The global fall in prices for crude oil, Colombia's largest export, has had a big impact on the country's national income, but this is not the only budgetary concern for the country. The peace process with the guerrilla group Fuerzas Armadas Revolucionarias de Colombia (FARC) is under negotiation, and the process requires huge amounts of money.
Colombia has seen a series of reforms and modifications to the tax law over the past few years. Corporations, and foreign companies conducting corporate activities in Colombia, are now subject to a temporary income tax rate of 40%. In 2017, the income tax rate will be 42%, and in 2018 it will be 43%.
"This is a very high income tax rate, compared with other jurisdictions in the region," said Carolina Rozo Gutiérrez, co-head of tax at Philippi Prietocarrizosa Ferrero DU & Uría. "The upcoming tax reforms are addressed to provide the government with the required funds to finance the post-conflict development," she said.
However, these reforms have had a negative impact on investment in the Andean country. Rozo said that certain past tax reforms included tax provisions to attract foreign investors into Colombia, and after some years, said tax provisions were modified by recent tax reforms in order to seek funds. "We are facing a significant problem with both local and foreign investors," Rozo said. "The investors and taxpayers based their decisions on certain conditions and on a legal framework that is being modified every two years," she added.
These problems are due not only to the income tax rate, but also to the government not being able to assure stability of the law, said Laura Sanint on June 14 2016, when she was senior associate at Philippi Prietocarrizosa Ferrero DU & Uría (Sanint is now working at Sanint Ruiz). "We've had so many reforms," she said. "We are expecting another one this year, which is scary for investors because they can't know for sure what these are going to say in the following years."
Tax professionals hope the reform, which should come into force in 2017, will reduce the tax burden on businesses. However, there is a lot of uncertainty as the country's President Juan Manuel Santos has said he will not reveal details of the reform before it is presented to Congress in October.
Meanwhile, tax compliance has become increasingly important for the Colombian government. Ciro Meza, partner at Baker & McKenzie, said that this tax compliance culture was a result of everything that has been going on in the tax world, in terms of international discussions like the OECD BEPS Project, and that tax planning has been taken very seriously.
"Colombia made a bold move in 2012, when it first introduced real and substantial tax avoidance rules," said Meza. "That came along with an amnesty programme, and that coincided with all the common reporting standards, agreements with BEPS, and with exchange of information agreements, so I would say that the environment right now has changed 360 degrees compared with how it was five years ago."
During the past year, the tax authorities have continued to audit companies regarding their tax affairs. "The former government was very aggressive towards taxpayers, both individuals and corporations," said Jaime Vargas, head of tax at EY. "It has become more flexible, however all tax authorities favour the treasury department rather than the taxpayers."
Although the government is mainly focused on resolving internal affairs, Colombia is also planning to become a member of the OECD. Meza said that this was a special era and things were changing. "We are definitely moving towards more transparency," he said.
Ernst & Young SAS
Carrera 11 No. 98-07 Piso 3
Tel: +57 1 484 7000
South America Tax Managing Partner
Tel: +51 1 411 4440
Country Tax Managing Partner
Jaime Vargas Cifuentes
Tel: +57 1 484 7590
Tel: + 57 1 484 7170
Business Tax Services
Diego E. Casas
Tel: +57 1 484 7050
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Tel: +57 1 484 7174
Tel: +57 1 484 7225
International Tax Services
Tel: +57 1 484 7590
Tel: +57 1 484 7297
Tel: +57 1 484 7600
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For more details: www.godoyhoyos.com
Established in 2004, Godoy & Hoyos Abogados has consolidated itself as a market leader in legal services in Colombia. In providing our services, we take a practical, versatile and innovative approach, supported by the knowledge, experience, and leadership of our partners and associates. We focus on providing our clients with the best service possible and satisfying their legal needs. Our goal is to ensure that they receive comprehensive legal advice in respect of their most important business decisions, which we provide through a personable, practical approach – the hallmark of the very best boutique law firms.
Our partners are recognized as leaders in their respective practice areas in Colombia. Their experience includes counselling some of the most important local and foreign companies operating in the country. They are also highly regarded professors at some of the best law schools in Colombia, keeping Godoy & Hoyos Abogados at the forefront of the legal services industry in Colombia.
Juan Pablo Godoy Fajardo, Education: Universidad Javeriana (Law degree, 1988 and Social Economic Sciences Program, 1988). Memberships: Colombian Association of Petroleum and Mining Lawyers, Colombian Institute of Tax Law(Former Chairman), LA Institute of Tax Law and International Fiscal Association (Former Chairman of the Colombian Branch). Practice areas: Mining, Oil & Gas Law, Tax and Foreign Trade planning and counseling on domestic and international matters.
