On October 29, the Colombian Ministry of Finance and Public Credit (MinHacienda) has issued Decree 1973, which clarified measures regarding the taxation of private equity funds and collective investment funds and rules on the attribution of income to a permanent establishments (PEs) or branch of individuals, companies or foreign entities of any nature, located in Colombia.
In the Decree it was determined that the permanent establishments of foreign individuals, societies or entities located in Colombia, regardless of their nature, will be taxed on the income and occasional earnings from national and foreign sources that are attributable to them.
The functions developed, the assets used, the personnel involved, and the risks assumed by the company through the permanent establishment or branch as well as other parts of the company must be taken into account.
This Decree also explained deferral of income in funds whose shares are traded on the stock exchange as following:
- The deferral of income applies when the shares of the private equity or collective investment fund are registered in a stock exchange inspected by the Financial Superintendence of Colombia.
- The benefit of deferred income is maintained if the obligations arising from the registration in the stock exchange are fulfilled and the shares are negotiated through the stock exchange.
- The withholding agent will practice withholding at the source aligned with the rules applicable to commercial trust contracts.
- Deferral of income is applicable as of the date on which the withholding agent confirms compliance with the stated requirements.
The Decree defined the scope of the terms (i) beneficial owner, (ii) final beneficiary, (iii) beneficiaries or majority investors, (iv) group of economically linked investors, (v) family group, (vi) negotiation of shares of a fund in a stock exchange and (vii) new innovative ventures.
The Decree was entered into force on the similar day of its publication.
