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04 November 2021 Colombia issues regulations to identify preferential tax regimes The decree regulates the criteria for identifying preferential tax regimes. Taxpayers may want to consider reviewing their structures to determine whether they are subject to the preferential tax regime rules. On 28 October 2021, the Colombian Government issued Decree 1357 of 2021, regulating the criteria established by Article 260-7 of the Colombian Tax Code (CTC) for identifying preferential tax regimes (PTR). Article 260-7 of the CTC establishes five criteria for identifying a PTR. If two of the five criteria are met, the regime will be considered a PTR. Decree 1357 establishes the following series of assumptions to assess whether each of the criteria is met:
In accordance with Decree 1357, these criteria must be applied to the list of PTRs established by the Organisation for Economic Co-operation and Development, to determine whether they are PTRs under the Colombian regulations. If it is determined that a person, company or entity is resident, located or carrying out activities in a PTR as established in Article 260-7, the tax implications will be as follows: Payments made to the PTR, which are deemed as Colombian-source income, will be subject to withholding tax at the same rate as the corporate income tax rate (31% for 2021 and 35% for 2022). The rate may be reduced if a tax treaty applies. Transactions with persons, companies, entities or residents located or carrying out activities in a PTR will be subject to the transfer pricing regime, including the filing obligations, even if the person located in the PTR is not a related party. If the transaction is concluded with a related party, a functional analysis should be submitted for the related party.
Document ID: 2021-6142 | ||||||||||||