Tax and Legal Times. News Alert/ Monthly update. June, DC2 - Información de distribución restringida

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1 Tax and Legal Times News Alert/ Monthly update June, 2015.

2 Ruling released on late filing penalty Annual return for assets held abroad According to the enacted Tax reform (Law 1739 of 2014), beginning taxable year 2015, income taxpayers subject to taxation on a worldwide basis are required to file an annual return to disclose and identify any kind of assets held outside Colombia. The Tax Authorities ruled that currently, the law does not provide for an specific late filing penalty of this return. However, the DIAN makes it clear that taxpayer may be subject to the penalty stated in Section of the Colombian Tax Code according to which, non disclosed assets within the tax return will be considered net income (Ruling of 2015). Ruling released for Zero rate treatment- exportation of services Scope of the requirement of Exclusively use of the services abroad General overview As a general rule, VAT is triggered by the provision of services within the Colombian Territory (Section 420 of the Tax Code TC.) However, literal e) of Section 481 of the TC states that the services rendered in Colombia to be used exclusively abroad by companies without business or activities in Colombia are exempted from VAT, since those are deemed to be exportation of services". Such treatment implies that exported services will be zero rated for VAT purposes, and the Colombia provider of the services will be able to credit the input VAT charged from its vendors and services suppliers. The balance in favour (if any) would be refundable before the Tax Authorities. To be eligible for the zero rate VAT treatment the Colombian company must comply (among others) with the following requirements: Provision of the services within the Colombian territory Exclusively use of the services abroad The beneficiary of the services should not have business or activities in Colombia Existence of a written agreement The tax registry of the services provider must include the "exporter of services" responsibility. Keeping a certificate of good standing of the recipient of the service. The ruling The Tax Authorities ruled that a service is considered to be exclusively used abroad if it is fully utilized outside the Colombian Territory. In the case under analysis, a resident company claimed the VAT zero rate treatment for the provision of services consisted on the development of studies to determine the credit risk of individuals and Companies located in the Colombian Territory.

3 The Tax Authorities concluded that the situation described implied an improper use of the zero VAT treatment because the beneficiary takes advantage of the service inside Colombia ( Ruling of 2015). Double taxation treaty ( DTT ) with Korea Tax treatment for a branch that provides international transportation services for passengers Colombian Tax Authorities have ruled about the application of the DTT subscribed between Colombia and South Korea, for a Colombian Branch of a South Korean Company, rendering international transportation services for passengers in the following terms: a. Income tax and income tax for equality ( CREE ): Profits of the South Korean company from the operation of ships or aircraft in international traffic, are only taxable in South Korea according to Section 8 of the DTT. The Tax Authorities confirmed that income Tax for Equality is covered by the DTT, because it is "analogue to the income tax. b. Wealth Tax: This tax is not covered for the DTT between Colombia and South Korea. Furthermore, it would be necessary to apply sections and that state that taxpayers include not only resident companies but non-residents directly or indirectly (through branches or permanent establishments) holding wealth in Colombia and regardless of whether such non-residents are income taxpayers in Colombia. c. Finally, DIAN stressed that it is possible for the South Korean Company, through its Branch, apply for a refund of the income tax withholding, and CREE selfwithholding unduly charged from ( Ruling of 2015). Technical accounting Authority ruled that goodwill internally generated by companies should not be recognized under IFRS Pursuant to this entity, goodwill internally generated by companies resulting from development expenditure shall not be recognized as an intangible asset. Furthermore any accounting entry related to this goodwill should be written-off against the corresponding surplus of capital or accumulated profits ( Ruling 578 of 2015).

4 PwC Tax and Legal times prepared a summary of the Double taxation Agreements signed by Colombia Country Subscription Date Law Number/ Date Approved DOUBLE TAXATION Agreements Constitutional Exchange Of Notes In Force Applicable Date Court Ruling Canada November /2011,2008 C-295/2012 June 12, 2012 June 12, 2012 January 1, 2013 Chile April 19, /2008 C- 577/2009 December 22, 2009 December 22, 2009 January 1, 2010 Spain March 31, 1082/ C-309/ 2007 July 24, 2007 October 23, 2008 January 1, 2009 Mexico August /2012,2009 C 221/2013 June 6, 2013 July 11, 2013 January 1, 2014 Portugal August 30, 1692/ C-667/2014 January 30, 2015 January 30, 2015 January 1, 2016 October 29, Switzerland 1344/ C-460/ 2010 July 26, 2011 January 1, 2012 January 1, 2012 Korea July 27, /2013 C-260/2014 July 3, 2014 July 3, 2014 January 1, 2015 India May 13, /2013 C-238/2014 July 7, 2014 July 14, 2014 January 1, 2015 Czech March 22, 1690/2013 Republic * 2012 C-049/2015 May 6, 2015 May 6, 2015 January 1, 2016

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6 Contactos Carlos Mario Lafaurie Escorce Socio María Helena Díaz Méndez Socia Carlos Miguel Chaparro Plazas Socio Eliana Patricia Bernal Castro Socia Nacira Akeber Lamprea Okamel Socia

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8 Contactos Bogotá Calle 100 No. 11A -35, piso 3 Teléfono: (57-1) Fax: (57-1) Carrera 7ª No , Piso 19 Teléfono: (57-1) Fax: (57-1) Centro Empresarial Dorado Plaza Calle 26 No. 85 D - 55, Módulo verde Oficinas 248M, 249M y 250M, Teléfono: (57-1) Zona Franca Carrera 106 No Mz. 17 Bodega 85 Teléfono: (57-1) Fax: (57-1) Cali Edificio la Torre de Cali Calle 19 Norte No. 2N-29, piso 7 Teléfono: (57-2) Fax: (57-2) Medellín Edificio Forum II Calle 7 Sur N 42 70, piso 11 Teléfono: (57-4) Fax: (57-4) Barranquilla Edificio Centro Empresarial de Las Américas Calle 77B No , piso 8 Teléfono: (57-5) 368 2