Double tax treaty between Colombia and France

The Convention applies to residents of Colombia and / or France.

2. Taxes covered

The Convention applies to taxes on income and on capital.

3. Permanent Establishment

Permanent establishment means a fixed place of business through which an enterprise carries out its activity.

The following are also understood as permanent establishments:

a)   A building site or construction or installation project only if it lasts more than 183 days. 

b)   The provision of services by a company of one State in the other State through employees or other personnel for more than 183 days within any 12 months. 

c)   When a person other than an independent agent acts on behalf of an enterprise and, in doing so, habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts on behalf of the company. 

d)   When a company from one State carries out activities in the other State concerning the exploration or exploitation of natural resources located in that State, for more than 60 days within any 12 months.

4.Taxation of income

4.1 Income from immovable property

Income derived from an immovable property can be taxed in the state where the real estate is situated.

The term immovable property also includes accessory assets such as livestock, agricultural equipment and rights to receive payments.

4.2 Business profits

Profits of an enterprise from a State will only be subject to taxation in that State unless the company carries out its activity in the other State through a permanent establishment.

In this case, the profits that it could have had if it were an independent company will be attributed to the permanent establishment.

4.3 International Shipping and Air Transport 

Profits from the operation of ships or aircraft in international traffic are subject to taxation only in the State where the enterprise’s effective administrative headquarters are located.

4.4 Associated enterprises

The Convention establishes a definition of associated enterprises mainly for the application of the transfer pricing regime.

If the associated companies are linked in their commercial or financial relations by agreed conditions that differ from those that would be agreed by independent companies, the profits may be subject to taxation.

4.5 Dividends

Dividends may be taxed in the State of the recipient of the dividends.

Likewise, dividends can be taxed in the State of the enterprise that pays the dividends.

However, in the latter case, if the beneficial owner is a resident of the other State, this tax may not exceed:

1. 5% of the dividends if the beneficial owner is an enterprise that directly owns at least 20% of the capital of the enterprise paying the dividends.
2. 15% of the dividends in all other cases.

In the case of dividends paid by a Colombian enterprise charged to profits that have not been subject to income tax at the enterprise level, the tax cannot exceed 15% of the dividends.

4.6 Interest

Interest may be taxed in the state of the recipient.

Likewise, interest can be taxed in the State from which the interest originates:

However, in the latter case, if the beneficial owner is a resident of the other State, this tax cannot exceed 10% of the interest.

This rate is more beneficial than the Colombian rate for payments abroad of 15% or 20% depending on whether the credit is greater than one year.

Notwithstanding the foregoing, the interest will be taxable only in the State of the recipient of the interest, if that person is the beneficial owner of the interest and one of the following conditions is met:

1. Said person is a Contracting State of the Convention, territorial authority or public entity, including the Central Bank; or if such interest is paid by one of those States or public law entities;
2. Such interest is paid in respect of credit guaranteed, insured, or subsidized by a Contracting State or by someone acting on its behalf;
3. Such interest is paid in connection with credit sales of industrial, commercial, or scientific equipment, or connection with credit sales of goods or merchandise from one company to another company;
4. Said interests are paid by a credit of any nature granted by a bank, but only if the credit in question is granted for no less than 3 years;
5. Said interests are paid by a financial institution of a State to a financial institution of the other Contracting State.

4.7 Royalties

Royalties may be taxed in the State of the beneficial owner.

However, they can also be submitted in the State from which they come, in which case the tax cannot exceed 10% of the royalties.

This withholding rate is more favorable than the general rate of 20% for royalties of the Colombian Tax Statute.

4.8 Capital Gains

Capital gains from the sale of immovable property may be taxed in the state where the property is located.

When the shares or similar rights directly or indirectly represent more than 50% of their value in immovable property, the gains from the alienation may be taxed in the State where the real estate is situated.

Gains from the sale of a permanent establishment or movable property attributable to it can be taxed indefinitely in the State of the source.

The sale of ships or aircraft is only taxed in the Contracting State where the administrative headquarters of the enterprise is situated.

Profits obtained by a resident of a state from the sale of shares or other rights of a company resident in the other state, when the alienator, alone or with related parties, has direct or indirect participation of 25% or more in the enterprise, may be taxed in the other State.

4.9 Income from employment

Salaries and other similar remuneration obtained by a resident of a State for his work as an employee are only taxed in that State unless the work is done in the other State, in which case he must comply with the requirements contemplated in article 14 of the Convention.

4.10 Directors’ fees

The remuneration of the members of boards of directors or similar may be taxed in the state of the enterprise.

4.11 Entertainers and sportspersons

Income obtained by artists, sportsperson and models can be taxed in the State of the source of such income.

When an artist, sportsperson, or model, being a resident of a State, obtains income from another State corresponding to the services rendered in connection with his professional reputation, said income may be subject to taxation in that other State. However, they will only be subject to taxation in that State, if the amount of the gross income does not exceed 15,000 euros for the fiscal year or its equivalent in Colombian pesos.

4.12 Pensions

Pensions and other similar remuneration paid to a resident of a Contracting State for past employment shall be taxable only in that State.

4.13 Government Service

Salaries, wages, and remuneration paid by a Contracting State to its public officials, will only be taxed in that State.

4.14 Students and interns

Remuneration received by students residing in one State to cover their maintenance, education, or training expenses in the other State, are not taxed in the State where they are going to study, provided that they come from sources located outside that State and do not exceed 6 years consecutive from the date of arrival.

4.15 Other income

The income of a resident of a Contracting State, whatever arising, not mentioned above and of which the resident is the effective beneficiary, will only be subject to taxation in that State.

5. Taxation of capital 

Capital represented by immovable property may be taxed in the State where these real estates are located.

Capital represented by shares or similar rights that directly or indirectly represent more than 50% of its value in real property, can be taxed in the State where said real estate is located.

Capital represented by movable property that is part of the assets of a permanent establishment that an enterprise of a State has in the other State may be subject to taxation in that other State.

Capital represented by goods that are part of the assets of an enterprise and that consist of ships or aircraft for international traffic is only taxed in the Contracting State where the effective headquarters of administration is located.

All other items of property owned by a resident of a Contracting State shall be taxed only in that State.

6. Elimination of double taxation

6.1 In Colombia

Double taxation will be eliminated as follows:

a) When a resident in Colombia obtains income or has assets that may be subject to taxation in France, Colombia will allow: 

i) The deduction (discount) of the income tax of that resident of an amount equal to the amount paid in France.

ii) The deduction (discount) in the wealth tax of that resident of an amount equal to the wealth tax in France.

b) In the case of dividends, Colombia will allow the deduction (discount) of the income tax of that resident of Colombia, of the amount resulting from multiplying the gross amount of the dividends by the tax rate applicable to profits charged to which said dividends were paid, plus an amount equal to the tax paid in France in connection with those dividends.

6.2 In France

Double taxation will be eliminated as follows: 

a) Income that can only be taxed in Colombia will be taken into account for the calculation of French tax when said income is not exempt from corporate tax under French internal legislation. In this case, the Colombian tax will not be deductible from said income, but the French resident will be entitled to a tax credit from the French tax. 

b) A resident of France who owns assets that may be subject to taxation in Colombia, will also be subject to taxation in France.

The French tax will be calculated allowing a tax credit equal to the amount of tax paid in Colombia on that asset. That tax credit may not exceed the amount of French tax corresponding to that State.