Colombia

The Colombian tax system provides for WHT as a general mechanism of advance tax collection. Under the law, as a general rule, all corporate entities are required to collect or withhold taxes from payments made to third parties. The WHT collection agents must collect the applicable WHT amounts, deposit the withheld amounts with the authority, file monthly WHT returns, and issue WHT certificates to the payees. The payees who are also CIT return filers credit the withheld taxes against the annual CIT liability computed on their returns.

Foreign non-resident persons are taxed on their Colombian-source income only. Generally, the full tax liability accruing on payments made to foreign non-resident persons is satisfied via the collection of the applicable WHT. The WHT rate on payments made to foreign non-resident persons for royalties and taxable interest is 20%, while administrative expenses are taxed at 33% (FY 2023). On payments made for consulting, technical assistance, and technical services, the WHT rate is 20% (whether supplied inside or outside Colombia). For SEP payments, if the non-resident does not voluntary register and pay the tax, a 10% WHT will apply. On payments made for software licences, the WHT rate is also 20%. For the WHT rate on dividends, see the description of Dividend income in the Income determination section.

However, domestic income earned by non-resident entities that is not attributable to branches and PEs will be taxed at 35% for FY 2022 onwards.

On other types of payments that give rise to Colombian-source income, the general WHT rate is 15%, with the foreign non-resident payee being required to file a CIT return in Colombia to report the final CIT liability, at the rates mentioned before on net income (and being entitled to a refund where the final liability is less than the amount withheld at the 15% rate or being required to pay the deficit should the case be the opposite).

WHT returns do not need to be filed where there are no taxes to declare or pay.

Offsetting of WHT

WHT returns filed on a non-payment basis will be treated as not filed, except if the filer has a refundable tax credit balance equal to or higher than two times the outstanding payment. A six-month deadline applies for the taxpayer to apply the offsetting of the credit balance. Otherwise, late filing penalties will apply.

The WHT return that has been filed without full payment before the expiration of the due date to be submitted will have legal effects, as long as the total payment of the withholding is made within the two following months counted as from the due date to submission of the tax return.

Special self-withholding tax

There is a special self-withholding tax from 0.55% up to 4.5% over gross revenues for Colombian taxpayers that are exempt from paying social security and health contributions for their employees earning less than ten times the current legal minimum monthly wage (approximately USD 3,250 in FY 2024). The self-withholding is creditable against the CIT liability.

Self-withholding on some exports

There is a 5.4% self-withholding tax on exports for the mining, oil, and gas industry. The self-withholding is creditable against the CIT liability.

WHT on interest

Interest payments made abroad on loans or cross-border leasing agreements are subject to a 20% WHT. If the loan or cross-border agreement has a term equal to or greater than eight years and it is destined to financing government/private-run infrastructure projects under the conditions set in Law 1508 of 2012, a 5% WHT is triggered.

However, lease agreements for aircraft, ships, and the like, or parts thereof, are subject to a 1% WHT. In addition, a reduced rate of 15% is applicable upon interest and alike payments connected with loans provided by foreign entities which term is equal to or higher than one year. This also applies to interest and financial payments related with the monthly payment of leasing agreements.

Summary WHT chart for payments to non-Colombian entities

DTT rates

Notes

1. The treaty rate depends on the participation of the shareholder in the Colombian company that distributed the dividends and some other requirements.
2. The rate depends on whether the lender is a financial entity or not.
3. If services are locally untaxed, there is no WHT; otherwise, a 10% WHT will apply.
4. Treaty will presumably apply from 2026 onwards. The internal approval phases are not completed yet.
5. In the treaty with France and the United Kingdom, the definition of royalties does not include technical services and consulting services, which might be considered as business profits not subject to withholding. This consideration might be applied in other DTTs as it triggers the 'most favoured nation' clause.
6. In the treaty with Switzerland, the rental/leasing of technical equipment is considered as a royalty; however, it might, under the most favoured nation clause, be considered as a business profit based on the tax treatment provided in the DTT.
7. 20% for profits taxed at the level of the entity making the distribution. 35% + 20% (48%) for profits untaxed at the level of the entity making the distribution. 
8. Treaty will presumably apply from 2026 onwards. The internal approval phases are not completed yet.