Catalina Hoyos Jimenez, Education: Universidad Colegio Mayor de Nuestra Señora del Rosario (Law degree, 1998, Tax Law Program, 2002; Universidad de Salamanca, Candidate to PhD). Memberships: Colombian Institute of Tax Law Board Member, Vice-President and Former Chairperson. Latin American Institute of Tax Law Board Member. International Fiscal Association (IFA) Member. Practice areas: Tax planning, litigation and counseling on domestic and international tax law matters.
Jaime Moya-Suárez, Education: Attorney-at-law from the Colegio Mayor de Nuestra Señora del Rosario (1997); Specialization in financial law of the same university (1998), and an honor graduate of that program; Master in law (LL.M) with an emphasis in international finance (Enrique Low-Murtra scholarship) from the Harvard Law School. Experience: General Secretary – Legal Manager of Almacenes Éxito S.A. (2009 – 2011); Legal Vice President of the Chamber of Commerce of Bogotá, (2001 – 2005); Senior associate of the law firm Brigard & Urrutia Abogados. Academic and Professional Awards and Distinctions: Jaime has been a lecturer in the event "Workshop and Discussion Panel on Corporate Governance" (with a presentation on the fiduciary duties of shareholders) – sponsored by the economic newspaper La República (2014); Full professor of Civil Law, Obligations, Contracts and of Corporate Law at Colegio Mayor de Nuestra Señora del Rosario; Professor in the Board of Directors Program of Universidad de los Andes and ex-professor of the master in law program in International Contracts of Universidad Externado de Colombia. Practice Areas: Corporate law; Mergers and acquisitions; Antitrust law and consumer protection law; Infrastructure and project finance.
|Corporate Income Tax||25%||A D|
|Corporate income tax for equality rate||9%||B|
|Corporate income tax for equality surtax||6%||C|
|Capital Gains Tax||10%|
|Branch Remittance Tax||0%||40%|
A Reduced and gradually increasing income tax rates exist. Also, a wealth tax applies to companies for 2015 through 2017.
B This tax applies to local corporate taxpayers required to file an income tax return, which include branch offices and permanent establishments (PEs) of foreign entities.
C The surtax applies to income tax for equality taxpayers on their taxable income that exceeds COP800 million. The surtax apples for 2015 through 2018. The rates of the surtax are 5% for 2015, 6% for 2016, 8% for 2017 and 9% for 2018. The surtax is subject to an advance payment that is calculated applying the corresponding tax rate for the relevant year to the taxable income of the prior year. The surtax does not apply to companies that operate or are located in offshore free trade zones.
D Corporate income tax rates applicable to non-residents that receive Colombian source income not attributable to a branch or PE and that are required to file an income tax return in Colombia are temporarily increased from 2015 through 2018 (2015: 39%; 2016: 40%; 2017: 42%; and 2018: 43%). The National Tax and Customs Administration issued Official Opinions 11676 and 12343 of 2015, which state that withholding tax rates set at 33% were not modified because the increase of the corporate income tax rates for foreign entities did not change the general withholding tax rates. However, these opinions did not address the withholding tax rate applicable to dividends. Consequently, the increase of rates may affect the applicable withholding tax rate on dividends.
E Dividends paid to non-residents are not subject to tax if the dividends are paid out of profits that were taxed at the corporate level. If the profits were not taxed at the corporate level, dividends paid to non-residents that are not attributable to a branch or PE are subject to withholding tax at the corporate income tax rate of 40% for 2016. Dividends paid between domestic corporations are not subject to tax if the company generating the profits out of which the dividends are paid is taxed on these profits in Colombia. Otherwise, the dividends are included in the income tax return of the recipient of the dividends. A 20% withholding tax is imposed on dividends paid to residents if the taxpayer is required to file an income tax return.
F Interest paid or accrued by Colombian residents to foreign entities on loans with a term equalling or exceeding one year are subject to 14% withholding tax; otherwise, the applicable rate is 33%. Interest paid on loans that have a term equal or greater than eight years and that are related to certain infrastructure projects are subject to a 5% withholding tax. Interest paid by Colombian financial institutions and interest paid by Colombian residents to foreign entities with respect to international trade operations are deemed to be foreign-source COLOMBIA 307 income and are accordingly exempt from withholding tax. Certain qualified loans executed before 31 December 2010 do not generate Colombian-source income. As a result, interest on such loans is exempt from withholding tax.
