Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

December 20, 2019
2019-6635

Colombia-UK tax treaty will enter into force in 2020

On 13 December 2019, Colombia and the United Kingdom (UK) exchanged notes, informing each other that they have completed the approval processes for the Treaty to Avoid Double Taxation (the Treaty).

The exchange of notes was the only step remaining for the Treaty to enter into effect. With this step completed, the Treaty will apply from 1 January 2020 for Colombia. For the UK, the Treaty generally will apply from 1 April 2020; for taxes withheld at source, however, the Treaty will apply from 1 January 2020.

The Treaty follows several recommendations of the Organisation for Economic Co-operation and Development’s (OECD) Base Erosion and Profit Shifting (BEPS) project, such as (1) a principal purpose clause prohibiting use of the Treaty’s benefits when there is no verified business purpose; (2) robust rules on cooperation between the tax authorities (e.g., the exchange of information and cooperation in tax collection); (3) updated rules on permanent establishments; and (4) a mutual agreement procedure to resolve residence conflicts for companies. The Treaty expressly provides that it should be interpreted under the OECD’s commentaries.

The Treaty also includes certain thresholds for withholding tax (WHT) rates as follows:

Type of income

WHT

Beneficial owner

Dividends

0%

Pension funds

5%

Companies with at least 20% of ownership

15%

All other cases, including dividends paid out from profits that were not subject to income tax at the level of the Colombian entity

Interest

0%

State-owned entities, Central Banks, pension funds, banks (with a term of three years or more), among others

10%

All other cases

Royalties

10%

Tax residents

Under the Treaty, technical services, technical assistance and consultancy services are not taxed in the source state, unless there is a permanent establishment in that source state. This provision could cause the most favorable rule, contained in some treaties into which Colombia has entered, to apply. If the rule applies, the services must receive treatment that is similar to the treatment that would apply under the Colombia-UK treaty. As a result, each transaction related to these services should be reviewed on a case-by-case basis to determine whether the most favorable rule applies.

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

Ernst & Young S.A.S., Bogotá
Ernst & Young LLP (United States), Latin American Business Center, New York
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific

ATTACHMENT

 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.

 


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.


Yes, I accept         Find out more