Taxes
Income Tax and Complementary taxes
As a general rule, foreign portfolio investors are income taxpayers. However, the tax payable by them is fully collected through withholding at source made at the end of each month by the administrator of this type of investment; therefore, they are generally not required to file an income tax return.
The tax obligations for foreign portfolio investors are established in Articles 18-1 and 23-1 of the Colombian Tax Code, the latter in relation to the recognition of income for beneficiaries or participants of Collective Investment Funds (Fondos de Inversión Colectiva - FIC).
The basis for withholding tax is the profit obtained by the investor during the respective month. Profit corresponds to the difference between the results determined in accordance with Article 18-1 and the net administrative expenses incurred in Colombia.
Additionally, in accordance with applicable tax regulations, when foreign portfolio investors hold shares, the issuing company is required to apply withholding tax on dividends distributed.
Applicable tax rates according to the type of investment
The portfolio manager of the foreign portfolio investors, or the issuers, as applicable, must include in their monthly withholding tax return the withholdings applied to third parties, followed by a summary of the applicable tax rates according to the type of investment:
|
Portfolio Investment |
Withholding Agent |
Divestment |
Earnings |
Double Taxation Agreements |
|---|---|---|---|---|
|
Fixed Income |
Portfolio Manager |
Withholding: 5% and 25% for domiciled in jurisdictions with zero or low taxation. |
Withholding: 5%. |
Withholding: 5%. |
|
Shares |
Issuer |
Not taxed 0 < 3% of outstanding shares. Declaration: Yes >3%. Rate: 35%. Income tax filing: to be paid by the portfolio manager. |
Dividend that was taxed in the company: Dividend that was not taxed in the company: Differential rates per year. |
Colombia: Dividend that was taxed in the company: Withholding: 0% rate in Colombia if the shareholder is a company and participates > 25% in the company that distributes. Other cases: If < 25%, Colombia withholds 7%. Dividend that did not pay tax in the company: First withholding of 25%. Then, on the difference between the dividend and the withholding made, the rates of 0% or 7% will be applied, depending on the indicated conditions. |
|
Yields |
Portfolio Manager |
Withholding: 7%. |
Withholding: 7%. |
Withholding: 7%. |
|
Profit in Collective Investment Fund (FIC in Spanish) |
Fund Administrator |
Withholding: General rate of 14%. Tax havens: 25%. |
Withholding: General rate of 14%. Tax havens: 25%. |
Withholding: General rate of 14%. |