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 any property, other than immovable 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 days preceding the alienation, the shares or comparable interests derived at least 50% of their value directly or indirectly from immovable situated in the other State, with an exemption if the shares or comparable interests are traded on a recognized stock exchange and the alienator and related parties own 5% or less of the class of such shares or comparable interests; and
• Gains from the alienation of shares, comparable interests, or other rights representing the capital of a company resident in the other State if, at any time during the 365 days preceding the alienation, the shares, comparable interests, or other rights represented 10% or more of the capital of the company, although the tax rate may not exceed 10% and an exemption applies where the gains are the result of a reorganization or the gains are derived by a recognized pension fund.

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

Article 28 (Entitlement to Benefits) provides that a resident of a Contracting State will only be entitled to benefits provided under Article 13 (Capital Gains) if the resident is a qualified person (as defined in the treaty). However, if a resident is not a qualified person, the benefits may still apply if certain conditions are met, which include where an "active conduct of business" test is met, subject to certain activity restrictions, and where the resident demonstrates to the satisfaction of the competent authority that neither its establishment, acquisition or maintenance, nor the conduct of its operations, had as one of its principal purposes the obtaining of such benefits.

Article 28 also includes provisions to limit benefits where the income of a resident of a Contracting State is attributed to a permanent establishment in a third state, and:

• The income is exempt from tax in that Contracting State; and
• The rate of tax in the third state is less than 60% of the tax that would be imposed in that Contracting State had the income not been attributed to the permanent establishment.

This restriction will not apply, however, if the income is derived in connection with or is incidental to the active conduct of a business carried on through the permanent establishment, other than the business of making, managing, or simply holding investments for the enterprise's own account, unless these activities are banking, insurance or securities activities carried on by a bank, insurance enterprise or registered securities dealer, respectively.

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 has directly or indirectly owned at least 20% of the voting power of the paying company throughout a period of six months that includes the date on which entitlement to the dividends is determined; otherwise, 10%. The exemption applies if the beneficial owner is a recognized pension fund.

An increased withholding tax rate of 15% applies:

• In the case of the dividends distributed by a company that is a resident of Colombia, provided that the dividends are paid out of profits that have not been subject to tax on income at the level of that company in Colombia; or
• In the case of the dividends distributed by a company that is a resident of Japan, provided that the dividends are deductible in computing the taxable income of that company in Japan.

Article 28 (Entitlement to Benefits) provides that a resident of a Contracting State will only be entitled to benefits provided under Article 10 (Dividends) if the resident is a qualified person (as defined in the treaty). However, if a resident is not a qualified person, the benefits may still apply if certain conditions are met, which include where an "active conduct of business" test is met, subject to certain activity restrictions, and where the resident demonstrates to the satisfaction of the competent authority that neither its establishment, acquisition or maintenance, nor the conduct of its operations, had as one of its principal purposes the obtaining of such benefits.

Article 28 also includes provisions to limit benefits where the income of a resident of a Contracting State is attributed to a permanent establishment in a third state, and:

• The income is exempt from tax in that Contracting State; and
• The rate of tax in the third state is less than 60% of the tax that would be imposed in that Contracting State had the income not been attributed to the permanent establishment.

This restriction will not apply, however, if the income is derived in connection with or is incidental to the active conduct of a business carried on through the permanent establishment, other than the business of making, managing, or simply holding investments for the enterprise's own account, unless these activities are banking, insurance or securities activities carried on by a bank, insurance enterprise or registered securities dealer, respectively.

10%, with an exemption where:

• The beneficial owner is either Contracting State;
• The beneficial owner is a resident of a Contracting State, and the debt-claims are guaranteed, insured, or indirectly financed by that State;
• The beneficial owner is:
• a financial institution provided that such interest is paid by a financial institution that is a resident of the other State; or
• a bank, in respect of debt-claims granted for a period of at least three years;
• The beneficial owner is a pension fund; or
• The interest is paid with respect to debt-claims arising as a part of the sale on credit of equipment or merchandise.

 Article 28 (Entitlement to Benefits) provides that a resident of a Contracting State will only be entitled to benefits provided under Article 11 (Interest) if the resident is a qualified person (as defined in the treaty). However, if a resident is not a qualified person, the benefits may still apply if certain conditions are met, which include where an "active conduct of business" test is met, subject to certain activity restrictions, and where the resident demonstrates to the satisfaction of the competent authority that neither its establishment, acquisition or maintenance, nor the conduct of its operations, had as one of its principal purposes the obtaining of such benefits.

