The Controlled Foreign Corporation regulation and the passive income in Colombia.
If a Colombian resident owns for example of a Panamanian corporation, which controls a Colombian entity, there is no deferral of income in Colombia.
The above because the income will be considered passive. This is corroborated by the first discussion at the congress when was pointed: “In this order of ideas, no matter where in the world is carried out activity by the subsidiary and subordinate of the CFC provided that it has the same tax residence of the CFC”.
In conclusion, the dividends received by the CFC of part of a subsidiary in Colombia, are passive income even in the event that dividends come from a real activity carried out by its subsidiary in Colombia.
The attribution of income to foreign corporations with a permanent establishment in Colombia precedence over other concepts if they are linked to it.
Even when the double taxation agreement indicates the limit of 10% on income royalties, it does not proceed if they are effectively linked to a permanent establishment and therefore in this case comes the provisions of article 7 of the Convention itself.
Consequently, the withholding at source by way of tax on the income in the case under study, i.e., a foreign company is attributed to whom a permanent establishment, it must be practiced in accordance with provisions of article 408 of the Colombian Tax Code.