On 4 September 2018, the Colombian Tax Authorities (DIAN) issued Tax Official Opinion 024422, in which they summarized the rules included in Article 18-1 of the Colombian Tax Code, which apply to taxpayers categorized as investors in the foreign capital portfolio regime.

Article 7 of Law 1819 of 2016 established a 5% withholding tax on dividends, which was incorporated into Article 245 of the Colombian Tax Code and applicable to distributions made to foreign nonresidents and paid out of profits obtained in 2017. In the Official Opinion, the DIAN concluded that the 5% withholding tax rate on dividends applies to taxpayers in the foreign capital portfolio regime.

The position adopted by the DIAN requires withholding agents to observe the following rules:

• Dividend distributions arising from profits that were not subject to taxation at the corporate level will be subject to a 25% rate, rather than the 35% rate, according to Article 18-1 of the Tax Code; an additional 5% withholding rate will apply to the distributed amount after being reduced by the 25% rate (for a combined tax rate of 28.75%).
• Dividend distributions arising from profits that were subject to taxation at the corporate level will be subject to the 5% withholding rate.

The DIAN did not comment on how the 5% withholding tax on dividends applies when a double taxation treaty applies. Some of the double taxation treaties into which Colombia and its treaty partners entered include dividend benefits that may generate a different treatment from the one described in the Official Opinion.

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CONTACTS

For additional information with respect to this Alert, please contact the following:

Ernst & Young S.A.S., Bogotá

• Ricardo Ruiz
  ricardo.ruiz@co.ey.com

Ernst & Young LLP, Latin American Business Center, New York

• Juan Torres Richoux
  juan.torresrichoux@ey.com
• Ana Mingramm
  ana.mingramm@ey.com
• Enrique Perez Grovas
  enrique.perezgrovas@ey.com
• Pablo Wejcman
  pablo.wejcman@ey.com

Ernst & Young LLP (United Kingdom), Latin American Business Center, London

• Jose Padilla
  jpadilla@uk.ey.com

Ernst & Young Tax Co., Latin America Tax Desk, Japan & Asia Pacific

• Raul Moreno, Tokyo
  raul.moreno@jp.ey.com
• Luis Coronado, Singapore
  luis.coronado@sg.ey.com

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ATTACHMENT

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