Article 28 also includes provisions to limit benefits where the income of a resident of a Contracting State is attributed to a permanent establishment in a third state, and:

• The income is exempt from tax in that Contracting State; and
• The rate of tax in the third state is less than 60% of the tax that would be imposed in that Contracting State had the income not been attributed to the permanent establishment.

This restriction will not apply, however, if the income is derived in connection with or is incidental to the active conduct of a business carried on through the permanent establishment, other than the business of making, managing, or simply holding investments for the enterprise's own account, unless these activities are banking, insurance or securities activities carried on by a bank, insurance enterprise or registered securities dealer, respectively.

2% for royalties for the use or right to use industrial, commercial, or scientific equipment; otherwise, 10%.

Article 28 (Entitlement to Benefits) provides that a resident of a Contracting State will only be entitled to benefits provided under Article 12 (Royalties) if the resident is a qualified person (as defined in the treaty). However, if a resident is not a qualified person, the benefits may still apply if certain conditions are met, which include where an "active conduct of business" test is met, subject to certain activity restrictions, and where the resident demonstrates to the satisfaction of the competent authority that neither its establishment, acquisition or maintenance, nor the conduct of its operations, had as one of its principal purposes the obtaining of such benefits.

Article 28 also includes provisions to limit benefits where the income of a resident of a Contracting State is attributed to a permanent establishment in a third state, and:

• The income is exempt from tax in that Contracting State; and
• The rate of tax in the third state is less than 60% of the tax that would be imposed in that Contracting State had the income not been attributed to the permanent establishment.

This restriction will not apply, however, if the income is derived in connection with or is incidental to the active conduct of a business carried on through the permanent establishment, other than the business of making, managing, or simply holding investments for the enterprise's own account, unless these activities are banking, insurance or securities activities carried on by a bank, insurance enterprise or registered securities dealer, respectively.

2% for royalties for the use or right to use industrial, commercial, or scientific equipment; otherwise, 10%.

Article 28 (Entitlement to Benefits) provides that a resident of a Contracting State will only be entitled to benefits provided under Article 12 (Royalties) if the resident is a qualified person (as defined in the treaty). However, if a resident is not a qualified person, the benefits may still apply if certain conditions are met, which include where an "active conduct of business" test is met, subject to certain activity restrictions, and where the resident demonstrates to the satisfaction of the competent authority that neither its establishment, acquisition or maintenance, nor the conduct of its operations, had as one of its principal purposes the obtaining of such benefits.

Article 28 also includes provisions to limit benefits where the income of a resident of a Contracting State is attributed to a permanent establishment in a third state, and:

• The income is exempt from tax in that Contracting State; and
• The rate of tax in the third state is less than 60% of the tax that would be imposed in that Contracting State had the income not been attributed to the permanent establishment.

This restriction will not apply, however, if the income is derived in connection with or is incidental to the active conduct of a business carried on through the permanent establishment, other than the business of making, managing, or simply holding investments for the enterprise's own account, unless these activities are banking, insurance or securities activities carried on by a bank, insurance enterprise or registered securities dealer, respectively.

2% for royalties for the use or right to use industrial, commercial, or scientific equipment; otherwise, 10%.

Article 28 (Entitlement to Benefits) provides that a resident of a Contracting State will only be entitled to benefits provided under Article 12 (Royalties) if the resident is a qualified person (as defined in the treaty). However, if a resident is not a qualified person, the benefits may still apply if certain conditions are met, which include where an "active conduct of business" test is met, subject to certain activity restrictions, and where the resident demonstrates to the satisfaction of the competent authority that neither its establishment, acquisition or maintenance, nor the conduct of its operations, had as one of its principal purposes the obtaining of such benefits.

Article 28 also includes provisions to limit benefits where the income of a resident of a Contracting State is attributed to a permanent establishment in a third state, and:

• The income is exempt from tax in that Contracting State; and
• The rate of tax in the third state is less than 60% of the tax that would be imposed in that Contracting State had the income not been attributed to the permanent establishment.

This restriction will not apply, however, if the income is derived in connection with or is incidental to the active conduct of a business carried on through the permanent establishment, other than the business of making, managing, or simply holding investments for the enterprise's own account, unless these activities are banking, insurance or securities activities carried on by a bank, insurance enterprise or registered securities dealer, respectively.

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).