Colombia's Recent Tax Developments*

Article prepared to be featured in the upcoming issue of Global Tax Briefing, a CCH – Wolters Kluwer publication, as part of a collection of articles written entirely by members of the Latin American Tax and Legal Network (LATAXNET). LATAXNET, is a network of top tax and legal specialists all over Latin America. For more information about LATAXNET please go to www.lataxnet.net.

Temporary Settlement of Local Taxes Controversies Congress Act 1328-2009, has authorized settlements of local taxes controversies, e.g., industry and commerce tax, property tax, registration tax, including any disputed penalties and interests. The settlement authorization is only available until January 15, 2010 and exclusively for tax controversies originated before December 31st, 2008, and already being disputed before the tax courts.

Pursuant to the settlement authorization, taxpayers wishing to terminate their tax controversies would benefit from a reduction of the assessed and disputed liability as follows:

If the tax controversy is before the lower tax court, the disputed tax liability would be reduced in 20%, while disputed penalties and interest would be wiped out. If the tax controversy is before the lower tax court but the only disputed item is a penalty, the amount of the disputed penalty would be reduced in 20%. If the tax controversy is before the highest tax court, or is before the lower tax court but is one of those controversies for which there is no appeal level available, the disputed tax liability would not be reduced, while disputed penalties and interest would be wiped out. Income Tax Treaty Network Developments Colombia has executed income tax treaties with Spain on March 2005, Chile on April 2007, Switzerland on October 2007, Canada on November 2008 and with Mexico on August 2009.

The treaty with Spain entered into force on October 2008. The Constitutional Court ruled the treaty with Chile constitutional (Ruling C-577-2009), clearing the way for its ratification and entry into force in the near future. Congress recently approved the treaty with Switzerland (Act 1344-2009), which prior to its ratification is now pending the required constitutional review. The treaties with Canada and Mexico are now pending both the approval from Congress and subsequent constitutional review, before the Government can proceed to ratify them.

The Government is currently negotiating income tax treaties with Belgium, Czech Republic, Germany, South Korea...