Tax Benefits of Solar Energy for Companies: From the UPME Certificate to the Tax Return

Articles 11, 12, 13 and 14 of Ley 1715 de 2014, as worded by Ley 2099 de 2021, share one clause: the investment «must be evaluated and certified» by UPME as a non-conventional energy generation project. Decreto 895 de 2022 gave it a name —the investment certificate for the eligibility of tax benefits— and set its scope: it is valid for the goods and services the taxpayer included in the application and that received a favourable opinion, not for the project in the abstract.

That precision changes how the project is prepared. The application is not made on «a solar plant of so many kilowatts» but on a concrete list: panels, inverters, mounting structures, meters, transformers and the engineering or installation services, each with its make, model, supplier and value. What is not on that list is not in the certificate and therefore carries no benefit.

How long the incentives last is not the problem: article 14-1 of Ley 1715, added by article 55 of Ley 2099, keeps them for thirty years counted from 1 July 2021, that is, until 2051. The bottleneck is the process, and UPME is feeling it: in 2025 it received 6,284 applications for non-conventional generation projects, 58% more than in 2024.

Resolución UPME 135 de 2025 sets out the requirements and the procedure, and Resolución UPME 400 de 2026 changed the dates. Until May 2026 applications were received in two cycles; Resolution 400, of 29 May, replaced them with a continuous window, from 1 February to 15 December each year. UPME itself explained the change as a need to eliminate dead time between cycles. Anything filed outside the window is deemed not submitted.

For a solar generation project, the file is built from seven pieces, all through the web application, which is the only valid channel: the applicant and project information; the signature form in PDF, signed by the applicant; the catalogues or technical data sheets for each item of equipment with current conformity certificates (or, if the catalogue already cites the technical standards, the catalogue alone is enough); the quotes or contracts for the services, with name, scope, supplier and value; proof of payment of the fee; the project's UPME registration number when the capacity exceeds 1 MW; and, for grid-connected projects above 1 MW, the identification of the planned connection point.

The response times are set by the same resolution, and they are maximums: UPME has 10 business days to check that the application is complete and up to 20 business days, from when it says it is, to decide a non-conventional energy project. If it asks for clarifications —it does so only once— the clock is suspended until the company replies, and the company has one calendar month to do so, extendable by another month if requested before it expires. If it does not reply, it is deemed to have withdrawn. Added together without clarifications, the maximum times are 30 business days: about six weeks.

The outcome is favourable or unfavourable and is communicated by email with the reasons for the decision. An appeal for reconsideration (recurso de reposición) lies against it. Certificates issued under this resolution have no expiry date, without prejudice to the tax rules specific to each benefit.

The evaluation fee is set by article 13 of Resolution 135 and is paid through PSE before filing; the receipt, with its unique tracking code, is one of the requirements. For investments of 3,305 UVT or more, the minimum payment is the lower of 13.4 UVT plus 0.5% of the estimated benefit —which the resolution calculates as 40.5% of the investment value above 3,305 UVT— and a cap of 275 UVT. With the 2026 UVT, set at COP 52,374, the cap is equivalent to about COP 14.4 million, whatever the size of the project.

Three rules in the resolution turn a procedural error into a cost: the applicant calculates the minimum payment, and UPME checks the payment but does not state the amount that is missing; the fee is not refunded if the application is archived, rejected, withdrawn or if any item is not certified; and every new application requires a new payment, even for the same project. Because the investment declared is the sum of the VAT-exclusive costs of the goods and services in the application, it is worth working it out from the figures in the contract and not from an earlier quote.

To that entry cost must be added the cost of a scope error. After filing, the resolution prevents new items from being included or supporting documents from being changed unless UPME asks; if the project needs other goods or services, another application must be filed. And if the reported value changes after payment, the certificate is not amended: the company must keep the documents that justify the difference before the tax authority.

Article 1.3.1.12.24 of Decreto 1625 de 2016, as left by Decreto 895 de 2022, excludes from VAT the equipment, items, machinery and services —domestic or imported— intended for the pre-investment and investment stages of the project, provided they are on UPME's list of goods and services. The certification includes the tariff subheadings, which are used to support the import declaration and to request the exclusion.

The benefit requires the certificate. The DIAN restated this in its Concepto 003086 de 2026: it is not valid to apply the exclusion without the certification. In practice, a supplier that invoices before the certificate exists must charge the VAT. The same decree provides for what to do then: when UPME issues the certificate after the acquisition or import, the investor may request a refund of the tax paid, which the DIAN treats as an undue payment.

The refund is neither automatic nor cheap to manage. It is requested invoice by invoice, in the tax year in which the purchase was made, and requires the electronic invoices, the certificate, a list of those invoices certified by the accountant or statutory auditor, a statement that the VAT was not carried as a higher cost, as a deduction or as creditable tax, and another that no refund or offset has been received for that purchase. The DIAN also recommends checking that the invoices match the items in the certificate and that the purchase falls within the project's execution dates.

The financial consequence is simple: on a large project, the VAT on the equipment is an outlay the company advances if it buys before having the certificate, and recovers months later. If the schedule allows it, waiting for UPME's answer avoids that cash mismatch; if it does not, the financing cost of the advanced VAT must be in the model.

The exemption in article 13 of Ley 1715 is not a general discount on everything imported. It applies to machinery, equipment, materials and inputs that national industry does not produce and whose only means of acquisition is import. The Registry of National Goods Producers serves as a reference for the Ministry of Commerce in deciding the applications, and the Import Committee decides on approval of the prior licence.

