Failure to remit withheld taxes: when it becomes a criminal offence

Failure by a withholding or collection agent to remit taxes is an offence under Article 402 of the Colombian Criminal Code. It arises when an individual or legal entity legally required to collect, withhold and remit tax funds — such as withholding taxes, VAT, consumption tax or parafiscal contributions, among others — fails to deliver those funds to the tax administration within the statutory deadlines.

In other words, the offence occurs when a withholding agent, legally responsible for acting as an intermediary between the taxpayer and the State, fails to remit the amounts withheld or collected, improperly retaining public funds.

When does the offence arise?

The offence does not arise merely from a late tax return, but when the funds have not been remitted to the DIAN two months after the relevant payment was due. Filing the return is therefore not sufficient: the core of the offence is the failure to actually remit withheld or collected amounts within the statutory period. At that point, the DIAN may report the matter to the Colombian prosecution service (Fiscalía General de la Nación), which may begin an investigation.

The text defining the offence is as follows:

Article 402. Failure by a withholding or collection agent to remit taxes. A withholding or self-withholding agent who fails to remit amounts withheld or self-withheld as withholding tax within two (2) months following the date set by the National Government for filing and paying the relevant withholding tax return, or a person responsible for collecting public fees or contributions who fails to remit them within the statutory period, shall incur imprisonment of forty (48) [sic] to one hundred and eight (108) months and a fine equal to twice the amount not remitted, not exceeding the equivalent of 1,020,000 UVT.

The same penalty shall apply to a person responsible for sales tax or national consumption tax who, despite being legally obliged to do so, fails to remit the amounts collected within two (2) months following the date set by the National Government for filing and paying the relevant sales tax return.

A withholding agent or person responsible for sales tax or national consumption tax who fails to charge and collect these taxes when required to do so shall incur the same penalty provided for in this article. For companies or other entities, the individuals responsible within each entity for complying with those obligations shall be subject to the same penalties.

PARAGRAPH. A withholding or self-withholding agent, person responsible for sales tax or national consumption tax, or collector of public fees or contributions who extinguishes the tax obligation by paying or offsetting the sums due, as applicable, together with the corresponding interest provided for in the Tax Statute and relevant legal rules, shall benefit from a decision not to open proceedings, termination of the investigation or cessation of proceedings within the criminal case initiated on that basis, without prejudice to any applicable administrative penalties.

Who may be liable?

The offender may be any individual or legal entity acting as a withholding or collection agent, including self-withholding agents. For legal entities, criminal liability falls on legal representatives or those who actually control the withheld funds. This means that managers, accountants, statutory auditors or administrators may face criminal investigations if their participation in or knowledge of the failure is established.

Applicable penalties

The criminal consequences are significant:

• Imprisonment of forty-eight (48) to one hundred and eight (108) months.

• A fine equal to twice the amounts not remitted, subject to a ceiling of 1,020,000 UVT.

These penalties are in addition to administrative and tax liabilities before the DIAN, including late-payment interest and penalties for inaccuracies, omissions or failures to fulfil formal duties.

Can payment bring the criminal proceedings to an end?

Yes. Article 402 of the Criminal Code provides for the termination of criminal proceedings when the withholding or collection agent pays all amounts due, including interest, or where a legally accepted offset applies. This option is available before judgment and terminates the criminal proceedings, although it does not remove the obligation to comply with administrative penalties imposed by the DIAN.

Limitation period for the offence

Prosecution for a withholding agent’s failure to remit taxes is time-barred after the maximum term of imprisonment prescribed for the offence (108 months). However, because the conduct relates to public functions — collecting public money — the period is extended by 50%, meaning that limitation may occur after 162 months (13 and a half years) from the date the offence arises, namely two months after the deadline for remitting the funds.

Does the offence include failure to collect?

Yes. The offence penalises not only a withholding agent who fails to remit collected funds, but also one who is required to withhold or collect and fails to do so. For example, a trader who does not charge customers VAT or apply withholding tax to suppliers, and then remits nothing to the DIAN, may also commit the offence.

Failure by a withholding or collection agent to remit taxes is serious conduct involving the improper retention of public funds and can have severe criminal consequences, in addition to the corresponding tax penalties. It is not simply a tax compliance failure: it compromises the public function of administering State resources. Companies and individuals must therefore comply rigorously with their duties as withholding agents and obtain appropriate advice whenever an issue arises.

This offence can have severe consequences for both individuals and legal entities. If you have questions about your tax obligations or face an investigation for this offence, specialist legal advice is essential.

If you have received a summons from the Colombian prosecution service (Fiscalía General de la Nación) concerning this conduct, Marín Ortega Consultores Jurídicos has experience in economic and tax criminal law. If you need legal guidance or support in addressing this situation, please contact us. We are ready to advise you carefully, confidentially and responsibly.