background image
9.2. Treaty-Based Relief

Tax Treaties with Mexico, Chile, Spain, Canada, Portugal, Korea (Rep.), India, Czech Republic and Switzerland

Under these treaties double taxation is eliminated through a tax credit method, according to the following rules:

  • Colombia will allow a credit for the income tax paid abroad.
  • Colombia will also allow a credit for the tax assessed over the profits of the company paying the dividends. In any case, the credit cannot exceed the amount of the income tax applicable in Colombia, determined before tax credits.31

Finally, these treaties set forth that the restrictions contained in Colombian domestic legislation will also apply for claiming tax credits under the treaties.

Andean Community (CAN)

Under Decision 578 of the CAN (applicable to Peru, Bolivia and Ecuador), only the source country is allowed to tax the corresponding income and therefore it must be treated as exempt income in the other country (exemption method).

31  Bear in mind the limitations established in section 8.2.2 of this chapter related to withholding rates determined in the treaties, considering that there are different rules in the Treaties and their Protocols that may apply (For example, see article VI of the Protocol of the Treaty sigh with Spain and Ad. to article 10 of the Protocol of the Treaty sigh with Chile.)