The procedure has two steps that cannot be skipped. The first is to request the exemption from the DIAN at least 15 business days before the import, in line with the project documentation endorsed in the UPME certificate. The second is to file the prior-licence application with the Single Window for Foreign Trade (VUCE), attaching the certificate, which is taken as satisfying the application to apply the exemption.

What matters is not to take for granted an exemption that depends on the product not being made in Colombia and on someone requesting it in time: ask the installer whether the price of the quote already discounts it, who handles the process and with what support.

The article 11 deduction is 50% of the total investment made, taken over a period of no more than 15 years counted from the tax year following the one in which the investment entered operation. The annual limit is 50% of the taxpayer's net taxable income, determined before subtracting the deduction. Decreto 1625 de 2016 adds that articles 177-1, 177-2, 616-1 and 771-2 of the Tax Code apply to its eligibility and limits.

This is why the cash saving is not 50%. What is saved is that deduction multiplied by the income tax rate: with the general corporate rate of 35%, every 100 pesos of certified investment reduce the tax base by 50 and the tax by 17.5 pesos, spread over the years in which taxable income can absorb them. It is an order of magnitude, not a promise: it depends on the rate that applies to the company and on its income each year.

The accelerated depreciation in article 14 is calculated separately. It allows depreciating the machinery, equipment and civil works needed for the pre-investment, investment and operation of the project, acquired or built exclusively for that purpose, at an overall annual rate of up to 33.33%. The rate may be varied each year without exceeding that limit, with prior notice to the DIAN regional office or the large-taxpayer operations office. The deduction and the depreciation can be claimed together, without being treated as a concurrence of benefits, by taxpayers required to file income tax returns and keep accounts.

There is a cash point that is often overlooked: the deduction is taken from the year after the project enters operation, not from the year it is paid. A project that enters operation in January starts deducting a full year later than one that entered operation the previous December. The commissioning date is not a construction detail: it is a cash-flow parameter.

The income tax benefits are conditional, and Decreto 1625 protects them with a repayment rule. If the asset is sold before its depreciation or amortisation period ends, the taxpayer must include what was deducted as net taxable income from recovery of deductions, in the tax year in which the sale is completed, under articles 195 and 196 of the Tax Code. Nor does the benefit apply to assets that, once sold, are reacquired by the same taxpayer.

The same repayment applies if the contracts entered into to make the investment are annulled, terminated or rescinded. And in a financial lease, if the lessee does not exercise the purchase option at the end of the contract, the amounts deducted are declared as net taxable income from recovery of deductions in the year in which it decides not to exercise it. The decree expressly excludes sale-and-leaseback contracts and any arrangement that does not transfer ownership at the end.

There is also a condition of origin: the taxpayer must be able to prove that the assets were kept in its estate from their initial activation and were not previously used by a third party. The benefit is for new project equipment, not for second-hand assets relocated.

The DIAN has express power to verify all of this: that the purchase option was exercised, that the assets were not sold before the end of their useful life, and that anyone who failed to comply declared the recovery. That is why the company must keep the UPME certificate, the invoices, the evidence that the deducted amount corresponds to project investments and proof that the project entered operation.

The UPME form cited by the DIAN distinguishes between a primary applicant —the natural or legal person that owns the project's assets— and one or more secondary applicants, who may be, for example, the financial institution with which the primary applicant signed a financial lease with an irrevocable purchase option, in which case the contract is attached.

That distinction connects this article with the previous one. In an outright purchase, the primary applicant is the company. In a lease, the company is the primary applicant and the bank appears as secondary. In an energy contract with a third party that owns the equipment, the primary applicant is the third party, and the incentives are theirs: the company that consumes has no investment to certify. The reasonable course is to require that the benefit be reflected in the price of the energy.

The DIAN, in Concepto 003086 de 2026, also observes that the term «investor» used in the decree for the VAT refund does not match the categories on the UPME form, and clarifies that it is not for it to rule on that agency's form-completion guide. In a structure with several parties —contractor, financier, owner— it is wise for the accountant to put in writing who applies, who pays and in whose name the invoices are issued, before filing.

With the above, the reasonable order for a commercial project is the following. It is best followed with the installer and the accountant at the same table, because each step conditions the next.

The first is filing with an incomplete list. Since items cannot be added later, an inverter, a transformer or an engineering service that was forgotten is left without benefit, or requires a second application with its fee. The list in the application must come from the final quote, not from a preliminary one.

The second is taking a date for granted. UPME's answer is not immediate, and a construction schedule that buys equipment the week after filing is deciding, without knowing it, to pay the VAT and claim it back later.

The third is assuming the incentive belongs to the project and not to the taxpayer. The deduction is only used by someone with net taxable income who absorbs it within the periods set by law; a company with losses or low income will carry it forward for years. Before committing, the accountant should run the calculation with the figures for the coming years.

The fourth is forgetting the repayment. A sale of the plant or a lease that is returned at the end can turn the deduction of earlier years into income of the year of the sale. If there is an exit plan for the asset, the financial model needs to know about it from the start.

The fifth is not keeping records. The burden of proving that the equipment is in operation, that it is new and that the deducted amount is the project's falls on the taxpayer; if the certificate and the invoices cannot be found when the DIAN asks for them, the benefit does not survive a review.