Contributions of assets and rights held in Colombia to offshore trusts
The Colombian Tax Code (the Code) specifically establishes that interests in foreign trusts are treated
as if they were rights in fiduciary agreements, for income tax purposes.[1]
The contribution of assets or rights to a fiducia,[2] which has similar characteristics to the common-law
trust, is not subject to Colombian income tax, as long as the assets are transferred at cost value and
the contributor’s interest is valued for the same amount. Under the fiduciae rules, the transfer of
assets by a settlor does not generate the consequences of a transfer between two different parties.
Doctrine from the Colombian Tax and Customs National Authority[3] confirms that transfers of assets
to irrevocable and discretionary trusts abroad excludes the contributor of the assets from qualifying as
owner of same for Colombian tax purposes, provided that the mentioned contributor is not entitled to
the economic exploitation of the assets.
In cases where the rights of the beneficiaries are conditional, an irrevocable discretionary trust will be
treated as an opaque entity and any earnings from local sources are taxable to the trust as an
independent entity.
Contributions of property to revocable, non-discretionary trusts abroad will be deemed to be held by
the settlor, who will be required to report the trust as his own property at the value equalling the cost
of underlying assets plus any profits during the year.[4]
Characterisation of trusts held abroad versus regulations on CFCs or ECEs
The settlor to the trust is deemed to have control over any companies or entities held through the
trust, whenever the trust holds more than 10 per cent interest on the company or entity, or whenever
the latter is incorporated in a low-tax jurisdiction.
In those cases, any passive income such as financial yield, rentals and sales of assets generating
passive income, which is earned by the Entidades Controladas del Exterior (ECEs), will be taxable in
Colombia in the year that it was earned by the ECE. This will be the case irrespective of whether the
earnings are distributed back to the trust, from the trust to the settlor or whether these remain in the
ECE.
The new 2024 Decree
The Colombian government has issued Decree 1496 of 13 December 2024, which updates the list of
non-cooperating jurisdictions, domains, territories and associated states.[5] Based upon the
negotiation of exchange of informerating jurisdictions.[6]
IHT rules
The Code regulates the taxation of inheritances,[7] legacies and donations of rights and assets held by
Colombian residents or those located in Colombia.
ation treaties, the Colombian government also excluded a number of
jurisdictions from its list of non-coop
Capital gains tax currently applies at a 15 per cent rate. The value of earnings or periodical rents from
trusts and other similar vehicles, incorporated and/or established in Colombia or abroad, paid to local
individuals’ resident in Colombia are subject to CGT.
In the case of succession, rights and assets received from an inheritance or legacy will be taxed at the
value that the assets and rights had on 31 December of the year prior to the liquidation of the
succession, or to the date the donation or the legacy was formalised.
NET rules
Under NET rules in Colombia, foreign trusts are treated as transparent entities, regardless of whether
they have an irrevocable or revocable, discretionary or non-discretionary nature.
Any time the beneficiaries of a trust are subject to conditions and do not have title or the ability to
exercise control over the assets, the settlor is required to report the trust for the value of the
underlying assets and pay the NET, which currently applies at a 1.5 per cent rate on the net value of the trust, as of 1 January each year.
Upon the settlor´s death, the succession that has not yet been liquidated or distributed will be liable
for the relevant taxes and, when it is liquidated, the trust´s beneficiaries will be required to report
their share in the trust for NET purposes.
[1] Paragraph 3, art.295-3 of the Code.
[2] Fiduciary companies provide a variety of asset management services throughout the Colombian
economy, such as payment administration, real estate, bursarial, and guaranty trustee.
[3] Opinion No. 034071 December 20th,2017 by the Doctrine Division of the Colombian Tax and
Customs National Authority.
[4] The Colombian tax year is the same as its calendar year.
[5] Svalbard Islands; Saint Pierre and Miquelon Islands; State of Kuwait; State of Qatar; Independent
State of Western Samoa; Qeshm, Pitcairn, Henderson, Ducie and Oeno Islands; Solomon Islands;
Labuan; Macao; Bahamas Commonwealth; Kingdom of Bahrein; Hashemi of Jordan Kingdom; Republic
of Guyana; Republic of Angola; Republic of Cape Verde; Marshall Islands Republic; Republic of the
Maldives; Republic of Liberia; Republic of Nauru; Republic of Trinidad and Tobago; Republic of
Vanuatu; Republic of Yemen; Saint Helena, Ascension and Tristan de Cunha (British Overseas
Territories); and the Sultanate of Oman.
[6] Antigua and Barbuda, State of Brunei Darussalam, Granada, Hong Kong, the Cook Islands,
Commonwealth of Dominica, Republic of Mauritius and Republic of Seychelles.
[7] Section 303 of the Code.
En cumplimiento de las disposiciones sobre el manejo de datos personales, REYES ABOGADOS ASOCIADOS S.A lo invita a comunicarse con nosotros en caso de no querer recibir nuestras actualizaciones legales. Este boletín es un servicio de REYES ABOGADOS ASOCIADOS S.A., ha sido remitido de manera informativa sin el propósito de constituir orientación o asesoría legal. Para casos específicos, se recomienda contar con asesoría particular antes de tomar una decisión con base en la información aquí contenida.