The Colombian Government issued Decree 598 of 2020, related to the tax regime of Colombian holding companies (the “CHC Regime”), which provides the following: (i) includes the definitions of direct participation, indirect participation, human resources, own address and strategic decisions; (ii) sets forth the procedure to determine the percentage of indirect participation of the CHC; and, (iii) indicates the documents that must be kept as evidence for the transactions that give rise to exempt capital gains, in accordance with Article 896 of the Colombian Tax Code.
Additionally, the decree establishes that the Colombian companies that want to benefit from the CHC Regime, must submit in the taxable year in which they intend to be classified, a letter signed by the company’s representative before the Colombian Tax Authority’s International Fiscalization Management Department (the “Department”), informing its intention to benefit from the CHC Regime. The letter must be submitted with the following documents in Spanish or an official translation into Spanish and duly apostilled or consularized:
(i) Description of the company name and Tax Identification Number of the national entities in which the applicant company has a participation of at least 10%.
(ii) Certificate of good standing or incumbency, of foreign entities in which the applicant company has a participation of at least 10%.
(iii) Certification of the legal representative of the entities in which the company intending to benefit from the CHC Regime has a stake, indicating the total number of shares and the percentage of participation during the last 12 months, with a validity no longer than 30 days.
(iv) Copy of the stock ledger evidencing at least a 10% stake in two or more Colombian or foreign entities, during a minimum period of 12 months.
(v) Identification, position and functions of at least 3 employees who are part of the requesting company, with payroll payments, certificates of social security, and copy of labor contracts.
After submission, the procedure to be classified in the CHC Regime will be as follows:
(i) Within 10 business days from the receipt of the documentation, the Department’s officer shall notify the applicant if there is any missing or inconsistent information, to the email address registered in the tax registry (RUT).
(ii) The applicant will have 10 business days from the following day of the date in which the email was sent, to complement and/or clarify the information, otherwise the request will be understood as deserted.
(iii) The Department will have a 15 business days term, from the following day of the date in which the communication has been received in full, to inform the Customer Assistance Management Division to update the Colombian Tax Registry, with the “CHC Enabled” status.
(iv) In case the CHC Regime requirements are not met, the Colombian Tax Authority will reject its benefits during the year in which it was requested or in subsequent years.
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