Colombia: Tax reform 2016 amends, new CFC rules

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On 5 June 2017, the government of Colombia published Decree 939 of 2017 that removed previous errors of articles 89, 99, 111, 123, 165, 180, 281, 289, 305, 317 and 319 of Law 1819 of 2016.

In accordance with Law 1819, there are multiple provisions that were guided by the OECD’s base erosion and profit shifting (BEPS) project’s recommendations. Regarding the controlled foreign company (CFC) rules, the standards of OECD try to address base erosion when there are overseas companies controlled by resident shareholders in Colombia or there are companies that are located in low tax jurisdictions.

In Colombia, controlled foreign company (CFC) rules are considered to be entities which are not tax residents of Colombia and comply with the obligations of subordination under Colombia’s transfer pricing regime. For instance, controlled foreign company (CFC) rules contain investment vehicles that are incorporated, domiciled or working in overseas regardless of whether they have legal personality or are transparent for tax obligations.

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