DIAN REVENUE RULING
The income derived from SWAP’s and Forward Agreements with foreign entities is not necessarily Colombian sourced
The Tax Authority established that the income received from a SWAP agreement is not considered national sourced income if the service is rendered from abroad and the company that provides the service is located outside the Colombian territory
In its Revenue Ruling No. 012358 of May of 2016, the Colombian Tax Authority –DIAN— discussed the application of withholding taxes on Swaps and Forwards operations held with foreign entities not domiciled in Colombia.
The Authority reiterates its Ruling No. 019266 of April 7th 2005, where it clarified that the service for protection of contingencies affecting financial instruments is a service provided offshore because the entity that provides it is not domiciled in Colombia. Additionally, it shall be considered that the financial transaction takes place outside the country and it is not relevant if its beneficiary is located in Colombia.
As follows, under the territoriality principle, the income from Swap agreements is not considered national source income and therefore withholding tax is not applicable. This, considering that Article 24 of the Tax Code considers national source income only those derived from the exploitation of tangible and intangible goods in Colombian territory and the provision of services in Colombia.