The Ruling clarifies tax rules for indirect transfers of Free Trade Zone branches, excluding preferential rates.
The Colombian tax authority (DIAN) issued Ruling 7858 int 924 on 18 June 2025, clarifying the taxation of indirect transfers involving a branch established in a Free Trade Zone.
The ruling states that when a non-resident shareholder sells shares in a foreign company that owns a Colombian branch, the transaction is subject to tax in Colombia under the Indirect Disposal Regime (REI).
The ruling specifies that the preferential 20% tax rate applicable to branches located in Free Trade Zones does not apply to the indirect transfer of such branches. This is because the transfer involves the sale of shares by the parent company’s shareholders, not a direct disposal of assets by the branch itself.
Under the ruling, the indirect transfer is generally taxed as standard income tax or as an “occasional gain,” depending on the holding period of the shares. However, the REI will not apply if the shares are listed on a recognised stock exchange and the beneficial owner holds 20% or less of the shares, or if the Colombian assets represent less than 20% of both the book value and the commercial (fair market) value of the foreign entity’s total assets.
