lunes, 2 de enero de 2017

Colombia signs Tax treaty with UK

On 1 November 2016, Colombia and the UK signed the first tax treaty between the two countries.
The main objectives of the treaty are to (i) reduce barriers to cross-border trade and investment; (ii) provide legal certainty to businesses and employees operating between Colombia and the UK, since the treaty provisions will prevail
over domestic legislation; (iii) provide clear rules on the tax treatment of various activities and sources of income and reduce the withholding tax on payments made by a resident of one contracting state to residents of the other state; and (iv) allow residents of one contracting state to request a tax credit for tax paid in the other state.
The treaty provides for the following withholding tax rates on dividends, interest and royalties paid by a resident of one contracting state to a beneficial owner in the other state:
  • Dividends paid to a pension scheme or fund (or in the case of Colombia, a mandatory pension fund) will be exempt. A 5% rate will apply where the dividends are paid to a company that holds directly at least 20% of the capital of the payer company; otherwise, the rate will be 15%. The 15% rate also will apply to dividends paid by a Colombian company out of profits that have not been taxed at the corporate level or where profits of a resident of the UK attributable to a Colombian permanent establishment have not been subject to tax in Colombia and such profits, upon transfer out of Colombia, are treated as a dividend equivalent under Colombian law.
  • Interest paid to a pension fund (or in the case of Colombia, a mandatory pension fund) will be exempt; otherwise, the rate will be 10%.
  • Royalties: 10%. The term “royalties” means “payments of any kind received as consideration for the use of, or the right to use, any copyright of literary, artistic or scientific work, including cinematograph films, any patent, trade mark, design or model, plan, secret formula or process, or for information (knowhow) concerning industrial, commercial or scientific experience.”
The treaty includes special provisions regarding tax abuse that will operate to deny treaty benefits if obtaining the benefit was one of the principal purposes of an arrangement. The treaty also contains an OECD-compliant exchange of
information provision and a provision for assistance in the collection of taxes.
The treaty will enter into force once both countries have completed their legislative procedures and exchanged diplomatic notes.
Source: Deloitte

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