The Treaty includes reduced withholding tax rates and provisions to limit cases of double non-taxation. Taxpayers should continue to monitor the progress of the Treaty as the reduced withholding tax rates may become important in light of the recent tax reform proposed in Congress, which increases some withholding tax rates.

Colombia's Ministry of Finance reported on November 1, 2016, that Colombia and the United Kingdom signed a Treaty to Avoid Double Taxation (Treaty).

Before the Treaty can enter into force, Colombia's Congress must first approve a law to adopt the Treaty. After Congress approves the law, Congress will send the Treaty to the Constitutional Court for a constitutional review. Once the court approves the Treaty, the countries will exchange diplomatic notes, reporting that they have completed their internal approval process.

For now, Colombia has signed the Treaty in compliance with the new guidelines for negotiating such treaties under the OECD's Base Erosion and Profit Shifting project. The Treaty contains certain rules to control international tax evasion, such as limiting the cases of double non-taxation, a special purpose clause prohibiting use of the Treaty's benefits when there is no verified business purpose and robust rules on cooperation between the tax authorities (e.g., the exchange of information and cooperation in tax collection).

The Treaty also includes reduced withholding tax rates for dividends, interest and royalties. The reduced rates would apply in the country in which the payments arise. The reduced rates in the Treaty are particularly important in light of the recent tax reform proposed in Congress, which increases some of the withholding tax rates for payments abroad and creates a tax on dividends.

———————————————