The tax authority of Colombia (DIAN) published a ruling regarding whether the exemption for controlled foreign company (CFC) dividend income paid out of profits from real economic activities will apply if the dividends are paid by a subsidiary of a CFC in Colombia. The situation involved a Colombian resident that held two CFCs that each held a share of another company operating in Colombia.
Under Colombia’s CFC rules, income of a CFC held by a Colombian resident may be exempt from the rules (attribution to the Colombian resident) if derived from real economic activities performed by the CFC, its subsidiaries, its affiliated companies, or its permanent establishments (PE), provided that the economic activity is performed in the same jurisdiction of residence of the CFC, its subsidiary, its affiliated company, or its PE, as the case may be.
