Both countries generally apply the credit method to eliminate double taxation, although the UK exempts dividends paid to a UK-based company if the conditions for exemption under UK law are met. An exemption may also apply to profits from a permanent establishment of a British enterprise in Colombia if the conditions for exemption under United Kingdom law are met. The 2016 Double Taxation Convention was signed on 2 November 2016. It entered into force on 13 December 2019. Where a company is established in both Contracting States, the competent authorities shall determine by mutual agreement the domicile of the company for the purposes of the Treaty. In the absence of an agreement, the undertaking is not entitled to the advantages of the Treaty, with the exception of those referred to in Articles 21 (elimination of double taxation), 23 (non-discrimination) and 24 (mutual agreement procedure). The contract follows several recommendations of the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) project, such as.B. (1) a main clause that prohibits the use of the benefits of the contract in the absence of a proven commercial purpose; (2) strong rules on cooperation between tax authorities (e.g. B exchange of information and cooperation on tax collection); (3) updating the rules applicable to permanent establishments; and (4) an agreement procedure to resolve residency disputes for businesses.
The Treaty expressly provides that it is to be interpreted in accordance with the OECD commentary. All other cases, including dividends paid on profits not subject to income tax of the Colombian enterprise The contract provides that a permanent establishment is considered to be founded when an enterprise of a Contracting State provides services in the other State for a period or a period of more than 183 days in a period of twelve months, and such services are provided for the same or related projects by one or more persons present in that other State and providing such services. In determining whether the 183-day threshold is reached, account shall be taken of the activities of a related undertaking providing substantially similar services for the same project or projects. Under the contract, technical services, technical assistance and advisory services are not taxed in the Home State unless there is a permanent establishment in that source State. This provision could lead to the application of the most favourable rule contained in some treaties into which Colombia has entered. If the rule applies, the services must receive treatment similar to the treatment that would apply under the British Columbia contract. Therefore, any transaction related to these services should be reviewed on a case-by-case basis to determine whether the most advantageous rule applies. On 13 December 2019, Colombia and the United Kingdom exchanged banknotes and informed each other that they had concluded the procedures for the approval of the double taxation avoidance contract (the contract). Article 22 further provides that, where income or profits are taxed in a Contracting State by reference to the amount transferred or received in that State and not to the full amount, any exemption provided for by the treaty in the other State shall be limited to the amount taxed by the first-mentioned State.
Tax treaties and related documents between Great Britain and Colombia. The agreement includes the Colombian income tax as well as its additional taxes and taxes. It covers UK income tax, corporation tax and capital gains tax. The exchange of notes was the only remaining step at the entry into force of the Treaty.