Colombia: Key changes on international mergers and spin-offs

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According to a recently published Ruling 2242 of 2017, the Colombian National Tax Authority (DIAN) pronounced on the tax effects of international mergers and spin-offs. In accordance with article 319-8 of the Tax Code (TC), the transfer of assets located in Colombia that are derived from international mergers or spin-offs is tax neutral if the value of the Colombian assets does not exceed 20% of the total value of the group assets. Accordingly, if more than 20% of the group assets are located in Colombia, the international merger or spin-off will be considered a taxable sale for income tax purposes.

In DIAN’s opinion, in order to determine whether the aforementioned transfer of assets is tax neutral or must be treated as a taxable sale, the value of the Colombian assets must be compared to the total value of the group assets.

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