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NEW COLOMBIAN HOLDING COMPANY REGIME

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NEW COLOMBIAN HOLDING COMPANY REGIME

International taxation

The tax reform bill proposes a preferential tax treatment for Colombian companies, whose main purpose is to invest or hold shares in foreign companies

  

Colombian companies, whose main purpose is to invest or hold shares in foreign companies, and/or the administration of such investments, may apply to the new tax regime for Colombian Holding Companies (“CHC”) if the following conditions are met:

a. Direct or indirect interest in at least 10% of the capital of each company or foreign entity on a 12 months period (minimum).

 b. The company develops its business purpose with at least three employees and a management office in Colombia.

Income accrued by a CHC derived from dividends or sale of shares in foreign companies will have the following treatment:

  • Dividends distributed to the CHC by foreign companies would be exempted for income tax purposes.
  • Distribution of dividends by CHC:

1. To Colombian residents: would be taxed at the general income tax rate but would grant the possibility to credit taxes paid abroad.

2. To Non -residents: would be deemed as foreign source income.

  • Income derived from the sale or transfer of the interest held by CHC in a foreign company, would be income tax exempted in Colombia.
  • Dividends received by a CHC from investments in foreign entities would not be subject to industry and commerce tax.

According to the tax reform bill, CFC rules will also be applicable to CHC companies in the relevant matters.

For the application of the CHC regime, an authorization shall be requested before the Tax Administration.