To the extent that the individual can benefit from a relief of charges within the meaning of the purpose of service to the person dependent on the applicable double taxation agreement, there can be no tax obligation. The concept of stable establishment (PE) for individuals is defined as follows: “It also assumes that there is a stable establishment in the country or jurisdiction when a person other than an independent agent acting on behalf of a foreign company possesses or exercises ordinary powers in the country or jurisdiction to enter into binding agreements or contracts for the company. The payment or consideration of interest should be subject to withholding tax and comply with Colombian exchange rules. The withholding rate at source is 15% for loans longer than one year and 20% if they are lower. The withholding rate can be lowered or abolished under a double taxation agreement signed by Colombia.1 Partnership agreements have neutral tax effects. Partners are subject to income tax and must report assets, commitments, income, costs and deductions based on their participation. Non-resident partners pay specific income tax rates: 35% for non-residents and 33% for foreign firms (to be reduced as described in Section 1.0). Colombian resident companies and non-resident businesses with stable establishments in Colombia must file an annual income tax return. The national tax authority sets each year the deadlines, which are generally between March and April of the year following the end of the tax year to be reported. If the resident unit is liquidated during the fiscal year, income tax is recorded and paid for part of the year.

The penalty for late deposit is 5% per month of tax payable, up to 100% of tax due or withholding tax. The taxpayer is responsible for calculating and paying interest in the event of a late deposit. 1. Colombia has signed double taxation agreements with Canada, Chile, the Czech Republic, France, India, Mexico, Portugal, South Korea, Spain, Switzerland, the United Arab Emirates and the United Kingdom.↩ The 2016 Double Taxation Agreement was signed on 2 November 2016. It came into force on December 13, 2019. In addition to Colombia`s national tax system, Which provides for a simplification of double taxation by granting a tax credit for taxes paid abroad for income from foreign sources within the limits set by law, Colombia has entered into tax agreements to avoid double taxation with Spain, Chile, Switzerland, Mexico, Canada, Portugal, India, Portugal, South Korea and the countries/jurisdictions of the Andean Community (Peru, Bolivia and Ecuador). Colombia negotiates with France, the United Kingdom, Italy and Japan, among others. Colombia has double taxation agreements (TTDs) with the following countries: The main local taxes (departmental and communal taxes) are the industrial and business tax, the property tax and the registration tax.

With regard to the prevention of double taxation and the prevention of tax evasion, Colombia has increased the number of double taxation agreements signed and implemented certain erosion and profit-transfer (BEPS) measures. The cost of consulting, technical assistance and technical services is subject to a 20% withholding rate at source. Under a double taxation agreement, a non-resident can apply for an exemption from Colombian income tax if the business does not have a stable establishment in Colombia. Payments related to management services are subject to a higher withholding tax rate (33%) payments to non-cooperative jurisdictions or low-tax or low-tax jurisdictions (32%). The most widely used business vehicle in Colombia is the simplified limited company, which does not require a minimum number of shareholders.