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3.7. Tax Consequences of Acquisition or Loss of Tax Residence

The main consequence of being considered as a corporate tax resident under Colombian law is liability to tax in Colombia on worldwide income. Therefore, a company considered as a resident would be obliged to:

  • Pay income tax and file income tax returns;
  • If certain additional requirements are met and for certain payments, withhold income tax, deposit the money withheld, issue income and withholding certificates;
  • If applicable, meet the Colombian transfer pricing regime;
  • Pay and file returns related to income tax for Equity – CREE;
  • Register in the RUT;
  • Issue invoices that meet the requirements determined by law and keep a copy of it for each of its transactions;
  • Answer all information requirements made by the DIAN;
  • Keep information for up to 5 years;
  • Keep books and accounting records;
  • Summit exogenous information required by law in magnetic media according to the Tax Code and the resolutions of the DIAN.

If the company is treated as a resident by virtue of its incorporation under Colombian law, then it will be deemed a resident starting the date of incorporation. If the reason is the place of effective management, under article 8 of Decree 3028 of 2013, the entity will be considered resident from the moment it has its effective place of management within Colombia. However, according to Colombian Tax Administration (DIAN), once a foreign company becomes resident due to its place of effective it will be considered resident for the entire taxable year. (See Ruling No. 58445 of 2013 of the DIAN.)

In the Colombian Tax Code there are no specific provisions that deal with the effects of acquiring or losing tax residency.

Finally, a resident company may be deemed to be a resident of another country in application of the tie-breaker rule in the tax treaty between Colombia and that other country. In that case, from a Colombian perspective, the attribution of residence is limited to the application of the relevant tax treaty, and has in principle no impact on the application of other tax treaties.