Baker & McKenzie is a full-service firm. The team designs and implements complex foreign trade operations and advises in import and export procedures. The practice also represents clients before the tax, customs, foreign trade and exchange control authorities, both at domestic and Andean community level. The firm also offers transfer pricing, litigation, structuring and tax compliance services.
"They provide great advice in taxation and planning," one client said.
Baker & McKenzie has a strong presence in the oil and gas and mining sectors, and represents many multinational companies. In September 2015, the firm advised a client in the designing of an ideal holding and operational structure from a tax perspective for the acquisition of a frequent flyer administrative company. This required planning and finalising an innovative structure.
Department leader Ciro Meza practises planning, advisory and litigation, and has advised taxpayers in the oil and gas, pharmaceutical, technology, consumer business, and mining sectors in Colombia.
Brigard & Urrutia Abogados is a respected law firm led by José Andrés Romero. Three partners and 15 other tax professionals make up the tax team. Many have extensive experience outside of Colombia. The team provides tax services to the largest companies in Colombia across a range of sectors. Many of the firm's clients work in the infrastructure, energy, oil and gas and mining industries.
Its portfolio of services include corporate M&A, contentious tax, cross-border tax planning, finance tax issues, indirect tax, international tax and corporate restructurings. The firm is assisting a telecommunications service provider with regional tax planning to restructure an international telecommunications arrangement.
Romero also leads the firm's transfer pricing team and has more than 16 years of experience working as a national and international tax adviser, and in transfer pricing for well-known international firms in Colombia and New York.
The firm's clients are happy with the firm's services, with one client saying: "They are very good, efficient and hands-on. In particular, we work with Andrés Hernández, José Andrés Romero and Nicolás Bernal Abella. They are very fast and solution-orientated."
Cahn-Speyer, Paredes & Asociados is a boutique tax law firm. It offers corporate, indirect, transfer pricing and dispute services to both local and international clients. Paul Cahn-Speyer Wells leads the practice.
Diego Franco leads the tax department at Deloitte in Colombia, which comprises seven partners and about 150 other tax professionals. The firm is full-service and provides clients with a wide range of integrated tax services, including global business tax, cross-border tax, indirect tax, tax dispute, transfer pricing and global employer services.
The firm serves all industries. Many of its clients work in energy and resources, financial services, technology, media and telecommunications, life sciences and healthcare, consumer business, manufacturing and the public sector.
In February 2016, Franco and Carolina Bueno performed a business model review for a Mexican multinational beverage and retail company with the objective of optimising the VAT treatment involved in their operations. In March 2016, the team also assisted a client with structuring and application of a VAT exclusion certificate before the environmental authority.
Jaime Vargas leads the Colombian branch of EY. The team comprises 10 partners and 194 other tax professionals who are deeply specialised in industry segments. The team works on transfer pricing, compliance, tax policy and controversy matters.
Clients of the firm work in the energy and utilities, manufacturing, hospitality and food, fast-moving consumer goods and agriculture industries, to name a few. Over the past year, EY has assisted its clients in the purchase of interest in a client fidelity programme company, a joint venture in a port company and a purchase of a majority interest in a power generator company. The last deal was worth $1.96 billion.
"It was a very good experience. We would recommend this firm to others," one client said.
Camilo Zarama leads the tax department at Garrigues, which consists of two partners and eight other tax professionals. In August 2015, the firm hired William Daniel Bulla as a tax manager. The firm advises on general tax, international tax, transfer pricing, tax litigation, indirect taxes and local tax.
The team advised Cementos Molins in the tax aspects of a joint venture with Corona, a Colombian multinational, for the development of a cement business in Colombia.
"Garrigues is a great firm, in particular concerning tax law. They have a multidisciplinary team, directed by Camilo Zarama, with a great academic background and a vast experience in all matters related to local and international tax, as well as transfer pricing," said one client. Another client recommended César Cermeño Cristancho.
Godoy & Hoyos Abogados's tax department has two partners and 13 other tax professionals. Founding partners Catalina Hoyos and Juan Pablo Godoy lead the team. The professionals provide tax litigation, planning, advisory, policy and other services to clients in the oil and gas, construction and infrastructure, financial, technology, mining and retail industries.
"Both the partners and the associates are knowledgeable and diligent," said one client. Another client said: "My experience with them was excellent. I've been transferred out of Colombia, but, if I had the opportunity to go back to Colombia, I would not have any doubt to contact G&H again."
