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Explaining Corporate Dividend Tax in Colombia For Businesses

Explaining Corporate Dividend Tax in Colombia For Businesses

Find out everything you need to know about corporate dividend tax for businesses in Colombia. Understanding corporate dividend tax might be a challenging experience for companies recently operating or looking to operate in Colombia. We outline the key concepts every foreign executive should consider when complying with local regulations and interacting with Colombian tax authorities. What are dividends for tax purposes in Colombia? In Colombia, dividends can be taxed by the company who distributes them. As we explored in our article 'Understanding dividend withholding tax in Colombia for US residents in 2020', the definition of dividends for tax purposes can be found in section 30 of the Colombian Tax Code, which states the following: “Any distribution of benefits, in money or kind, charged to the equity that is made to partners, shareholders, community members, associates, subscribers or similar. The transfer of profits that correspond to income and occasional gains of national source obtained through permanent establishments or branches in Colombia, by non-resident natural persons or foreign companies and entities, in favour of related companies abroad.” Furthermore, according to the 48 and 49 section of the National Tax Code, dividends are taxed considering income tax. Likewise, dividends can be received by a third party without being taxed. Understand the difference between taxed and non-taxed dividends As previously explained, dividends in Colombia may be taxed by the company in charge of distributing them or by the individual or entity receiving said dividends. This...

Overview of Corporate Tax and Planning in Colombia

Overview of Corporate Tax and Planning in Colombia

The corporate tax season in Colombia usually takes place between February and June of each year. During this time, companies of all sizes and sectors doing business in the country are encouraged to review their corporate tax expenditure and look for optimization alternatives through corporate tax planning for the next year. Understand why corporate tax planning will maintain your business in good standing while complying with Colombian fiscal policy. What is corporate tax in Colombia and who is subject to it? In Colombia, the general tax rate for 2020 is 32% of taxable income and will decrease to 31% in 2021. As stated in Article 5 of the Colombian Tax Code “corporate tax is based on income, occasional earnings and international transfer of income, as well as on commercial profits in the case of branches of companies and foreign entities”. Likewise, Article 12 of the Tax Code states that entities who are fiscal residents in Colombia are taxed for their global source income, and non-resident corporations are taxed only for their local source income. This means that in both cases, residents and non-residents who receive income in Colombia must comply with corporate tax requirements. However, non-residents usually comply with their corporate tax obligations through the withholdings that fiscal residents are bound to do when making payments to non-residents. In Colombia, the general tax rate for 2020 is 32% of taxable income and will decrease to 31% in 2021. Hotels and hospitals, publishing houses and partially state-owned companies have a tax rate of 9% and the users of free...

Understanding Dividend Withholding Tax in Colombia for US Residents

Understanding Dividend Withholding Tax in Colombia for US Residents

Learn about dividend withholding taxes in Colombia that US residents should expect to pay to Colombian Tax Authorities when receiving dividends from Colombian companies. Colombia has an unmatched business environment. Its economy has seen growth rates of over 4% a year consistently during the last 5 years, according to data by the Ministry of Foreign Affairs. With a growing number of US residents investing in companies in Colombia, it’s important to clearly understand how the dividends from said investments will be taxed and which withholdings will be applied. Due to the latest tax reforms passed by the National Government there are currently 3 regimes in effect for dividends to be accrued. US residents in Colombia must understand the information below will be applicable to dividends accrued after 2019. Due to the latest tax reforms passed by the National Government there are currently 3 regimes in effect for dividends to be accrued: before 31 December 2016in 2017 and before 31 December 2018in 2019 and after. The main difference between said regimes will be in the rates the taxpayers will end up effectively paying, but each has considerations that must be thoroughly understood. Our tax advisory experts provide information applicable for dividends accrued by Colombian companies from 2019 to be paid to US residents. What is dividend withholding tax in Colombia? The definition of dividends for tax purposes is found in section 30 of the National Tax Code, which states the following: “Any distribution of benefits, in money or in kind, charged to equity that is made to...

When Do You Need a Transfer Pricing Study in Colombia and What Has Changed During Covid-19?

When Do You Need a Transfer Pricing Study in Colombia and What Has Changed During Covid-19?

