25% exempted income

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Colombian Tax Authority clarifies that the exempted income of 25% is not applicable in the determination of the minimum withholding for employees.

Through the legal opinion N° 000078 of February 4, 2016, the Colombian Tax Administration clarified that the procedure to determinate the minimum withholding for employees did not change by the ruling C-492 of 2015 issued by the Colombian Constitutional Court, which allowed to deduct 25% of the exempt income to the calculation of the alternative taxable income (“RGA” per its acronym in Spanish).

Indeed, by ruling C-492 of August 5, 2015, the Constitutional Court declared that article 10 of Law 1607 of 2012 was in accordance with the constitutional frame of the Colombian legal system under the condition that in the calculation of the alternative taxable income (RGA) through the IMAN or the IMAS system, is allowed to deduct 25% of exempt income referred to in paragraph 10 of article 206 of the tax code.

Despite this, the Tax Administration clarified that that this ruling only analyse the alternative taxable income (RGA), and the conclusion of the Constitutional Court is not extensive to determination of the minimum withholding of article 384 of the Tax Code.

Mr. Jiménez received his Colombia law J.D. from Universidad del Rosario (2004) and LL.M degrees from Universidad del Rosario in Colombia in Colombian taxation (2006), Universidad del Externado in Colombia in custom law (2007) and University of Florida in the United States of America in international taxation (2009). Finally, he did a Master in Business Administration (MBA) in Universidad de los Andes (2013). He has experience in the fields of Business Tax, International Tax, Tax Management Consulting and M&A. oscar@jimenezgonzalez.com

This publication contains general information only and it is none a professional advice. Before making any decision or taking any action that may affect your business, you should consult a

qualified professional adviser. The author is not responsible for any los whatsoever sustained by any person who relies in this publication.

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