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Analysis of the agreement to avoid double taxation on income tax and complementary taxes

The DTC (Double Tax Convention) between Spain and Colombia was the first comprehensive agreement in Colombia. The process for its adoption was concluded on March 31 of 2005 and the DTC entered into force on October 2008. In Article 12 of the agreement, section 3, it is stated that the services of technical assistance, technical services and consulting services are understood under the term “royalties”.

The concepts of technical assistance and service related to the use of technological knowledge applied by means of Measurement of an art or technique. However, the understanding of the Colombian Tax Authority concluded that in the case of legal and juridical advisory services provided by fiscal resident in Spain to a fiscal or tax resident in Colombia, would be applied.

In order to extend this interpretation what better suits it and as arranged in article 7 of the DTC, would be relative to the managerial benefits defined by:

The company’s profits which have been incurred in a contracting State should be taxed in the country of tax residence, unless the company carries out its business in the other contracting State through a permanent establishment. If the company carries out its contracting activity in that way, the company’s profits may be taxed in the other State, but only if those profits are attributable to that permanent establishment.

Therefore, there is no place to practice withholding tax on income earned by legal and juridical advisory services provided by Spanish tax residents to Colombian tax residents, because these profits are taxed in the country of residence of the company, ie in Spain. This is fulfilled unless that company has a permanent establishment in Colombia (EP), to which they can attribute such profits.

2017-09-18T13:23:41+00:00 15/05/2015|Latest news|