidated by the absorbed company prior.

It confirms that an absorbing company is authorized to allocate or offset any favorable balance in the VAT declaration for the period in which the merger was formalized. However, the same does not apply to the obligation to declare taxable periods preceding the legalization and perfection of the merger agreement. Also it clarifies that previously, two independent corporate entities existed with the obligation to declare separately, specifying the name, business name, and Tax Identification Number (NIT) of the absorbed entity.

In conclusion, the filing of income, sales, and withholding tax declarations once the merger is completed, and the obligation must be fulfilled after the granting of the public deed formalizing this type of corporate reorganization, will be the responsibility of the absorbing company, with its NIT as well as its business name.