Withholding tax on payments made to non-profit entities

DIAN Revenue Ruling No. 173209 of February, 2016


In its Revenue Ruling, the Colombian Tax Authority (DIAN) examines Section 14 of Decree 4400/2004, regarding non-profit entities belonging to the special tax regime. Section 14 states that payments or account credits made to taxpayers that belong to the special tax regime, are only subject to withholding tax, when the operation performed by the non-profit entity originates from industrial, commercial or financial activities, in accordance with Sections 395 and 401 of the Colombian Tax Code. On the other hand, payments or account credits made to taxpayers subject to the special tax regime stablished by Section 19 of the Tax Code that undertake operations other than those described above, are not subject to withholding tax.

In this sense, the Tax Authority concludes that if the entity belonging to the special tax regime certifies its character as a non-profit organization, the withholding agent will be in a legal obligation not to practice the withholding tax, as long as the economic activity in question is directly related to the main purpose of the non-profit entity.