Key Benefits:
LAW 1459 OF 2011
(June 29)
Official Journal No. 48.116 of 30 June 2011
CONGRESS OF THE REPUBLIC
By means of which the Convention between Canada and the Republic of Colombia is approved, to avoid double taxation and to prevent tax evasion in relation to income tax and wealth tax, and its Protocol, In Lima, at 21 days of November, two thousand eight (2008).
THE CONGRESS OF THE REPUBLIC,
Having regard to the text of the Convention between Canada and the Republic of Colombia, to avoid double taxation and to prevent tax evasion in relation to income tax and wealth tax, and its , made in Lima at the 21-day November of two thousand eight (2008).
(To be transcribed: A full and faithful photocopy of the original text in Spanish of the Convention and its Protocol is attached, which consists of twenty-six (26) folios, duly authenticated by the Coordinator of the Area of Treaties; is based on the archives of the Office of the Legal Counsel of the Ministry of Foreign Affairs.
BILL NUMBER 205 OF 2009
by means of which the Convention between Canada and the Republic of Colombia is approved, to avoid double taxation and to prevent tax evasion in relation to income tax and wealth tax, and its Protocol, facts in Lima at 21 days of the month of November of two thousand eight (2008).
The Congress of the Republic,
Having regard to the text of the Convention between Canada and the Republic of Colombia, to avoid double taxation and to prevent tax evasion in relation to income tax and wealth tax, and its , made in Lima at the 21-day November of two thousand eight (2008).
(To be transcribed: A full and faithful photocopy of the original text in Spanish of the Convention and its Protocol is attached, which consists of twenty-six (26) folios, duly authenticated by the Coordinator of the Area of Treaties; is based on the archives of the Office of the Legal Counsel of the Ministry of Foreign Affairs.
AGREEMENT BETWEEN CANADA AND THE REPUBLIC OF COLOMBIA
to avoid double taxation and to prevent tax evasion in relation to income tax and wealth tax
CANADA AND THE REPUBLIC OF COLOMBIA,
WISHING to conclude a Convention to avoid double taxation and to prevent tax evasion in relation to income and wealth taxes,
HAVE AGREED the following:
I. CONVENTION SCOPE
PERSONS.
This Convention shall apply to persons residing in one or both Contracting States.
TAXES INCLUDED.
1. This Convention shall apply to taxes on income and on equity, imposed by each of the Contracting States, whatever the levy system.
2. Income and equity taxes are considered to be taxed on the whole of the income or the equity or any part thereof, including income taxes arising from the disposal of movable or immovable property, taxes on the total amount of wages or salaries paid by companies, as well as capital gains taxes.
3. The current taxes to which this Convention applies are, in particular:
a. in the case of Canada to the taxes set by the Government of Canada under the Income Tax Act (henceforth "Canadian tax");
b. in Colombia:
i. Income tax and supplementary income tax;
ii. National Order Tax on Heritage (hereinafter referred to as the "Colombian tax").
4. The Convention shall also apply to taxes of an identical or substantially similar nature and taxes which are established after the date of signature of the Convention, and which are added to or replaced by the present. The competent authorities of the Contracting States shall notify each other of the substantial changes which have been made to their respective tax laws.
II. DEFINITIONS
GENERAL DEFINITIONS.
1. For the purposes of this Convention, unless a different interpretation is inferred from its context:
a. the term "Canada" means the Canadian territory, including its land portion, internal waters and maritime territory, the airspace over these areas, and also the exclusive economic zone and the continental barrier, as defined by its internal legislation, in accordance with international law;
b. the term "Colombia" means the Republic of Colombia;
c. the terms "one Contracting State" and "the other Contracting State" mean, as required by the context, Canada or Colombia;
d. the term "person" comprises natural persons, societies, trusts ("trust") , people's societies and any other group of people.
e. the term 'company' means any legal person or any entity deemed to be a legal person for tax purposes;
f. the term "company" applies to any activity or business;
g. the term 'undertaking of a Contracting State' and 'undertaking of the other Contracting State' means, respectively, a company operated by a resident of a Contracting State and an undertaking operated by a resident of the other Contracting State;
h. the expression 'international traffic' means any transport carried out by a vessel or aircraft operated by a company of a Contracting State, except where such transport is carried out mainly between points located in the other State Contractor;
i. the expression 'competent authority' means:
i. in Canada, the Minister of National Income or his authorised representative; and
ii. in Colombia, the Minister of Finance and Public Credit or his authorised representative;
j. the term 'national', in relation to the Contracting State, means:
i. any natural person who holds the nationality of that Contracting State; and
ii. any legal person, company of persons or association established in accordance with the laws in force of that Contracting State.
k. the term "business" includes the provision of professional services and other activities of an independent nature.
2. For the application of the Convention at any time by a Contracting State, any term not defined in it will have, unless its context is inferred a different interpretation, the meaning that at that time the legislation of that State concerning the taxes which are the subject of the Convention, the meaning attributed by the tax legislation on which it would result from other laws of that State prevail.
RESIDENT.
1. For the purposes of this Convention, the expression "resident of a Contracting State" means:
a. any person who, by virtue of the law of that State, is subject to taxation in the State on the grounds of his domicile, residence, seat of address, place of establishment or any other criterion of a similar nature. However, this expression does not include persons who are subject to taxation in that State solely on the basis of the income they obtain from sources located in that State, or from the assets located therein, and
b. that State and any political subdivision or local authority thereof or any agency or instrument of such government, subdivision or authority.
2. Where, pursuant to the provisions of paragraph 1, a natural person is resident of both Contracting States, their situation shall be resolved as follows:
a. such person shall be deemed to be resident only in the State in which he has permanent housing at his disposal; if he has permanent housing at his disposal in both States, he shall be considered a resident of only the State with which he maintains relations. closer personal and economic (vital interests centre);
b. if the State in which that person has the centre of his or her vital interests cannot be determined, or if he does not have permanent housing at his disposal in any of the States, he shall be considered a resident of only the State where he lives typically;
c. if you lived habitually in both States, or did not in any of them, be considered a resident of only the State of which you are a national;
d. if it is a national of both States, or is not a national of either State, the competent authorities of the Contracting States shall resolve the case by common agreement.
3. When a company is a national of a Contracting State and for the reasons of paragraph 1o is resident of both Contracting States, it shall be considered resident only in the State mentioned in the first place.
4. Where, by reason of the provisions of paragraph 1, a person other than the natural person or company described in paragraph 3 is resident of both Contracting States, the competent authorities of the Contracting States shall decide by mutual consent. agreement on the matter and shall determine the application of the Convention in such a case. In the absence of agreement, such person may not have access to the tax benefits or exemptions provided for in the Convention.
PERMANENT ESTABLISHMENT.
1. For the purposes of this Convention, the term "permanent establishment" means a fixed place of business by which a company performs all or part of its business.
2. The expression "permanent establishment" includes, in a special way:
a. address locations;
b. branches;
c. offices;
d. factories;
e. the workshops, and
f. mines, oil or gas wells, quarries or any other place in connection with the exploration or exploitation of natural resources.
3. The expression "permanent establishment" also includes:
a. a construction, installation or assembly project or project, including the planning and preparatory work, as well as the supervisory activities related to them, but only where such work, construction project or activity has a duration of more than six months, and
b. the provision of services, including consultancy services, by a company of a Contracting State through its employees or other natural persons entrusted by the undertaking for that purpose in the other Contracting State, but only where such activities continue in that State for a period or periods which in total exceed 183 days, within a period of any 12 months.
4. Notwithstanding the foregoing in this article, the expression "permanent establishment" is deemed not to include:
a. the use of facilities for the sole purpose of storing, exposing or delivering goods or goods belonging to the undertaking;
b. the maintenance of a deposit of goods or goods belonging to the undertaking for the sole purpose of storing, exposing or delivering them;
c. the maintenance of a deposit of goods or goods belonging to the enterprise for the sole purpose of being transformed by another undertaking;
d. the maintenance of a fixed place of business for the sole purpose of buying goods or goods, or collecting information, for the undertaking;
e. the maintenance of a fixed place of business for the sole purpose of carrying out any other preparatory or ancillary activity for the undertaking;
f. the maintenance of a fixed place of business for the sole purpose of carrying out any combination of the activities referred to in subparagraphs (a) to (e), provided that the whole of the business of the place of business resulting from that combination retains its auxiliary or preparatory character.
5. By way of derogation from paragraphs 1 and 2, where a person, other than an independent agent to whom paragraph 7o applies, acts on behalf of an undertaking and is habitually and habitually exercised in a Contracting State, powers which shall be power to conclude contracts in the name of the undertaking shall be deemed to have a permanent establishment in that State in respect of any of the activities which that person carries out for the undertaking, unless the activities of the undertaking that person is limited to those referred to in paragraph 4 and that, if they are made by means of a fixed place of business, such a fixed place of business shall not be regarded as a permanent establishment in accordance with the provisions of that paragraph.
