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CONSEQUENCES OF THE LIQUIDATION OF SILENT PARTNERSHIP AGREEMENTS

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CONSEQUENCES OF THE LIQUIDATION OF SILENT PARTNERSHIP AGREEMENTS

Income Tax  

Colombian Tax Authority clarified how the contributions and returns should be treated in case of liquidation of Silent Partnership Agreements  

 

The recent tax reform modified section 18 of the Colombian Tax Code, establishing that participants of silent partnership agreements have to allocate the assets, liabilities, items of income, costs and expenses in their income tax return, in accordance to their participation.

By means of Revenue Ruling No. 0850 of 2018, the Colombian Tax Authority referred to the treatment when a silent partnership agreement is liquidated, as follows:

  • The revenue subject to income tax for the participant would be the profit derived from the liquidation.
  • The restitution of the contribution, partially or totally, should not be deemed as an item of income for the participants.
  • The silent partnership agreement is not considered as a commercial corporation. Therefore the excess over the contribution could not be treated as a capital gain.