Capital gains from the sale of shares in a private resident company by non-residents are taxed at the rate of 15% (increased from 10% effective from 1 January 2023).

The following capital gains derived by a resident of one Contracting State may be taxed by the other State:

• Gains from the alienation of immovable property situated in the other State;
• Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other State;
• Gains from the alienation of shares or comparable interests if:
  • at any time during the 365-day period preceding the alienation, the shares or comparable interests directly or indirectly derived more than 50% of their value from immovable property situated in the other State; or
  • the alienator at any time during the 365-day period preceding the alienation directly or indirectly owned shares or comparable interests representing at least 10% of the capital of a company resident in the other State, but the tax rate is limited to 10% (exempt if alienated as part of a non-taxable reorganization); and
• Gains from the alienation of shares or comparable interest as above by a pension fund, but the tax rate is limited to 5%.

Gains from the alienation of other property by a resident of a Contracting State may only be taxed by that State.

Article 29 (Entitlement to Benefits) provides that a benefit under the treaty shall not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.

The standard withholding tax rate on dividends is 20% (increased from 10% effective from 1 January 2023), including on dividends received by permanent establishments in Colombia of foreign companies. The withholding tax applies on dividends paid out of profits generated in 2017 and subsequent years that are declared after 31 December 2018. If dividends are distributed from profits not taxed at the corporate level, the standard corporate tax rate applies, and after deducting such amount, an additional 20% (increased from 10% effective from 1 January 2023) is withheld.

5% if the beneficial owner is a company that directly holds at least 20% of the paying company's capital or is a recognized pension fund; otherwise, 15%.

Article 29 (Entitlement to Benefits) provides that a benefit under the treaty shall not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.

• 0% (exemption) in certain cases, including for interest paid to/by the government, local authority, central bank, etc. of a Contracting State; interest paid in connection with a sale on credit of industrial, commercial, or scientific equipment, or a sale on credit of goods or merchandise from a company of one State to a company of the other State and interest paid on a loan of any nature granted by a bank with a minimum term of three years;
• 5% if the beneficial owner is a statutory body or an export financing agency or a recognized pension fund;
• Otherwise, 10%.

Article 29 (Entitlement to Benefits) provides that a benefit under the treaty shall not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.

10%

10%

10%

The treaty does not specifically deal with technical, management and similar service fees. In line with the OECD Model, this means that said services do not fall under the royalty article and do not attract the royalty withholding tax provided for under the treaty unless the services represent a minor part of a commingled transaction imparting in essence know-how. In that case, the services would follow the qualification of the principal component of the transaction, and may then attract the royalty withholding tax under the treaty. Otherwise, said services may be taxed in the source country only if the recipient has therein a (services) PE and the fees are attributable to that PE. Note, however, that not all countries would adhere to the OECD standpoint. ORBITAX has by default opted for the OECD position and the withholding tax rate is by default set to zero where the treaty does not specifically deal with technical, management and similar service fees. Where the relevant country has a developed policy regarding the treatment of technical, management and similar service fees and the correlation between those and royalties, ORBITAX has sought to cover this in Sec. 5.6. of the country chapters (Qualification of Specific Income Categories for Tax Purposes). 

The treaty does not specifically deal with technical, management and similar service fees. In line with the OECD Model, this means that said services do not fall under the royalty article and do not attract the royalty withholding tax provided for under the treaty unless the services represent a minor part of a commingled transaction imparting in essence know-how. In that case, the services would follow the qualification of the principal component of the transaction, and may then attract the royalty withholding tax under the treaty. Otherwise, said services may be taxed in the source country only if the recipient has therein a (services) PE and the fees are attributable to that PE. Note, however, that not all countries would adhere to the OECD standpoint. ORBITAX has by default opted for the OECD position and the withholding tax rate is by default set to zero where the treaty does not specifically deal with technical, management and similar service fees. Where the relevant country has a developed policy regarding the treatment of technical, management and similar service fees and the correlation between those and royalties, ORBITAX has sought to cover this in Sec. 5.6. of the country chapters (Qualification of Specific Income Categories for Tax Purposes).