6. Notwithstanding the foregoing provisions of this Article, it is considered that a resident insurer of a Contracting State has, with the exception of reinsurance, a permanent establishment in the other Contracting State if collects premiums in the territory of this other State or if it ensures risks situated in the territory of a representative other than an independent agent to which paragraph 7o applies.
7. It is not considered that a company has a permanent establishment in a Contracting State for the mere fact that it carries out its activities in that State by means of a broker, a general agent or any other independent agent, always (a) that such persons act within the ordinary framework of their business, and that the conditions of the transactions between the agent and the undertaking are those which have been established between undertakings or independent parties.
8. The fact that a resident company of a Contracting State controls or is controlled by a resident company of the other Contracting State, or that it carries out business activities in that other State (either by means of an establishment permanent or otherwise), does not make any of these societies permanent establishment of the other.
III. TAXATION OF INCOME
RE RENTS.
1. Income which a resident of a Contracting State obtains from immovable property (including income from agricultural or forestry holdings) located in the other Contracting State may be subject to taxation in that other State.
2. For the purposes of this Convention, the term "immovable property" shall have the meaning attributed to it in the relevant tax provisions of the Contracting State in which the goods are situated. This expression includes in any case the property, livestock and equipment used in agricultural and forestry holdings, the rights to which the provisions of general law relating to property are applicable. roots, usufruct of real estate and the right to receive variable or fixed payments for the exploitation or the concession of the exploitation of mineral deposits, sources and other natural resources. Ships and aircraft shall not be considered as immovable property.
3. The provisions of paragraph 1 are applicable to income derived from direct use, leasing, as well as any other form of exploitation of the real estate and the income derived from the disposal of the property.
4. The provisions of paragraphs 1 and 3 shall also apply to income derived from the real estate of a company.
BUSINESS PROFITS.
1. The profits of a company of a Contracting State may only be subject to taxation in that State, unless the undertaking carries out its business in the other Contracting State by means of a permanent establishment situated in that State. If the company does or has carried out its business in that way, the profits of the company may be subject to taxation in the other State, but only to the extent that they can be attributed to that permanent establishment.
2. Subject to the provisions of paragraph 3, where a company of a Contracting State carries out (or has carried out) its activity in the other Contracting State by means of a permanent establishment situated in it, in each Contracting State it shall be attributed to the permanent establishment of the profits which it would have been able to obtain from being a separate and separate undertaking which carried out the same or similar activities on the same or similar terms and treated in full independence with the company from which it is a permanent establishment and with all other persons.
3. For the purposes of determining the benefits of the permanent establishment, the deduction of the expenditure incurred for the purposes of the permanent establishment, including the costs of management and general expenditure, shall be permitted. administration for the same purposes, whether they are carried out in the State where the permanent establishment is located or elsewhere.
4. No benefit shall be attributed to a permanent establishment for the mere fact that it purchases goods or goods for the undertaking.
5. For the purposes of the preceding paragraphs, the benefits attributable to the permanent establishment shall be calculated each year by the same method, unless there are valid and sufficient grounds to proceed otherwise.
6. Where benefits include elements of income regulated separately in other articles of this Convention, the provisions of those articles shall not be affected by those of this Article.
MARITIME AND AIR TRANSPORT.
1. The profits of a company of a Contracting State from the operation of ships or aircraft in international traffic may only be subject to taxation in that State.
2. Notwithstanding the provisions of paragraph 1 and Article 7or, the profits of a company of a Contracting State arising from the carriage by ships or aircraft, which is carried out mainly between two places of the other Contracting State may be taxed in the other Contracting State.
3. For the purposes of this article:
a. the term 'profit' includes gross receipts that are directly derived from the operation of ships or aircraft in international traffic
andb. the expression 'operation of ships or aircraft' by a company also includes:
i. the chartering or leasing of ships or aircraft with a bare hull;
ii. the leasing of related containers and equipment, provided that such freight or leasing is incidental to the exploitation, by that undertaking, of vessels or aircraft in international traffic.
4. The provisions of paragraphs 1 and 2 shall also apply to profits from participation in a pool, in a holding in common or in an international operating agency.
ASSOCIATED COMPANIES.
1. When:
a. a company of a Contracting State participates directly or indirectly in the direction, control or capital of a company of the other Contracting State, or
b. the same persons directly or indirectly participate in the management, control or capital of a company of a Contracting State and of a company of the other Contracting State, and in one and another case the two companies are, in their relations (a) commercial or financial, joined by accepted or imposed conditions which differ from those which would be agreed by independent undertakings, the profits which would have been obtained by one of the undertakings in the absence of such conditions; have not been done because of the same, they may be included in the profits of that undertaking and be subject to taxation accordingly.
2. Where a Contracting State includes the profits of an undertaking in that State, and subject, consequently, to taxation, the profits on which a company of the other Contracting State has been subject to taxation in that other State, and the The benefits thus included are profits which would have been realised by the company of the State mentioned in the first place if the conditions agreed between the two companies had been those which had been agreed between independent undertakings, that another State, if it agrees that the adjustment made by the State mentioned in the first place is justifies, it will practice the corresponding adjustment of the amount of tax it has received on those benefits. To determine this adjustment, the other provisions of this Convention shall be taken into account and the competent authorities of the Contracting States shall consult each other if necessary.
3. A Contracting State may not modify the income of an undertaking in accordance with the circumstances referred to in paragraph 1 after the expiry of the period laid down in its national law and, in no case, after seven years from the end of the period. of the year in which the revenue which would be subject to such a change would have been, unless for the conditions mentioned in paragraph 1o, attributed to the company.
4. The provisions of paragraphs 2 and 3 shall not apply in the case of fraud or fraud.
DIVIDENDS.
1. Dividends paid by a resident company of a Contracting State to a resident of the other Contracting State may be subject to taxation in that other State.
2. However, such dividends may also be subject to taxation in the Contracting State in which the company pays dividends and under the legislation of that State, but if the beneficial owner of the dividends is a resident of the another Contracting State, the tax so required may not exceed:
a. 5 percent of the gross amount of dividends if the beneficial owner is a company that directly or indirectly controls at least 10 percent of the voting shares of the company that pays the dividends; and
b. 15 percent of the gross amount of dividends in all other cases.
This paragraph does not affect the imposition of the company on the profits from which the dividends are paid.
3. The term "dividends" within the meaning of this article means the income of the shares, shares or bonds of enjoyment, of the mining units, of the parts of the founder or of other rights, except those of credit, that permit participation in profits, as well as the income of other units subject to the same tax regime as the income of the shares by the law of the State of residence of the company making the distribution.
4. The provisions of paragraph 2 are not applicable if the beneficial owner of the dividends, resident of a Contracting State, performs in the other Contracting State, of which the dividend-paying company is resident, an activity The Commission is not in a position to take the view that the Commission is not in a position to take a decision on the matter. In this case, the provisions of the article 7or.
5. Where a resident company of a Contracting State obtains profits or income from the other Contracting State, that other State may not require any tax on dividends paid by the company, except to the extent that those dividends are paid by the company. dividends are paid to a resident of that other State or the holding which generates the dividends is effectively linked to a permanent establishment situated in that other State, nor does it subject the non-distributed profits of the company a tax on the same, even if dividends paid or profits not distributed consist, in whole or in part, of profits or income from that other State.
6. Nothing in this Convention shall be construed as an impediment to a Contracting State imposing on the profits of a company attributed to a permanent establishment in that State, or to gains attributable to the disposal of property. property situated in that State, by a company engaged in the trade in immovable property, an additional tax to be charged on the profits of a national company of that State, except that any additional tax so required is not exceed 5 percent of the amount of such profits and the same has not been subject to this tax In the previous fiscal years. For the purposes of this provision, the term 'profit' means earnings attributable to the disposal of such immovable property situated in a Contracting State which may be taxed by that State within the meaning of the provisions of the Article 6or paragraph 1 or article 13, and utilities, including any gain, attributed to a permanent establishment in a Contracting State in a prior year or years, after deduction of all taxes, other than the additional tax mentioned here, which were imposed on those utilities in that State.
INTERESTS.
1. Interest from a Contracting State and paid to a resident of the other Contracting State may be subject to taxation in that other State.
2. However, those interests may also be subject to taxation in the Contracting State from which they come and under the law of that State, but if the beneficial owner of the interest is resident of the other Contracting State, the tax It shall not exceed 10% of the gross amount of interest.
3. The term "interest", within the meaning of this Article, means the income of claims of any kind, with or without a mortgage guarantee, and in particular, the income of public securities and the income of bonds and bonds, including premiums and (a) prizes linked to those securities, bonds and bonds, as well as any other income which the law of the State in which the interest is derived from the income of the amounts given on loan. However, the term "interest" does not include the rents included in items 8or 10.
