How Colombia’s 2022 Tax Reform Affects Corporate Dividends: Ley 2277 of 2022

There is no doubt that among the best long-term investments is to start a business. From there, the return that is expected from it (as partners or shareholder) are the juicy profits generated in the operation. These profits for the company that generates them are taxed with a particular tax rate (which for the year 2023 the rate is 35%). These profits generated within a taxable period by order of the shareholders’ meeting are distributed or retained for eventual capitalization.

In the event that the shareholders’ meeting decides to distribute profits through dividends, this distribution will be made at the head of each of the partners or shareholders in proportion to their investment.

This is how the taxation of dividends was born. For this kind of tax, three elements are taken into account:

• The status of taxpayer vis-à-vis each shareholder, i.e.:

1. If it is a natural person or illiquid succession, resident of the ordinary regime.
2. If it is a non-resident natural person.
3. If it is a foreign branch (in this case it is called a permanent establishment of a foreign company).
4. If he or shee is a natural person of the simple regime.

Everyone has a different treatment at the time of taxation.

• The tax rate

1. Rates are for resident natural persons and allowances and donations and modal donations. According to article 241 of the Tax Statute, the tax rate of the year 2022, went from zero to ten percent, by 2023 from zero to 39 percent..

1. With regards to the rate for non-residents located in countries with agreements to avoid double taxation, the agreement must be reviewed to apply the corresponding rate with the country in agreement.
   

   Attorney and tax expert Humberto Rodriguez

2. In the event that there is no double taxation agreement with other countries, the rates must be revised in accordance with the case provided for in the following articles: 242, 242-1, 245, and 246 of the Statute.
3. In the case of the foreign branch, the rate will be 20%, in accordance with article 245 of the Tax Statute. For this case it is worth noting that this rate applies to those residing in countries with which Colombia currently has no agreement to avoid double taxation.
4. In the case of a natural person of the simple taxation regime, they are only taxed at the rates corresponding to the activity that is developed, in accordance with article 908 of the tax statute.
5. In this same sense, the status of a legal entity that has issued the dividends must be taken into account, that is:
6. If it is a national company that carries out the “mega investments” referred to in articles 235-3 and 235-4 of the Tax Statute.
7. If it is a company that does not carry out “mega investments” and that is not covered by the company regime (CHC) dealt with in articles 894 to 898 of the tax statute. Or
8. In the case of dividends issued by a national company of the ordinary regime that does not carry out “mega investments” of article 235-3 but that is covered by the company regime (CHC) of articles 894 to 898 of the Tax Statute.

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This guest article is published as a courtesy to readers. Finance Colombia is a news publication and does not provide financial, legal, or tax advice. This information is provided as general news and the reader must consult is or her own counsel in order to make qualified, informed decisions. Information, rules, procedures, and laws may (and almost certainly will) change, and Finance Colombia assumes no responsibility for accuracy or timeliness of information.