The firm is assisting a client in a case where the tax authority summoned the company to amend the tax returns from 2009-2013.
Many of the firm's professionals are professors at some of Colombia's best law schools. Hoyos specialises in tax planning, advisory and litigation at the local, national and international levels. Godoy is the director of the firm's mining and oil practice, and also advises on tax law and foreign trade.
Gómez-Pinzón Zuleta, Taxand Colombia offers tax services to its clients globally, including indirect tax, international tax, M&A, tax dispute resolution, transfer pricing and business restructuring services. Mauricio Piñeros Perdomo leads the practice. He has more than 22 years' experience in the tax field and has counselled clients in various sectors in matters of corporate tax, research and litigation in M&A, private equity investments, financial transactions, project finance and inbound and outbound investment.
Lewin & Wills Abogados is led by founding partner Alfredo Lewin. The firm is a boutique and provides legal advice on tax in the areas of transactions, domestic, corporate and international tax, transfer pricing, controversy, compliance and arbitration. Lewin advises clients on the tax aspects of cross-border transactions, M&A, reorganisations, partnerships and joint ventures, and structured finance, and transfer pricing, and has acted as an arbitrator in tax controversies.
Mauricio Plazas leads a team of lawyers and accountants at the law practice of Mauricio A Plazas Vega Abogados & Cia. The practice provides tax planning, consulting and litigation services. Plazas is a professor and published author of a number of books about taxes.
Martin Acero and Carolina Rozo co-head the tax practice at Philippi Prietocarrizosa Ferrero DU & Uría. They lead a team of 13 tax professionals. The firm resulted from the merger of Chilean firm Philippi with Colombian law firm Prietocarrizosa and an alliance with Spanish law firm Uría Menéndez on January 1 2015. In 2016, Ferrero Abogados and Delmar Ugarte, two Peruvian law firms, joined the firm.
The department is strongly oriented to business, both local and international, as well as to local and cross-border transactions and family tax planning strategies. The team also has expertise within M&A, private equity investment, financial operations, and the oil and gas, mining, infrastructure and port and transport services. The litigation practice covers both national and local taxes, and has had litigation cases involving income tax, transfer pricing matters, VAT, turnover tax and custom duties.
"I had a really good experience, I received integral support in the advice and interdisciplinary help. I'm satisfied with the services," said one client.
In November 2015, the firm provided tax advice on potential tax audits which involved a merger between companies located in a free trade zone and in the Colombian customs territory.
Posse Herrera Ruiz provides tax, customs, cross-border, tax planning, compliance, appeals and litigation services to clients. Founding partner Juan Guillermo Ruiz leads the tax planning and international commerce practice. Ruiz focuses on taxation, tax planning for cross-border transactions, developing M&A tax structures, project finance, public and private infrastructure bids, and tax disputes.
PwC's tax department is led by Carlos Miguel Chaparro. The team offers a wide range of services, including labour, commercial, administrative, M&A and legal advisory, and tax compliance and outsourcing. As part of PwC's global network, the firm has access to a large network of attorneys worldwide.
Important industries for the firm are energy and utilities, technology, media and telecommunications, manufacturing and computers, software, online and digital. The firm also advises numerous other industries.
In 2015, the firm provided tax advice in the business opening process of an oil and gas company.
The team at Quiñones Cruz Abogados offers clients a range of local, regional and international tax advice. The firm's tax professionals also work in tax planning, advisory, policy design and consulting, arbitration and litigation. Founding partners Antonio Quiñones Montealegre and Lucy Cruz de Quiñones are respected for their tax and litigation expertise. Quiñones Montealegre is a leader in trade and corporate tax planning and is experienced in local and provincial taxation, tax litigation, domestic and international tax planning, and M&A tax advice. Cruz de Quiñones is a constitutional tax law specialist and expert income tax litigator. She focuses on tax advice and litigation, domestic and international tax planning, M&A tax advice, arbitration and administrative procedures tax, and tax policy design.
|Tier 1 - Colombia|
|Tier 2 - Colombia|
|Baker & McKenzie|
|Brigard & Urrutia Abogados|
|Cahn-Speyer, Paredes & Asociados|
|Godoy & Hoyos Abogados|
|Gómez-Pinzón Zuleta, Taxand Colombia|
|Lewin & Wills Abogados|
|Mauricio A Plazas Vega Abogados & Cia|
|Philippi, Prietocarrizosa Ferrero DU & Uría|
|Posse Herrera Ruiz|
|Quiñones Cruz Abogados|