By Cindy Simbaqueva, transfer pricing manager, BaseFirma Colombia, Bogotá
On August 10, the Colombian tax authority published new guidance related to the taxation of indirect transfers.
An indirect transfer is the disposition of an ownership interest in an asset located in a particular jurisdiction which is owned by a resident located outside of that jurisdiction.
New Decree 1103 regulates article 90-3 of Colombia’s tax statute, adding a new chapter to the Unique Regulatory Decree on Tax Matters, related to the taxation of indirect transfers.
Decree 1103 defines the key concepts of the tax statute for the application of indirect transfer regulations. Included are definitions of foreign entities, the underlying asset, sale price, disposal value, related parties, beneficial owner, stock exchange recognized by a government authority, the first point of contact, and subordinate.
Pursuant to the Colombia decree, the application of a treaty to avoid double taxation will prevail over this new decree (it is also applicable to decision 578 of the Andean Community).
The new decree also outlines the correct procedure in the case of cross-border mergers and acquisitions, possession of assets in foreign branches, and Colombia’s controlled foreign corporation regime.
Furthermore, the new Colombia decree specifies the responsibilities that each party assumes in the relevant transactions, such as withholding obligations and the preparation of a specific disclosure form to be filed within the month following the date of disposal.
Finally, the decree provides additional procedures to be followed, the joint responsibility of the purchaser, and the applicable penalty regime.
I am an American citizen expat in Colombia. This week, Xoom(dot)com charged my Colombian savings account $146.00 on a $1600 transfer from the US bank account I maintain for deposit of my SS monthly. This amounts to double taxation, which is specifically to be avoided in the Colombian Decree 1103. Anyone know how I can avoid this in the future?