TAX TREATMENT OF SILENT PARTNERSHIP AGREEMENTS
By means of Revenue Ruling No. 008537 of 2018, the Colombian Tax Authority referred to the tax treatment participants of silent partnership agreements have to apply
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.
Nevertheless, section 18 was not clear in regard to the treatment of the profit transferred to the silent partner, the applicable withholding tax and the VAT treatment. Therefore, by means of Revenue Ruling No. 008537 of 2018, the Colombian Tax Authority referred to the aforementioned issues as follows:
- The operator cannot deduct the profit transferred to the silent partner, nor will have to apply withholding tax.
- The operator is liable for filing, paying and certifying the withholding tax applied to third parties. Additionally, the operator will be the one entitled to offset any withholding tax.
- The operator will be the one who provides the services to third parties and issues the invoices. Consequently, the operator will be the one who causes the output VAT, having the right to credit the input VAT.