Global Tax Alert (News from Americas Tax Center) | 11 October 2013

Colombia issues decree listing tax havens

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On 7 October 2013, Colombia's Ministry of Finance and Public Credit issued Decree 2193, listing the countries, jurisdictions, domains, associated states or territories that are considered tax havens for tax purposes.

The decree temporarily excludes the following jurisdictions: Barbados, Bermuda, United Arab Emirates, State of Kuwait, State of Qatar, Guernsey and Republic of Panama. These jurisdictions are excluded because Colombia is carrying out paperwork to sign treaties or agreements that permit the exchange of tax information. If the treaties and agreements are not completed by 7 October 2014, these jurisdictions will be added to the tax haven list.

Under Article 4 of the decree, the decree applies to the following tax period.

In accordance with this decree, taxpayers that do business with a company located, domiciled or resident in a tax haven and want to deduct income tax payments must document and show detail of the functions performed, assets used, risks assumed and all costs and expenses incurred by the beneficiary company in the tax haven. Additionally, to constitute a cost or deduction, the taxpayer must have withheld tax (except for financial transactions registered with Colombia's Central Bank). If the payments constitute taxable income to the beneficiary company, the applicable tax rate is 33%, regardless of the nature of the payments.

Further, under the decree:

  • The withholding tax rate for portfolio capital investors resident or domiciled in a tax haven will be 25%, instead of 14%.
  • Transactions with persons, companies, firms or entities located, resident or domiciled in tax havens will be subject to the transfer pricing regime, requiring supporting documentation and an informative tax return to be filed.
  • If the supporting documentation omits information related to transactions with persons, companies, firms or entities located, resident or domiciled in tax havens, as well as knowledge of costs and deductions arising from such transactions, a special penalty of 4% of the total value of the transactions will be applied. The penalty will not exceed COP$ 268,410,000 for tax year 2013.
  • If the information related to the transactions also is omitted from the information statement, as well as knowledge of costs and deductions arising from such transactions, a penalty of 2.6 % of the total value of the transactions will be generated. The penalty will not exceed COP$ 161,046,000 for tax year 2013.
  • Citizen individuals that during the relevant tax year or period are tax resident in one of the jurisdictions classified as a tax haven will be considered residents in Colombia for tax purposes.

Article 1 of the decree lists the following tax havens:

1. Anguila

2. Antigua and Barbuda

3. Archipelago of Svalbard

4. Territorial Collectivity of San Pedro and Miguelón

5. Commonwealth of Dominica

6. Commonwealth of the Bahamas

7. Kingdom of Bahrain

8. State of Brunei Darussalam

9. Independent State of Western Samoa

10. Grenada

11. Hong Kong

12. Isle of Man

13. Queshm Island

14. Cayman Islands

15. Cook Islands

16. Pitcairn, Henderson, Ducie and Oeno

17. Solomon Islands

18. British Virgin Islands

19. Jersey

20. Labuan

21. Macao

22. Principality of Andorra

23. Principality of Liechtenstein

24. Principality of Monaco

25. Hashemite Kingdom of Jordan

26. Cooperative Republic of Guyana

27. Republic of Angola

28. Republic of Cabo Verde

29. Republic of Cyprus

30. Republic of the Marshall Islands

31. Republic of Lberia

32. Republic of Maldives

33. Republic of mauritius

34. Republic of Nauru

35. Republic of Seychelles

36. Republic of Trinidad and Tobago

37. Republic of Vanuatu

38. Republic of Yemen

39. Lebanese Republic

40. St. Kitts & Nevis

41. Saint Vincent and Grenadines

42. Saint Helena, Ascension and Tristan de Cunha

43. St. Lucia

44. Sultanate of Oman

For additional information with respect to this Alert, please contact the following:

Ernst & Young Ltda., Bogotá, Colombia
  • Ximena Zuluaga
    +57 1 484 7170
  • Maria Camila González
    +57 1 401 4763
  • Juan Sebastián Torres
    +57 1 484 7658

EYG no. CM3869