In a recently published ruling, the National Tax Authority of Colombia pronounced on the income tax, VAT and withholding tax treatment of a consultancy agreement concluded between a Colombian taxpayer and the Inter American Centre of Tax Administrations with headquarters in Panama. Key issues are following of this ruling:

• Foreign companies are subject to income tax in Colombia only for their Colombian-source income.
• The legal meaning of “Colombian-source income” includes income derived from the provision of services in Colombian territory and income derived from technical services or technical assistance services, whether provided from abroad or within Colombian territory.
• If payments considered Colombian-source income are made to foreign taxpayers, they will be subject to income tax at a general rate of 33%, or, 10% rate will apply in the case of technical services or technical assistance services.
• on the subject of VAT, consultancy and advisory services are considered to be provided in Colombia, and thus subject to VAT, when they are carried out from abroad, but their beneficiaries are located in Colombia.
• If payments for services provided or deemed to be provided in Colombia are made to foreign taxpayers, they will be subject to 16% VAT.
• in the case of contracts concluded with an international organization such as CIAT for the provision of consultancy services, DIAN considered that the payments made from Colombia to CIAT will be subject to income tax at a rate of 10% and VAT at 16%, regardless of whether the service is provided from abroad or within Colombian territory.