Contributed By Baker McKenzie S.A.S.
Regarding any real or perceived abuses/loopholes on tax laws, the Organisation for Economic Co-operation and Development (OECD) has praised Colombia for its high level of commitment to the international standard for transparency and exchange of information. After an assessment of the domestic legal framework by the OECD, Colombia obtained an overall rating of Compliant, due to its legal provisions on financial information and widening network of treaties on exchange of information.
On 25 May 2018, OECD countries agreed to invite Colombia to join the OECD as the 37th member of the organisation after being subject to in-depth reviews by 23 OECD committees and the introduction of major reforms seeking to align its legislation on taxation, anti-bribery, trade and labour issues, among others, to OECD standards. Colombia's main efforts for the achievement of tax transparency and global reporting are as follows.
Exchange of Information
Colombia has also entered into several agreements for the exchange of tax information. For a list of countries with which Colombia has agreed to share information under the Common Reporting Standard (CRS), go to the OECD website. In accordance to the Colombian Tax Office, USA and 36 other countries exchanged tax information on 29 September 2017 and 62 countries in 2018.
In relation to the exchange of information, the Colombian and US government have an enforceable Intergovernmental Agreement Model 1 (IGA), within the framework of Law 1666 of 2013, which made the Foreign Account Tax Compliance Act (FATCA) mandatory for Colombian financial institutions and taxpayers. The IGA was implemented in 2015 by means of Resolution 60 of 2015 issued by the Colombian Tax Office.
Ultimate Beneficial Ownership
Financial entities are required to identify and report to the Colombian Tax Office the ultimate beneficial owner in accordance with the Laundering Assets Risk Management and Terrorism System (SARLAFT) standards. This, provided that a non-resident has direct or indirect ownership and control of more than 20% of a resident entity, local trusts and mutual funds. This information is not available to the public.
Rules Against Tax Haven Practices
The national government enacted Decrees 1966 of 2014 and 2095 of 2014, which established the official list of the jurisdictions that are deemed as low tax jurisdictions for Colombian tax purposes.
Andorra, Antigua and Barbuda, Cayman Islands, British Virgin Islands, Isle of Man, Hong Kong, Andorra, Lebanon and Bahamas, amongst others, were included in the official list.
The Colombian government may review and modify the list of low tax jurisdictions pursuant to the criteria contemplated in Article 260-7 of the Colombian Tax Code to determine if the current jurisdictions may be excluded or if there are additional jurisdictions to be included. This list has not been recently updated.
Voluntary Disclosure (Normalisation Tax)
Law 1943 of 2018 established a new mechanism allowing taxpayers to include any omitted assets without having to pay income tax on the resulting equity increase, but instead by paying an additional tax on the omitted assets (Normalisation Tax).
The additional tax would apply at a 13% rate if reported, liquidated and paid only on 25 September 2019. Normalised assets must be included in all applicable tax returns for FY 2019 and onwards.
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