Find out when businesses should carry out a transfer pricing study in Colombia, and changes in the regulatory environment that could impact your activities. Transfer pricing is a broad concept coined by the Organization for Economic Cooperation and Development (OECD) which encompasses a set of obligations for multinational enterprise groups who develop commercial transactions between their member companies. What is a transfer pricing study in Colombia? OECD issued a set of recommendations which have been progressively adopted by the member countries’ internal legislation, including by Colombia. In its most basic definition by OECD, a transfer price is “a price, adopted for book- keeping purposes, which is used to value transactions between affiliated enterprises integrated under the same management at artificially high or low levels in order to effect an unspecified income payment or capital transfer between those enterprises.” In the development of that definition, OECD issued a set of recommendations which have been progressively adopted by the member countries’ internal legislation, including by Colombia. In essence, transfer pricing regulations aim to reduce the shifting of profits from one jurisdiction to another through internal transactions inside a corporate group. Any transaction made with a company inside the same corporate group must be made amarket conditions. Who must comply with regulations for transfer pricing studies in Colombia, and how? Colombia, as a recently accepted member of OECD, has included the organization’s recommendations regarding transfer...

Explaining Developments in Digital Tax in Latin America

Explaining Developments in Digital Tax in Latin America

Economies in Latin America are changing rapidly. One important regulatory development for many countries in the region is digital tax, because it captures services delivered online or electronically. The OECD claims that Latin American economies are making real progress to address the tax challenges arising from the digitization of the economy. This international entity also expects that further digital tax developments in Latin America provides stability and certainty in the international tax system.  Managing your company while keeping a careful watch over new regulations is one of the challenges to overcome while doing business in Latin America.  We provide an explanation of digital tax developments in several emerging and developing economies in Latin America, so your business understands its obligations when offering digital services in these markets. Digital tax developments in Argentina  Latin American countries are adapting to a new digital age with the establishment of digital services taxes across the region. The Argentine government levied taxes for digital services under law 27,430 and on a general basis. This regulation includes services carried out through the Internet network or any adaptation or applications, platforms or technology used by the Internet or other networks through which equivalent services are provided. By their nature, these services are basically automated and require minimal human intervention, regardless of the device used for its download, display or use. The regulation of digital services in Argentina has been in place since 27...

What Are the Labor Laws in Colombia?

What Are the Labor Laws in Colombia?

Labor laws are the core of work relationships in Colombia, as they establish the rights and duties of employees and business owners operating in the country. This legal framework incorporates the guidelines and parameters set out by the International Labor Organization (ILO). Furthermore, the Colombian labor code enshrines aspects related to the types of employment contracts, hours of work, vacations and other rules concerned to work activities. Being aware of labor laws in Colombia is crucial when incorporating your business in the country, Overview: labor laws in Colombia Labor laws establish the rights and duties of employees and business owners. The Colombian labor code is the most important regulatory framework regarding labor laws in the country. This code is vital to understand all aspects of work relationships in Colombia, such as: Probation period: Employers can establish a trial period for employees of up to 2 months, in which they can choose to terminate the contract without having to pay any compensation.Working hours: The standard working time period in Colombia is 48 hours, which can be distributed over 6 days by prior agreement. Likewise, overtime work is paid differently depending on whether it is day or night work.Internal work regulations: Internal regulations are a set of rules that determine the working conditions of employees.Termination of contracts: The employee can end the employment relationship through a resignation letter. On the other hand, the employer can terminate a contract with or without cause. If the contract is terminated with cause,...

What is the Nature of Canada-Latin America Relations?

What is the Nature of Canada-Latin America Relations?

Canadian companies looking to expanding their businesses should consider the opportunities available to them through strengthening Canada-Latin America relations. This means they ought to think about the commercial and bilateral trade and opportunities and agreements granted by the developing relationships between Canada and key Latin American markets. Canada-Latin America trade relations have been interlocked for many years and continue to promote and support each other in economic, social and political endeavours. Free Trade Agreements (FTAs) have allowed the globalized north and south to strengthen their access to each other’s markets abroad and important benefits. BizLatin Hub provides an extensive comprehension of commercial and trade relations between Canada and Latin America. Continue reading to understand further about how BizLatin Hub can help your business expand into Canada or Latin America. The core of Canada-Latin America trade and commercial relations  NAFTA has enabled Canada to sign trade agreements with nations in the region. The foundations for trade and commercial relations between Canada and Latin America were laid down for hundreds of years. However, these relations intensified when the North America Free Trade Agreement was signed in 1992 and then later came into force in 1994. The North American Free Trade Agreement (NAFTA) links Canada’s economy to the rest of the Americas like never before.  NAFTA is defined as a free-trade region between the United States, Latin America, and Canada. The establishment of NAFTA has enabled Canada to sign trade...

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