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4.3. PE Force of Attraction Principle

As a general rule, Colombian legislation does not establish expressly a force of attraction principle. In this regard, it is not possible to attribute to a PE the income originated from activities directly performed by the foreign company, even when such activities are similar to the activities developed by the PE. Therefore, the only income attributable to a PE is the income that is actually attributable to such PE based on a study of functions, risks, assets and personnel involved.

Nonetheless, the Tax Code sets forth that a foreign company is subject to income tax when it has perceived Colombian-source income,regardless of whether attributable to a PE or not. If the specific type of income is included within articles 407 to 411 of the Tax Code, the company will be taxed via withholding tax. However, if the tax is not withheld or the type of income perceived is not included within the mentioned articles, the foreign company will be obliged to file an income tax return. In those cases, branches and PEs are responsible for filing the income tax return of the foreign company. Therefore, in those cases there is a kind of force of attraction