4. The provisions of paragraph 2 are not applicable if the beneficial owner of the interest, resident of a Contracting State, carries out in the other Contracting State, from which the interest comes, a business activity by means of a permanent establishment located there and the credit which the interests generate is effectively linked to the permanent establishment. In this case, the provisions of the article 7or.
5. Interest is considered to be from a Contracting State when the debtor is a resident of that State. However, where the debtor of interest is resident of a Contracting State, he has a permanent establishment in a Contracting State in respect of which the debt for which the interest is paid has been incurred, and these are they shall be deemed to be from the Contracting State in which the permanent establishment is situated.
6. Where, by reason of the special relations between the debtor and the beneficial owner, or of which one and the other maintain with third parties, the amount of interest, in the light of the credit for which they are paid, exceeds the amount the debtor and the creditor have agreed in the absence of such relations, the provisions of this Article shall not apply more than to the latter amount. In such a case, the excess amount may be subject to taxation in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.
ROYALTIES.
1. Royalties from a Contracting State and paid to a resident of the other Contracting State may be subject to taxation in that other State.
2. However, these royalties may also be subject to taxation in the Contracting State from which they proceed and in accordance with the law of that State, but if the beneficial owner is resident of the other Contracting State, the tax thus required cannot exceed 10 percent of the gross amount of royalties.
3. The term "royalties" used in this article means the amounts of any kind paid for the use, or the right to use, of copyright on literary, artistic or scientific works, including film or film Films, tapes and other means of reproduction of image and sound, patents, trademarks, designs or models, plans, formulas or secret procedures or other intangible property, or for the use or right to use, of industrial equipment is, commercial or scientists, or information on industrial, commercial or scientific experience. The term "royalties" also includes payments received for the provision of technical assistance, technical services and consultancy services. However, the term "royalties" does not include income related to item 8or.
4. The provisions of paragraph 2 are not applicable if the beneficial owner of the royalties, resident of a Contracting State, performs in the Contracting State from which the royalties are derived from a business activity through an establishment permanent location there and the good or the right for which the royalties are paid is effectively linked to that permanent establishment. In such a case the provisions of the article 7or.
5. Royalties are considered to be from a Contracting State when the debtor is a resident of that State. However, when the person who pays the royalties, whether or not resident of a Contracting State, has in one of the Contracting States a permanent establishment in respect of which the obligation to pay the royalties has been incurred and said Permanent establishment shall bear the burden of the same, the royalties shall be considered as coming from the State where the permanent establishment is situated.
6. Where, by reason of the special relations between the debtor and the beneficial owner, or of which one and the other maintain with third parties, the amount of the royalties, having regard to the use, right or information for which they are paid, exceeds the the debtor and the beneficial owner would have agreed in the absence of such relations, the provisions of this Article shall not apply more than to the latter amount. In such a case, the excess amount may be subject to taxation in accordance with the law of each Contracting State, taking into account the other provisions of this Convention.
CAPITAL GAINS.
1. The gains that a resident of a Contracting State obtains from the disposal of immovable property located in the other Contracting State may be subject to taxation in the latter State.
2. Gains arising from the disposal of movable property which are part of the assets of a permanent establishment which a company of a Contracting State has or has had in the other Contracting State, including profits derived from the disposal of this permanent establishment (alone or with the company as a whole) may be subject to taxation in that other State.
3. The profits of a company of a Contracting State arising from the disposal of vessels or aircraft operated in international traffic, or of movable property affected by the operation of such vessels or aircraft, may be taxed only in that State. Status.
4. Proceeds derived by a resident of a Contracting State from the disposal of:
a. shares the value of which is derived directly or indirectly by more than 50% of immovable property located in the other Contracting State,
b. a participation in a company of persons, trust fund or any other entity whose value is derived directly or indirectly in more than 50% of real estate located in that other State; or
c. the shares or other rights in the capital of a company that is resident of the other State, if the resident of the first State mentioned was the owner, at any time within the period of twelve months prior to the disposal, directly or indirectly, 25% or more of the capital of that company, may be taxed in that other State.
5. Gains arising from the disposal of any other goods other than those referred to in paragraphs 1, 2, 3 and 4 may only be subject to taxation in the Contracting State in which the person is resident.
6. The provisions of paragraph 5 shall not affect the right of a Contracting State to impose, in accordance with its legislation, a tax on profits arising from the disposal of property, other than those under the provisions of application of paragraph 7o, derived by an individual resident of the other Contracting State and who has been resident of the first State mentioned during the six (6) years immediately prior to the disposal of the property.
7. When an individual ceases to be a resident of a Contracting State and immediately thereafter becomes a resident of the other Contracting State, for tax purposes it shall be considered in the first Contracting State mentioned, which the individual has It will be taxed in that State for the same reason. The individual may choose to be treated for tax purposes as if before becoming resident of this Contracting State, he would have sold and repurchased the property for an amount equal to the fair market value at that time. However, this provision shall not apply to the gain from any property that has been generated immediately before the individual becomes a resident of the other State, which may be taxed in that other State. Nor shall it apply to the profit derived from the immovable property located in a third State.
INCOME FROM A JOB.
1. In accordance with the provisions of Articles 15, 17 and 18, salaries, wages and other remuneration obtained by a resident of a State Contracting by reason of a job, they can only be subject to taxation in that State, unless the employment is exercised in the other Contracting State. If employment is exercised in that way, the remuneration derived from it may be subject to taxation in that other State.
2. Notwithstanding the provisions of paragraph 1, the remuneration obtained by a resident of a Contracting State on account of a job pursued in the other Contracting State shall be taxed exclusively in the first State mentioned if:
a. the recipient remains in the other State for a period or periods of not exceeding 183 days in any twelve-month period starting or ending in the tax year in question, and
b. the remuneration is paid by, or on behalf of, an employer who is not a resident of the other State
andc. remunerations are not supported by a permanent establishment that an employer has in the other State.
3. Notwithstanding the foregoing provisions of this Article, the remuneration obtained by reason of a job carried out on board a vessel or aircraft operated in international traffic by a company of a Contracting State may only be subject to taxation in that State, unless the remuneration is derived from a resident of the other Contracting State.
DIRECTORS ' HOLDINGS.
Directors ' fees and other similar payments that a resident of a Contracting State obtains as a member of a board or similar body of a resident company of the other Contracting State may be subject to imposition in that other Status.
ARTISTS AND SPORTSMEN.
1. Notwithstanding the provisions of Articles 7or and 14, the income of a resident of a Contracting State from the exercise of his or her personal activities in the other State A contractor as an artist, such as theatre, film, radio or television, or musician, or as a sportsman, may be subject to taxation in that other State. The income referred to in this paragraph includes income from any personal activity in the other Contracting State related to his or her reputation as a show artist or sportsperson.
2. By way of derogation from Articles 7or 14, where the income derived from the personal activities of the artists or the sportspersons, in that quality, is attributed not to the artist or sportsman himself, but to another person, such income may be subject to taxation in the Contracting State in which the activities of the artist or the athlete are carried out.
3. The provisions of paragraph 2 shall not apply if it is determined that neither the artist nor the athlete, nor the persons involved in their activity, participate directly or indirectly in the benefits of the person referred to in that paragraph.
PENSION.
1. Pensions and annuities from a Contracting State and paid to a resident of the other Contracting State may be taxed in that other State.
2. Pensions from a Contracting State and paid to a resident of the other Contracting State may also be subject to taxation in the State from which they come and in accordance with the law of that State. However, in the case of periodic pension payments, the tax so required shall not exceed the lower of the following:
a. 15% of gross payment amount; and
b. the rate determined in relation to the amount of tax that the recipient of the payment would otherwise have had to pay in the year, on the total amount of periodic pension payments received by that natural person in the year, if the person was resident of the Contracting State from which the payment is made.
3. Annuities other than pensions, coming from a Contracting State and paid to a resident of the other Contracting State may also be subject to taxation in the State from which they come and in accordance with the law of that State, but the tax so required shall not exceed 15% of the part of the tax which is subject to taxation in that State. However, this limitation is not applicable to single payments arising from the waiver, cancellation, redemption, sale or any other sale of a life income, or payment of any kind under a contract for life income, the cost in whole or in part, was deducted when computing the income of any person who acquired such a contract.
4. Notwithstanding any provision in this Convention:
a. pensions and war allowances (including pensions and allowances paid to war veterans or paid as a result of damage or injury suffered as a result of a war) from a Contracting State and paid to a resident of the other Contracting State shall not be subject to taxation in that other State to the extent that they were not subject to taxation, if they were received by a resident of the State mentioned in the first place, and
b. the payment of food and other similar maintenance payments from a Contracting State and paid to a resident of the other Contracting State, which is subject to taxation in that State in respect of the same, shall only be subject to taxation in that other State, but the amount on which these taxes are applied cannot exceed the amount on which they would be applied in the Contracting State mentioned first, if the recipient were resident of the same.
