The Radical Change party, a political party of Colombia submitted a tax reform bill to Congress. The bill contains following proposals:
Tax residence
The bill would eliminate the requirement to base a company’s tax residence on the company’s effective place of business.
Corporate income tax (CIT)
The bill would reduce the CIT rate from 33% to 30%. Income derived from agricultural activities would be subject to a 10% CIT rate. The bill would exempt income from foreign portfolio investments from the CIT. The bill would repeal the minimum presumptive income for CIT purposes.
Thin capitalization rules
The thin capitalization rules would only apply to debt obligations contracted by Colombian taxpayers with their foreign-related parties.
Loss carry forward
The bill would allow Colombian taxpayers to carry forward losses without any time limitations, currently an entity can carry forward losses up to 12 years.
Dividends
Dividends, currently taxed at a 5% rate, would not be taxed when remitted abroad. Dividends paid from profits not taxed at the corporate level would be taxed at a 30% rate.
Foreign income
The bill would clarify the foreign income earned by foreign individuals in their first year of tax residence in Colombia, but before they relocated to Colombia, would not be subject to tax. Similarly, foreign-source income earned by foreign individuals in their last year of tax residence, but after they leave Colombia, would not be taxed in Colombia.
