Por: Miguel Carrillo Naranjo - Hamkke Consulting
The ongoing constitution in Colombia is from 1991, which also resolute the investment framework through law 9 which main objectives are to promote the Colombian economy in the world in order to increase competitiveness in the global market, by stimulating exports, facilitating financial transactions abroad, stimulating FDI in the country, and creating adequate control mechanisms to track capital movements among others.
Legal Stability Contracts
It were created by the Colombian Government in 2005, aimed protect investors from adverse changes in national legislation. These contracts have a term of between 3 and 20 years (subject to negotiation); the Colombian government commits itself not to change the legislation concerning the investor.
Double Taxation Agreements (DTA)
Double taxation agreements negotiated by Colombia are in accordance with international standards and include the principle of non-discrimination.
According to this principle, the terms of a double taxation agreement cannot be more burdensome for taxpayers than those provided for in national legislation.
This principle is based on the respect for equality of conditions among residents of a State and is expressed in the event that the national standard provides for something more beneficial to taxpayers than what was settled in the Agreement. In these agreements, Colombia has negotiated income tax and supplementary income. Indirect taxes such as sales taxes (IVA) are beyond the reach of double taxation agreements.
Public-Private Partnerships (PPP)
The Congress of Colombia approved in December 2011, the new law on Public-Private Partnerships, an excellent tool for MNCs to propose and execute profitable and viable projects for both parts. The main characteristics of this law are as follows:
Two components: Within public resources or 100% private.
The Colombian government has been developing a more aggressive strategy to attract FDI, the main investment incentives, according to (PROEXPORT Colombia, 2012) are:
Permanent Free Trade Zones (PFTZ): are geographical areas of no less than 20 hectares, where various companies establish themselves to operate. These Free Trade Zones have two types of users. The first is the Operating User which is the legal person in charge of running the Free Trade Zone, and the second is the Industrial User that can be for producing Goods or providing Services.
Single Enterprise Free Trade Zone (SEFTZ): Allows the company to establish anywhere in the country the company must be no more than six months old, and that the investment requirement is made after the Free Trade Zone Status is granted.
Among the benefits for PFTZ and SEFTZ are single 15% income tax rate; the granting period is 30 years that can be renewable for the same period, all the capital goods from around the world introduced in the FTZ are discharged from VAT or custom duties, goods exported from a FTZ will benefit from the trade agreements signed by Colombia except Peru, and exports may be made from the FTZ to the rest of the national custom territory. Furthermore, raw materials, parts and inputs sold from a national custom territory to FTZ users will be VAT excluded, and the possibility of partial processing outside the FTZ for a period up to six months.
Plan Vallejo Special Import – Export System for Services: is a foreign trade instrument created to promote Colombian service exports. With this tool, service exporting companies, including consortium and temporary unions, may request authorization from the Colombian National Tax and Customs Office (DIAN) to import capital goods and spare parts (the latter only for air transportation services) totally free of import tariffs and VAT, in exchange for providing exportable services (1.5 the FOB value of the imports’ capital goods). The main benefits are the tariff suspension for imports of capital goods and their parts for the duration of the program, and VAT deferral on the imports of capital goods and their parts. The sectors covered by Plan Vallejo are services provided to Companies, communication services, distribution services, teaching services, transportation services, social and health services, tourism and travel-related services, construction services and related engineering services.
There is a tax exemption depending upon the economic sector for a determined period of time that goes from 0% income tax rate to the general tariff of 33%, the period for the sectors benefited by this measure are:
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