PUBLIC FUNCTIONS.
1. a. Salaries, wages and other similar remuneration, excluding pensions, paid by a Contracting State or by one of its political subdivisions or local authorities to a natural person on the basis of services provided to that State or to that State subdivision or authority, they can only be subject to taxation in that State.
b. However, such wages, salaries and other similar remuneration may only be subject to taxation in the other Contracting State if the services are provided in that State and the natural person is a resident of that State who:
i. is national of that State, or
ii. has not acquired the status of resident of that State only to provide the services.
2. The provisions in Articles 14, 15 and 16 apply to salaries, wages, and other similar remuneration paid for services provided in the framework of a business activity carried out by a Contracting State or by one of its political subdivisions or local authorities.
STUDENTS.
The amounts you receive to cover your living expenses, studies or training a student or a person in practice who is, or has been, immediately before arriving in a Contracting State, resident of the other Contracting State and who is in the State mentioned in the first place for the sole purpose of continuing its studies or training, cannot be subject to taxation in that State, provided that they come from sources outside that State.
OTHER RENTS.
1. The income of a resident of a Contracting State not mentioned in the preceding articles of this Convention and which comes from the other Contracting State may also be subject to taxation in that other Contracting State.
2. In the case of Canada, where such income is the income of a trust other than a trust in which the contributions have been deductible, the tax so required shall not exceed 15% of the gross amount of the income, provided that the beneficiary cash resides in Colombia and rents are subject to taxation in Colombia.
IV. TAXATION OF ASSETS
HERITAGE.
1. The assets constituted by immovable property, owned by a resident of a Contracting State and situated in the other Contracting State, may be subject to taxation in that other State.
2. The assets constituted by movable property, which are part of the assets of a permanent establishment which a company of a Contracting State has in the other Contracting State, may be subject to taxation in that other State.
3. The assets constituted by vessels or aircraft operated by a company of a Contracting State in international traffic and by movable property affecting the holding of vessels or aircraft may only be subject to taxation in that country. Contracting State.
4. All other elements of the estate of a resident of a Contracting State may only be subject to taxation in that State.
V. METHODS FOR AVOIDING DOUBLE TAXATION
REMOVAL OF DOUBLE TAXATION.
1. In the case of Canada, double taxation will be avoided as follows:
a. subject to the provisions in the legislation of Canada in relation to the deduction on the tax payable in Canada for the tax paid out of Canada, and with any subsequent amendment to those provisions " that do not affect its general principles " and unless a higher deduction or benefit is granted in the terms of the legislation of Canada, the tax paid in Colombia on profits, income or profits from Colombia may be deducted from any Canadian tax payable in respect of such profits, income or profits;
b. subject to the existing provisions in Canada's legislation regarding the possibility of using the tax paid in a territory outside Canada as tax credit against the Canadian tax and any subsequent modification of those provisions "that do not affect their general principles" when a company that is a resident of Colombia pays a dividend to a company that is resident of Canada and that the company directly or indirectly controls at least 10 percent of the voting power in the first company mentioned, the credit shall take into account the tax payable in Colombia by the first company mentioned in respect of the profits on which such a dividend is paid; and
c. when in accordance with any provision of the Convention, income earned by a resident of Canada is exempt from tax in Canada, Canada may, however, calculate the amount of tax on other income, take in account for tax exonerated income.
2. In Colombia, double taxation will be avoided as follows:
a. When a resident of Colombia obtains income or possesses property assets which, according to the provisions of this Convention, may be subject to taxation in the other Contracting State, Colombia shall permit, within the limits imposed for its internal legislation:
i. the deduction (discount) of the income tax of that resident for an amount equal to the income tax paid in the other State;
ii. the deduction (discount) of the estate tax on that resident for an amount equal to the tax paid in the other Contracting State on those assets, and
iii. the company tax deduction (discount) effectively paid by the company that shares the dividends corresponding to the profits from which those dividends are paid.
However, such deduction (discount) may not exceed the income tax portion or the estate tax, calculated before deduction (discount), corresponding to the income or property assets that may be be taxed in the other Contracting State.
b. Where, in accordance with any provision of this Convention, the income obtained by a resident of Colombia or the property held by him is exempt from taxes in Colombia, Colombia may, however, take into account the income or the income exempt assets to calculate the tax on the rest of the income or property of that resident.
3. For the purposes of this Article, the income, income or earnings of a resident of a Contracting State who may be subject to taxation in the other Contracting State in accordance with this Convention shall be deemed to have their origin in that other State.
VI. SPECIAL PROVISIONS
NO DISCRIMINATION.
1. Nationals of a Contracting State shall not be subject in the other Contracting State to any imposition or obligation relating to the same one which is more burdensome than those to which nationals of that other State may be or may be subject. are in the same condition, in particular with respect to the residence.
2. Permanent establishments which a company of a Contracting State has in the other Contracting State shall not be subject in that State to an imposition less favourable than undertakings of that other State which carry out the same activities.
3. Nothing in this Article may be interpreted as requiring a State Co to grant to the residents of the other Contracting State the personal deductions, reliefs and tax reductions it gives to its residents. own residents in consideration of their marital status or family charges.
4. Undertakings of a Contracting State whose capital is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the other Contracting State shall not be subject to the first State referred to above. taxation or obligation relating to it which is not required or is more burdensome than those to which other similar undertakings resident in the first State referred to in which the capital is wholly or partly held, or which are held or may be subject controlled, directly or indirectly, by one or more residents of a third State.
5. In this article, the term "taxation" refers to the taxes that are the subject of this Convention.
MUTUAL AGREEMENT PROCEDURE.
1. Where a person considers that the measures taken by one or both Contracting States imply or may involve for it an imposition which is not in conformity with the provisions of this Convention, irrespective of the resources provided for in this Convention, by the national law of those States, it may submit to the competent authority of the Contracting State of which it is resident or, alternatively, if paragraph 1 of Article 23applicable, to that of the State Contracting party of the national, a written request stating the grounds for the which requests the review of such taxation. To be admitted, the said petition must be filed within three years of the first notification of the measure involving an imposition not in accordance with the provisions of the Convention.
2. The competent authority referred to in paragraph 1, if the complaint appears to be founded and if it cannot find a satisfactory solution by itself, shall endeavour to resolve the matter by means of a procedure of mutual agreement with the the competent authority of the other Contracting State in order to avoid an imposition that does not comply with this Convention. Any agreement that is reached must be implemented, regardless of the time limits in the internal law of the Contracting States.
3. A Contracting State may not increase the taxable amount of a resident of any of the Contracting States by placing on the same income that they have also been subject to taxation in the other Contracting State, after the the expiry of the time limits laid down in its domestic legislation, and in any case after seven years from the last day of the tax year in which the income in question was obtained. The provisions of this paragraph shall not apply in the case of fraud or doling.
4. The competent authorities of the Contracting States shall endeavour to resolve any difficulties or doubts raised by the interpretation or application of the Convention by means of a mutual agreement procedure.
5. The authorities of the Contracting States may consult each other for the purposes of the elimination of double taxation in cases not provided for in the Convention and may be communicated directly for the purposes of the application of the Convention.
INFORMATION INTERCHANGE.
1. The competent authorities of the Contracting States shall exchange information which is likely to be relevant for the application of this Convention, or for the administration or the application of the national law on taxation of any nature and denomination required by the Contracting States in so far as the imposition thus required is not contrary to the Convention. Information exchange is not limited by 1or 2or.
2. Information received by a Contracting State pursuant to paragraph 1 shall be kept secret in the same way as information obtained under the national law of that State and shall be communicated only to persons or authorities (including courts and administrative bodies) which have an interest in the settlement or collection of taxes, of the declarative or executive procedures relating to such taxes or of the resolution of the resources in relation to them, or of the monitoring of the above functions. Such persons or authorities shall only use this information for such purposes. They will be able to disclose information at public hearings in the courts or in court rulings.
3. In any event, the provisions of paragraph 1 and 2 may be interpreted as requiring a Contracting State to:
a. take administrative measures contrary to their legislation or administrative practice, or to those of the other Contracting State;
b. to provide information which cannot be obtained on the basis of its own legislation or in the exercise of its normal administrative practice, or of those of the other Contracting State;
c. provide information that discloses trade, managerial, industrial or professional secrets, business procedures, or information whose communication is contrary to public order.
4. Where the information is requested by a Contracting State in accordance with this Article, the other Contracting State shall use the measures to obtain information at its disposal in order to obtain the information requested, regardless of the the fact that this other State does not require such information for its own tax purposes. The foregoing obligation is limited by the provisions of paragraph 3, provided that such limitations are not interpreted to prevent a Contracting State from providing information exclusively due to the absence of national interest in the same.
5. In no case shall the provisions of paragraph 3 be interpreted as allowing a Contracting State to refuse to provide information only because it is in the possession of banks, other financial institutions, or of any person. acting in a representative or fiduciary capacity or because such information refers to the participation in the ownership of a person.
ANTIABUSE CLAUSES.
1. The provisions of items 10, 11 , and 12 will not apply if the purpose or one of the main purposes of any person related to the creation or attribution of an action, credit or right, in relation to which dividends, interest or royalties are paid, is the profit of one or more of these items by such creation or attribution.
2. No provision of this Convention may be interpreted as preventing a Contracting State from submitting to the tax the amounts included in the income of a resident of that State in respect of companies of persons, trusts ("trust"). , companies or other entities in which the resident has a holding.
3. The Convention shall not apply to a company, trust or other entity which is resident of a Contracting State and which effectively belongs to one or more non-resident persons of that State, or which is controlled directly or indirectly by the If the amount applied by that State on the income or equity of the company, trust, or other entity, is substantially less than the amount that would have been applied by that State (after taking into account any form of reduction or compensation of the amount of the tax, including a refund, contribution, credit, benefit to the company, trust or company of persons, or to any other person) if all shares in the company or all interests in the trust, or other entity, as the case may be, effectively belong to one or more natural persons residing in that State.
4. At the event where one or more of the provisions of the Convention derive results not intended or contemplated by it, the Contracting States shall consult each other with the aim of reaching a mutually acceptable solution, including possible amendments to the Convention.
MEMBERS OF DIPLOMATIC MISSIONS AND CONSULAR OFFICES.
1. The provisions of this Convention shall not affect the tax privileges enjoyed by members of diplomatic missions or consular posts in accordance with the general principles of international law or under the laws of the Member States. provisions of special agreements.
2. By way of derogation from Article 4or, a person who is a member of a diplomatic mission, consular post or permanent mission of a Contracting State located in the other Contracting State or in a third State be considered, for the purposes of this Convention, as a resident of only the sending State if that person is subject in the State that sends it to the same obligations relating to total income taxes as the residents of that State.
VARIAS PROVISIONS.
1. The provisions of this Convention shall not be construed as restricting any exemption, relief, credit or other deduction established by the laws of a Contracting State for the determination of the tax required. by that State.
2. For the purposes of paragraph 3 of Article 22 (Consultation) of the General Agreement on Trade in Services, the Contracting States agree that, notwithstanding that paragraph, any dispute between them shall be a measure falls within the scope of this Convention may be submitted to the Council for Trade in Services, as provided in that paragraph, only with the consent of both Contracting States. Any doubt concerning the interpretation of this paragraph shall be settled within the meaning of paragraph 4 of Article 24, or, in the absence of an agreement under such procedure, in accordance with any other the procedure agreed between the two Contracting States.
3. Contributions in one year for services rendered in that year and paid by, or on behalf of, a natural person resident of a Contracting State or temporarily present in that State, to a pension plan that is recognized for purposes Tax in the other Contracting State shall, for a period not exceeding 60 months, be treated in the State mentioned in the first place, in the same way as a contribution paid to a recognised pension system for purposes tax in that State, if:
a. that natural person was contributing on a regular basis to the pension scheme for a period that would have ended immediately before it became resident of or temporarily present in the State mentioned in the first place, and
b. the competent authorities of the State referred to first agree that the pension scheme is broadly in line with a pension scheme recognised for tax purposes by that State.
For the purposes of this paragraph, "pension plan" includes the pension plan created under the social security system of each Contracting State.
VII. FINAL PROVISIONS
ENTRY INTO EFFECT.
1. Each Contracting State shall notify the other, through diplomatic channels, of the procedures required by its legislation for the entry into force of this Convention. This Convention shall enter into force on the date of the last notification and the provisions of the Convention shall apply:
a. in Canada,
(i) in relation to the tax withheld at source, for amounts paid or credited to non-resident persons, from the first day of January of the calendar year following that in which this Convention enters into force, and
(ii) in relation to other Canadian taxes, for the fiscal years started on the first day of January in the calendar year following that in which the Convention enters into force.
b. in Colombia,
(i) with respect to taxes on the income to be obtained and the amounts paid, paid into account, made available or counted as expenditure, from the first day of the month of January of the calendar year immediately next to the one in which the Convention enters into force;
(ii) in other cases, from the entry into force of the Convention.
COMPLAINT.
This Convention will remain in force indefinitely, but any of the Contracting States may, by 30 June of each calendar year after the Convention enters into force, give the other Contracting State a notice of termination in writing, through diplomatic channels. In this case, the provisions of the Convention shall cease to have effect:
a. in Canada,
(i) regarding taxes withheld from source in amounts paid or credited to non-residents, after the completion of that calendar year, and
(ii) for other Canadian taxes, for tax years beginning after the end of that calendar year.
b. in Colombia,
(i) with respect to taxes on the income to be obtained and the amounts to be paid, paid into account or counted as expenditure, from the first day of January of the calendar year immediately following that in which the gives the warning;
(ii) in other cases, from the date the warning is given.
IN FE OF THE CUAL, the signatories, duly authorized to this effect, have signed this Convention.
FACT in duplicate in Lima, 21 days of the month of November 2008, in English, French and Spanish, all texts being equally authentic.
By Canada,
Unreadable signature.
By the Republic of Colombia,
Unreadable signature.
PROTOCOL
At the time of the signing of the Convention between Canada and the Republic of Colombia and to avoid double taxation and to prevent tax evasion in relation to income tax and property taxes, they have agreed to The following provisions form an integral part of the convention:
1. It is understood that:
a. With regard to paragraph 3 of Article 5or, for the purposes of calculating the time limits referred to in this paragraph, the period during which the activities are carried out by an undertaking associated with another undertaking within the meaning of Article 9or, it shall be added to the period during which the activities are carried out by the undertaking of which it is associated, if the activities of both undertakings are identical or substantially similar or are made in connection with the same site or project.
b. In respect of paragraph 3 of Article 5or planning, preparatory work and supervision activities shall be considered to be associated with a construction or installation work or project, only if such work or activity is performed on the work or in the build or installation project.
c. For purposes of article 7or, the utilities shall be attributed to a permanent establishment under paragraph 2 of Article 7or as if the permanent establishment was a company that is handled independently of the company from which it is a party. Paragraph 3 of Article 7or establishes the principle that the expenses incurred by the company, for purposes of the permanent establishment, indistinctly from where they have been incurred, may be deducted from the earnings attributable to the permanent establishment. In order to apply this paragraph, the deductibility of these expenses shall proceed as long as the requirements, conditions and limitations to which they are subject are met, in accordance with the internal legislation of the Contracting State in which the permanent establishment.
d. In the case of Colombia, for the purposes of this Convention, the term "ships" includes all types of ships.
e. Without prejudice to the provisions of paragraph 2 of Article 10, for the case of Colombia, when a company resident in Colombia has not paid income tax on profits that are distributed to the shareholders or shareholders for having an exemption or for exceeding the maximum untaxed limit contained in Article 49 and in paragraph 1 of Article 245 of the Tax Statute, the dividend that is fixed may be submitted in Colombia at the rate of 15 percent, if the cash beneficiary of the dividend is a resident partner or shareholder in Canada.
f. For more certainty, the term "right" in paragraph 4 of Article 12 includes the contractual rights to receive payments relating to the provision of technical assistance, technical services or services consulting.
g. If, after the signing of the Convention, Colombia subscribes with a third State to a Convention stipulating provisions concerning technical assistance, technical services or consultancy services which are more favourable than those provided for in the Article 12 of the Convention, those provisions shall automatically apply to the Convention, under the same conditions, as if those provisions have been established in the Convention. Those provisions shall apply to this Convention as from the entry into force of the Convention with the third State. The competent Colombian authority shall inform the competent Canadian authority without delay that the conditions for applying this sub-paragraph have been met.
h. Paragraphs 6o and 7o of Article 13 are included in the Convention taking into account the domestic legislation of Canada regarding the rules that apply to the emigration of taxpayers. At the time of the signing of this Convention, Colombia has no similar rules in its domestic law and therefore it is anticipated that these paragraphs will only apply, initially, in cases of people who cease to be residents of Canada.
i. With respect to paragraph 2 of Article 20, it was agreed that the latter only applies in the case of Canada under the understanding that, according to the internal legislation of Colombia, the income of a trust maintains the legal characterization of the underlying income generated by that trust.
j. For more certainty, the limit of seven years referred to in paragraph 3 of Article 24 and paragraph 3 of Article 9o shall apply only where in the internal legislation of the Contracting State First mentioned in those paragraphs is a longer term.
IN FE OF THE CUAL, the signatories, duly authorized to the effect by their respective Governments, have signed this Protocol.
FACT in Lima, 21 days of the month of November 2008, in duplicate, in English, French and Spanish, all texts being equally authentic.
By Canada,
LAWRENCE CANNON,
Minister of Foreign Affairs.
By the Republic of Colombia,
JAIME BERMUDEZ MERIZALDE,
Minister of Foreign Affairs.
EXECUTIVE BRANCH OF PUBLIC POWER
PRESIDENCY OF THE REPUBLIC
Bogotá, D. C., August 21, 2009
Authorized. Submit to the consideration of the honorable Congress of the Republic for the constitutional effects.
ALVARO URIBE VELEZ.
The Foreign Minister,
JAIME BERMUDEZ MERIZALDE.
DECRETA:
Article 1o. I approved the Convention between Canada and the Republic of Colombia, to avoid double taxation and to prevent tax evasion in relation to income tax and wealth tax, and its , made in Lima, at twenty-one (21) days of the month of November of two thousand eight (2008).
Article 2o. In accordance with the provisions of Article 1 of Law 7ª of 1944,, the Convention between Canada and the Republic of Colombia, to avoid double taxation and to prevent tax evasion in relation to the Tax on income and on equity, and its Protocol, made in Lima, at twenty-one (21) days of the month of November of two thousand eight (2008), which under Article 1 of this Law are approved, will force the country to from the date on which the international link with respect to them is improved.
Article 3o. This law governs from the date of its publication.
Dada en Bogotá, D. C., a ...
Presented to the honorable Congress of the Republic by the Minister of Foreign Affairs.
Jaime Bermudez Merizalde.
The Minister of Finance and Public Credit,
Oscar Ivan Zuluaga.
Honorable Senators and Representatives:
On behalf of the National Government, in compliance with articles 189 numeral 2, 150 numeral 16 and 224 of the Political Constitution, we present to the honorable Congress of the Republic the bill through which the Convention between Canada and the Republic of Colombia to Avoid Double Imposition and to Prevent Fiscal Evasion in Relation to the Income and Heritage Tax", and its Protocol, made in Lima, at 21 days of the month of November 2008.
The International Double Taxation (ADT) Agreements
Generalities
Economic openness implies the strengthening of investment, technology and capital between the different states that take measures to make them attractive. However, it is known that one of the factors that investors consider when establishing an investment in a given country is the tax component. In this sense, a factor that can affect the establishment of foreign investment is the high level of taxation and legislative uncertainty in this field, together, in the greatest of cases, to the phenomenon of double legal taxation in that the same income or the same property is subject to taxation in two or more countries, when similar taxes are applied during the same taxable period.
The economic effects at international level caused by the internal taxation of the different countries, has led to the need to seek solutions, of a unilateral, bilateral and even multilateral nature, in order to provide means to avoid double or multiple imposition cases.
It can be said that the most notorious consequences of the phenomenon of international double taxation are among others, the hindering the flow of investments and technology among the various countries, an excessive fiscal burden on the taxpayer, In addition to the economic development and particularly to foreign investments, there is also a marked increase in tax evasion at the international level.
The agreements to regularize tax relations between countries and avoid double taxation are consolidated as one of the mechanisms used by states to eliminate double taxation and thus attract investment. foreign.
Additionally, it deserves to be highlighted that such agreements provide security for taxpayers, as they provide legal stability. This stability means that with the signing of a treaty of this nature, the investor has the peace of mind that the tax conditions agreed between the States will be maintained over time.
At this point, it is important to note that the agreements to avoid double taxation are aimed at delimiting the scope of the tax authority of the States. Thus, in some cases the right of exclusive taxation by one of the Contracting States or in others is agreed to share taxation between States.
It must be stated that the power of the States to create and fix the taxable bases and other elements of the taxes is preserved in their head, since in general, the criterion used to delimit the right of a State to subject to taxation certain income or assets is based on the distribution of the tax jurisdiction of the countries on the basis of criteria such as residence or origin or source of income. The above, always within the objective pursued: that the economic facts covered by the treaty are not subject to taxation by two or more countries.
In this sense, agreements to prevent double taxation have no impact on the elements of determining the tax such as costs or deductions.
It is important to note that double taxation treaties in no way can be interpreted or used to create tax exemptions, as what you are looking for is that if a certain income or estate already pays tribute in a country (i) no longer be the subject of taxation in another country, but in no way and by the effect of the Treaty, an income is not taxed in any of the two States.
Similarly, because of what the doctrine has called the principle of non-aggravation, the agreements to avoid double taxation are not the creators of higher tax burdens because they are limited to distributing taxes among the countries without Such an objective has as a consequence to tax a taxpayer in excess of what the domestic laws of the States have foreseen.
On the other hand, agreements to avoid double taxation generally contain provisions against non-discrimination between nationals and foreigners as well as dispute settlement mechanisms through a friendly procedure. between the countries. Such agreements also seek to regulate international cooperation through mechanisms such as the exchange of tax information between tax administrations in order to combat tax evasion and fraud.
The tax power in the international trade area
The tax power, defined as the power or right that a State has to impose on its nationals or residents, is limited by legal principles that must be observed, principles such as that of legality, equality, generality, and non-confiscation. In addition, there are political constraints arising from the coexistence, within the same State, of different authorities endowed with tax power (national, regional and municipal).
In order to determine the legal relationship between the sovereign State and the taxable person, the latter determines binding criteria of both subjective and objective nature.
The first "subjective" take into account situations or circumstances that are related to the subjects who are obliged to contribute, in which, for the case under study, they highlight the nationality, the residence or the place of business.
The second "objectives" refer to the event generating the tribute, understood as the economic fact determined in the law and that gives rise to the birth of the tax obligation.
Based on subjective criteria such as nationality or residence, states require their nationals or residents to pay tribute to the generality of their income "world income" and property, without attending to the place in which they are Income was generated or without consideration to the place where the estate is located.
Likewise, according to objective criteria, the States tax any business or activity carried out in their territory, that is, they submit to their taxation the income generated in their territory, that is, they tax the income of national source.
As a result of the foregoing, by virtue of the imposition of taxes on world income, a resident or national of a State is taxed in the country in which he is resident or national on the income he has obtained in foreign countries, countries which, on their turn, have imposed these same income as national sources of income of those States, with international legal double taxation being generated.
In the face of this problem, solutions have been proposed to avoid double taxation, either by granting a state the exclusive right to tax the income of its residents regardless of the place in the world where they have been generated, while another proposed solution is that of the exclusive right of a State to tax the income produced in its territory, without taking into account the residence of the beneficiary of such income.
As is foreseeable, developed countries, capital exporters, seek to agree on their treaties that the income earned abroad by their national or resident investors will be taxed in those states, thereby capturing taxation on income generated in foreign countries "foreign source income".
On the contrary, developing countries whose investment rates abroad are lower and are recipients of investment, make sure that the income obtained by these investments in favor of foreigners or residents abroad is taxed in the country. its territory, that is, by virtue of its corresponding to national source income of that State.
To solve this problem, the OECD, the International Fiscal Association (IFA), the Interamerican Bar Association, the Latin American Institute of Tax Law and the Central American Common Market have joined forces in seeking to achieve three basic objectives:
(a) In the search for general principles, which are capable of acquiring the character of international uniform practice;
b) In the concertation of bilateral or multilateral agreements; and
c) In the harmonisation of legislation.
Internal methods implemented for the removal of international double taxation
One of the methods for the elimination of the International Double Taxation is the method of imputation that is used in Colombia.
According to the method of imputation, taxes paid abroad by a resident of a State, may be discounted from the tax paid in that State of residence for those same income.
This method partially eliminates double taxation, as the deduction or discount of tax paid abroad is allowed up to the tax limit that is payable in the State of residence on that same income. In this way, if the rate of the tax paid abroad is higher than that paid in the State of residence, the international double taxation still exists.
With the subscription of double taxation agreements, the treatment of the income obtained by a resident of a Contracting State will be taxed only in one of the countries subscribing to the treaty, or the taxation will be shared with Limited rate in one of the subscriber countries "country of source".
Because of this treatment, the internal method of elimination of double taxation becomes more effective, however, in the event in which, under the provisions of the treaty, a single serious country has a certain income. This implies in itself that there is not double legal taxation and, in the event that the agreement allows for a shared taxation, the fact that in one of the countries has a limited tariff "this is, in the country of the source", allows the In the case of an investor in his country of residence, he/she will ask for the discount of the total tax paid abroad, thereby eliminating international legal double taxation.
Additionally, when defined in a convention which country has the tax authority on a given income, more clear rules are provided to investors.
Finally, when it comes to shared taxation, a tax cap is guaranteed, a situation that provides legal stability to foreign investors.
On the other hand, in order to combat tax evasion at international level, the exchange of information represents a necessity for the effective development of the functions of the tax administration. It can be said that the function of controlling tax obligations does not represent anything other than administering and using information. The need for the exchange of information for tax purposes refers both to the internal and the international level.
The exchange of information between agencies in different countries represents a degree of degree and is an essential tool for the effective development of the functions of the tax administration, particularly in a scenario international as the current one characterized by a growing globalization. In this sense, it is important to note that the subscription of treaties does not eliminate tax evasion, but to the extent that the country subscribes to agreements in this area, progress is made in the fight against tax evasion. Major audit tools that allow the tax administration to approach the economic reality of transactions.
Currently, it is difficult to control tax evasion if information and control tools are not available for nationals and residents in Colombia who earn income abroad or have assets abroad.
Issues such as manipulation of transfer pricing, tax havens, abuse of treaties to eliminate double taxation, undercapitalization, control over e-commerce, among others are recurring concerns. in tax administrations around the world and, without mutual assistance among those administrations that provides the possibility of having information from the outside, reliable and timely, the claims of fiscal control become a task of very difficult concretion.
The exchange of information at the international level can be produced informally, that is, without any conventional commitment; only as a result of a courtesy attitude or solidarity between countries. This way of processing the exchange, however the utility it can offer, suffers from the inconveniences of not having sufficient legal backing, being sporadic, inarticulate and subject to all the internal legal limitations of the Country of origin and its goodwill regarding the opportunity, extension and way in which the information will be provided. In view of these circumstances, the need to conclude international agreements on this matter today is recognised in order to enable the contracting states to access information which could not be obtained using means and sources. available internally.
The Inter-American Center for Tax Administrations (IATTC) has conducted an investigation aimed especially at the analysis of the exchange of information in agreements concluded by member countries of the IATTC of Latin America and the Caribbean and of the prospects for strengthening the practice of this exchange for its tax administrations.
In this context, it is necessary to recognize the importance of the exchange of information in the Convention Models to avoid double taxation. The provisions on this subject contained in the agreements in force from which the countries referred, the reasons for the conclusion of specific agreements for the exchange of information, the agreements of the latter type in which the participating countries in Latin America and the Caribbean, and finally, the work that the IATTC has been developing in this field.
It should be noted that, out of the 131 bilateral agreements in force, only 8 have been concluded between the CIAT member countries of Latin America and the Caribbean: Argentina-Bolivia, Argentina-Brazil, Argentina-Chile, Barbados-Venezuela, Brazil-Ecuador, Chile-Mexico, Ecuador-Mexico and Trinidad and Tobago-Venezuela.
As for the exchange of information in those 131 bilateral agreements, 5 of them do not contain any clause in this respect: Argentina-Switzerland, Ecuador-Switzerland, Jamaica-Switzerland, Trinidad and Tobago-Switzerland and Venezuela-Switzerland, the others were based predominantly: two in the Andean Pact Model: Argentina-Bolivia and Argentina-Chile, two in the UN Model: Barbados-United States and Brazil-India, and the remaining in the OECD Model in its 1963 or 1977 versions.
The importance for Colombia of agreements to avoid international double taxation
In the new international scenario in which the Colombian tax and customs administration is moving, we need to make progress on the adequacy of the tax system, in order to make the country attractive to foreign investment and trade. " In this way, the design and implementation of new legal and technical instruments is necessary to achieve a balance between the control and the facilitation of the control to significantly improve the competitiveness of the country.
Then, it may be doubtful to say that for a developing country like Colombia it is of particular importance to achieve the increase of both domestic and foreign investment. In order to achieve this objective, it should be sought to establish mechanisms to reduce trade barriers and attract such investment. In this way, the country must move quickly to consolidate international agreements that seek clear rules in order to avoid international double taxation.
Colombia, as the generality of the States, provides for taxation for foreigners on their income obtained in the national territory and for their nationals or residents the tax on their income obtained both in the national territory and In other words, it taxes their global income, a situation that entails double taxation, hence the importance of the subscription of these agreements.
Government Policy
According to the foregoing, the National Government, within its State policy, giving prevalence to the criterion of national interest, has oriented international fiscal policy toward the negotiation and subscription of treaties to avoid double taxation. international taxation, in the understanding that, as already pointed out, one of the variables that interests investors and which they evaluate when investing is the fiscal component. With this policy, we intend to overcome the relative progress achieved due to the timidity with which until very recently the negotiation of these agreements was addressed and especially in the face of those economies that represent an important flow of investment for the country, such as Spain, Switzerland, Chile, the United States and Canada, among others.
[El Pais] The President of the Republic, Dr. Alvaro Uribe Velez, expressed this in the speech delivered during the visit of Spanish President Jose Luis Rodriguez Zapatero. after having set the stage of constitutional review was approved by the Congress of the Republic by Law 1082 of July 31, 2006) "(") opens a broad path to attract foreign investment and constitutes a precedent to be imitated with other nations (...) "
In this context and in the spirit of continuing to develop the policy promoted by the President of the Republic himself, the Superior Council of Foreign Affairs proposed through a document dated March 27, 2007, the Joint Agenda of Negotiation of the International Agreements on Investment AII (which has been developed so far under the coordination of the Ministry of Commerce, Industry and Tourism) and of the Agreements to avoid the Double Tax International (which has been the initiative of the Ministry of Finance and Public Credit, in coordination with the Directorate National Customs and Customs (DIAN).
This Agenda promotes the negotiation of the two instruments with the same countries, in coordination in time and in the interests of Colombia, trying to ensure that the countries with which it is negotiated are those where the greatest foreign investment is generated. towards Colombia, such as Mexico, the United Kingdom, Canada, France, the Netherlands and Switzerland, among others.
The Agenda was elaborated taking into account, among others, the investment flow criteria of the countries interested in the ADT subscription:
addition to being a guide to prioritizing and concentrating efforts, the joint agenda is vital to ensure that the countries with which it is negotiated are those where greater foreign investment is generated into Colombia. That is, negotiating without following the agenda would represent a high cost of opportunity by delaying negotiations that would represent a substantial impact on foreign investment.
For the elaboration of the Joint Negotiation Agenda, figures were used for 2005, for being the last year with which full information is available at the national level (source Bank of the Republic), as at international level. (UNCTAD source). The criteria for building the calendar are as follows:
2. Recent investment
While a foreign country may not have significant accumulated capital and installed in Colombia, it may have brought high investment flows recently, thus reflecting a dynamic relationship with Colombia. For the classification under this criterion, the investment flows of the last five years (2000-2005) were analyzed for each of the countries in the sample, and the relative position was averaged in the period (ordinal position). The result of this exercise was an orderly listing of the relative importance of the countries under this criterion. The most dynamic countries with respect to recent investment flows were: United Kingdom, United States, Mexico, Canada, Netherlands, France, Switzerland, Germany and Venezuela " ...
Under this context and in the development of government policy, negotiations with Canada were completed in 2008; reaching the present treaty, which is now under consideration by the honourable Congress of the Republic.
The National Tax and Customs Directorate, based on the OECD Model Model, elaborated the model for Colombia adjusted to the conditions and the country's tax system, which is a guideline for all negotiations in the country. National Government. Therefore, the Convention with Canada which is the subject of this analysis was discussed and agreed upon.
Canada-Colombia Convention to Prevent Double Taxation and Prevent Tax evasion on Income and Heritage Taxes
As mentioned above, the model that was used for the development and negotiation of the present agreement, which is now being considered by the honorable Congress of the Republic, is the one proposed by the OECD, which since 1977 has had a great deal of influence on the negotiation, implementation and interpretation of tax conventions. Today and since 1992, it is known as the "Dynamic" Model Convention that allows for its periodic and timely updating and modification, as a result of the continuous processes of globalization and the liberation of world economies.
El Tiempo] However, it is necessary to clarify that this model is not a straitjacket for Colombia. In this sense, the Colombian model inspired by the OECD model has some variations, some of which are collected from the UN model and others from Colombia, in order to have an appropriate model for the Colombian tax system.
The Convention maintains the principle of the source, although with some exceptions as it will be seen later.
The first part of the Double Tax Agreement (ADT) provides for the scope of application that includes both the taxes and the persons to whom it applies and clearly defines certain terms and expressions v. gr. which is considered income tax and property for the purposes of the convention and the taxes on which it will be applied are related. It also applies to taxes of an identical or similar nature which are established after the signature of the tax and which are added to or replaced by the current ones. It also provides that the competent authorities of the Contracting States shall communicate to each other the substantial amendments which have been made to their respective tax laws.
Later, the terms on which the ADT is structured are defined, as follows:
The political and geographical terms of the signatory countries are defined, and expressions frequently used in the ADT as "a Contracting State", competent authority, "the other Contracting State", "person", "company", "company", " traffic international "," competent authority "," national "" resident "and" business ", and it is clarified that any term or expression not defined in it will have, unless of its context is inferred a different interpretation, the meaning that at that time attribute the legislation of that State to the taxes which are the subject of the Convention, the meaning attributed by the tax legislation on which it would result from other Rams of the law of that State.
For clear understanding, it is explicitly defined as "resident of a Contracting State", and the criteria that will be applied shall be established in the event that the place of residence of a person cannot be clearly determined. natural or legal. Subsequently, a "permanent establishment" is defined, a figure which does not exist in our legislation and which is therefore of particular importance in the Convention as it delimits its application. However, it is important to note that in domestic legislation its equivalent is the branch of companies or other foreign entities in Colombia, since according to the article 471 of the Trade, when foreign companies perform or are to carry out permanent activities in Colombia, they must establish a branch in national territory. In addition, it is noted that it is not understood by permanent establishment as the development of activities that are in essence auxiliary or preparatory.
It is pertinent to note that in the case of construction works or projects it is incorporated that the same constitutes permanent establishment if its duration exceeds six (6) months " apart from the model agreement of the OECD that fixed that term in 12 This is more favourable for the recipient country of investment as the concept of permanent establishment. It is used to determine the right of a Contracting State (not that of the residence) to tax the profits of a company of the other State of which it is resident.
The main part corresponds to items 6or 20 and 22, in which the tax authority of the States is defined and delimited. (a) Contracting Parties in relation to income and equity taxes.
In terms of independent services, welcoming the OECD's position that in the revision of the 2000 model agreement, it removed the article 14 referring to these services " when considering the same can be governed by article 7or given that they are a mode of "business income" ", this agreement integrates them into the provisions of article 7or on benefits business.
It should be noted that however it is not incorporated in the OECD Model Convention, in article 26 the so-called "Anti-Abuse Clause" is included, which is intended, in line with international practice, to serve as a an instrument for combating fraud or tax evasion, by establishing that in the event of the conduct of abusive conduct of the provisions of the Convention, the provisions of the Treaty shall not benefit anyone who incurs such improper conduct; the provision which is of relevance for the exercise of the powers of the audit of the tax administration.
In the last part of the agreement some provisions are incorporated that are of general acceptance in international treaties to avoid double taxation, such as:
-- The non-discrimination clause intended to give the same treatment as the residents of the Contracting State to the residents of the other Contracting State.
-- The friendly procedure to be developed between the contractors when a resident of a Contracting State considers that the measures taken by one or both Contracting States imply or may involve for it an imposition which is not in accordance with the provisions of this Convention.
-- The exchange of information that is of vital importance to tax administrations in their fight to prevent and prevent tax evasion.
-- Regulatory reference not to affect the privileges enjoyed by members of diplomatic missions or consular offices in accordance with the general rules of International Law or under the provisions of agreements special.
-- Finally, the entry into force of the ADT and its complaint is regulated.
The following are the main aspects of the Convention, which will certainly result in a greater dynamic of the already very important business activity that operates between the two countries:
-- Comprises income and supplementary taxes and on equity for Colombia and in Canada these same taxes.
-- Income from business, air and sea transportation, investment, real estate, services, capital, and artists and sportspersons, among others, are covered.
-- In relation to the estate tax, it includes real estate, furniture, ships and aircraft and other assets.
-- In connection with the elimination of double taxation, it will be possible for Colombia and Canada to deduct or discount the income tax and property tax for residents (whether natural or legal persons) for an equal value. the tax paid in the other State.
-- For interest, a rate is set for the country of the source of 10% on gross value in all cases.
-- In the case of royalties and royalties paid to residents in the other State, the income tax rate is set at 10% on the gross value of the same.
-- In connection with the exchange of information, it is established as a mechanism to facilitate the application of the Convention and its internal tax laws to the Contracting States. Additionally, the secret character of such information is established and its disclosure is permitted only to the competent entities in the field of taxation.
-- As regards non-discrimination, it is agreed that nationals of the Contracting States shall not be subject in the other Contracting State to any tax or obligation relating thereto which is not required or is more burdensome than those to which they are those who are or may be subject to their nationals, who are under the same conditions, in particular with respect to residence (Reciprocal Clause).
-- Regarding the friendly procedure to be developed between the contractors when a resident of a Contracting State considers that the measures taken by one or both Contracting States imply or may involve a (a) it is not in conformity with the provisions of this Convention; it is agreed as proposed by the OECD Model, which, irrespective of the resources provided for by the national law of those States, may submit its case to the competent of the Contracting State of which he is resident.
-- Finally, it should be noted that as I attach to article 26 it is agreed that, at the event that the provisions of the Convention are used in such a way as to grant benefits not contemplated or intended by it, the competent authorities of the Contracting States shall examine the necessary amendments to the Convention. The Contracting States agree to discuss expeditiously with a view to amending the Convention to the extent necessary.
For the reasons outlined above, the National Government, through the Ministers of Foreign Affairs and Finance and Public Credit, requests the honorable Congress of the Republic to approve the Canada-Canada Agreement. Republic of Colombia, to Avoid Double Imposition and to Prevent Fiscal Evasion in Relation to the Income Tax and on Heritage, and its Protocol, made in Lima, at 21 days of November of 2008.
Of the honorable Senators and Representatives,
The Foreign Minister,
Jaime Bermudez Merizalde.
The Minister of Finance and Public Credit,
Oscar Ivan Zuluaga.
1998 424 LAW
(January 13)
by which the follow-up to the international conventions signed by Colombia is ordered.
The Congress of Colombia
DECRETA:
Article 1o. The National Government through the Foreign Ministry will submit annually to the Senate and Senate Foreign Relations Committees, and within the first thirty days of the legislative period, which begins every 20 years. July, a detailed report on how the existing International Conventions signed by Colombia with other States are being complied with and developed.
Article 2o. Each dependency of the National Government responsible for implementing the International Treaties of its competence and requiring reciprocity in them, will transfer the relevant information to the Ministry of Foreign Affairs and the Ministry of Foreign Affairs. Second.
Article 3o. The full text of this law shall be incorporated as an annex to any and all International Conventions that the Ministry of Foreign Affairs presents to the Congress.
Article 4o. This law governs from its enactment.
The President of the honorable Senate of the Republic.
AMILKAR ACOSTA MEDINA.
The Secretary General of the honorable Senate of the Republic,
PEDRO PUMAREJO VEGA.
The President of the honorable House of Representatives,
CARLOS SQUIRLA BALLESTEROS.
The Secretary General of the honorable House of Representatives,
DIEGO VIVAS TAFUR.
COLOMBIA-NATIONAL GOVERNMENT
Publish and execute.
Dada en Santa Fe de Bogota, D. C., on January 13, 1998.
ERNESTO SAMPER PIZANO
The Foreign Minister,
MARIA EMMA MEJIA VELEZ.
EXECUTIVE BRANCH OF PUBLIC POWER
PRESIDENCY OF THE REPUBLIC
Bogotá, D. C., August 21, 2009
Authorized. Submit to the consideration of the honorable Congress of the Republic for the constitutional effects.
ALVARO URIBE VELEZ.
The Foreign Minister,
JAIME BERMUDEZ MERIZALDE.
DECRETA:
Article 1o. I approved the Convention between Canada and the Republic of Colombia, to avoid double taxation and to prevent tax evasion in relation to income tax and wealth tax, and its , made in Lima, at twenty-one (21) days of the month of November of two thousand eight (2008).
Article 2o. In accordance with the provisions of Article 1 of Law 7ª of 1944,, the Convention between Canada and the Republic of Colombia, to avoid double taxation and to prevent tax evasion in relation to the Tax on income and on equity, and its Protocol, made in Lima, at twenty-one (21) days of the month of November of two thousand eight (2008), which under Article 1 of this Law are approved, will force the country to from the date on which the international link with respect to them is improved.
Article 3o. This law governs from the date of its publication.
The President of the honorable Senate of the Republic,
ARMANDO BENEDETTI VILLANEDA.
The Secretary General of the honorable Senate of the Republic,
EMILIO RAMON OTERO DAJUD.
The President of the honorable House of Representatives,
CARLOS ALBERTO ZULUAGA DIAZ.
The Secretary General of the honorable House of Representatives,
JESUS ALFONSO RODRIGUEZ CAMARGO.
COLOMBIA-NATIONAL GOVERNMENT
Communicate and comply.
Execute, upon review of the Constitutional Court, pursuant to article 241-10 of the Political Constitution.
Dada in Bogotá, D. C., on June 29, 2011.
JUAN MANUEL SANTOS CALDERÓN
The Foreign Minister,
MARIA ANGELA HOLGUIN HANG.
The Minister of Finance and Public Credit,
JOHN CARLOS ECHEVERRI GARZON.
