In Colombia, laws 1943 of 2018 and 2010 of 2019 modified the Tax Statute and introduced the Colombian Holding Companies (CHC) Regime to domestic regulations. This provides tax advantages which could also be interesting for foreign investors.
CHCs are not a separate type of company, but rather a series of tax benefits for which domestic companies can apply, provided they meet certain requirements. These include:
Incorporation as a company in Colombia, or a foreign company which has its effective administrative headquarters in Colombia.
A specific, main activity of the “holding of securities, the investment or holding of shares or participations in Colombian and/or foreign companies or entities, and/or the administration of said investments”.
Holding a stake in other companies of at least 10% of the capital of two or more Colombian and/or foreign companies or entities for a minimum period of 12 months.
Having the human and material resources for the full realization of the corporate purpose. This is considered done if a company has 3 employees, its own management in Colombia and is able to demonstrate that decision making is carried out in Colombia.
Be authorized by the National Tax and Customs Directorate (DIAN) to function as a CHC, in accordance with Decree 598 of 2020.
The CHC regime, in a similar way to that established for Spanish holding companies (Spanish Holding Regime, ETVE), foresees a series of benefits for non-residents who decide to apply the regime to resident companies. These include the following:
- Dividends or participations distributed by entities not resident in Colombia to a CHC will be exempt from income tax and will be declared as “exempt capital income”.
- Dividends distributed by a CHC to a natural or legal person not resident in Colombia will be understood as foreign source income.
- Income derived from the sale or transfer of a CHC’s participation in non-Colombian entities will be exempt from income tax and must be declared as “exempt occasional gains.”
- The capital gains derived from the sale of the shares of the CHC, to the amount corresponding to foreign source income, will be considered exempt income for non-residents.
For further information please contact:
ECOVIS Colombia SAS, Bogotá, Colombia