Foreign entities without legal presence in Colombia should ensure they comply with their wealth tax return filing obligations to avoid potential penalties.

Foreign entities without legal presence in Colombia may need to comply with the wealth tax filing requirements for 2016.

Colombia, through Law 1739 of 2014, established a new wealth tax for years 2015 to 2017 for companies (and for years 2015 to 2018 for individuals), including foreign entities without legal presence in Colombia (e.g., without a branch or a permanent establishment in Colombia).

Foreign entities without legal presence in Colombia are subject to the wealth tax on their wealth deemed to be held in Colombia, if such wealth, as of January 1, 2015, exceeded COP 1 billion¹ (approx. USD $310,000). If the wealth as of January 1, 2015, was below this threshold, the company is not liable for the tax in any of the three years (i.e., 2015, 2016 and 2017), even if it later surpasses that amount.

For tax year 2016, the taxable base is the wealth deemed to be held in Colombia as of January 1, 2016. Wealth is determined as the assets held in Colombia minus liabilities (certain exclusions apply, pursuant to local legislation and the application of tax treaties, which should be analyzed on a case-by-case basis). This taxable base, however, should not be greater (or lesser) than the taxable base determined as of January 1, 2015, increased (or decreased) by 1.69%.²

For tax year 2016, the applicable tax rates for companies are as follows:³

For tax year 2016, the wealth tax return and first payment is due from May 11 to May 24, and the second payment is due from September 8 to September 21. To fulfill all tax obligations in Colombia, foreign entities must be registered with the Colombian Tax Registry (RUT) as wealth taxpayers and obtain tax identification numbers. In addition, they must have a local agent or representative (via power of attorney) to sign and file the tax return.

If a foreign entity was required to file a wealth tax return for tax year 2015 but did not comply with that obligation (even if no tax was due), it should review the potential applicable penalties and alternatives to reduce the impact of not filing, as well as the consequences for the wealth tax returns that will be filed in tax years 2016 and 2017.

———————————————

———————————————
ENDNOTES

¹ Please note that under the US convention (used here) COP 1 billion refers to one thousand millions (COP 1,000,000,000).

² The increase or decrease to the 2015 taxable base is 25% of the inflation of the prior year. For 2015, the inflation in Colombia was 6.77%.

³ For individuals the applicable tax rates are: