Changes in dividend regulations
Last July 4, the Ministry of Finance and Public Credit issued Decree No. 1103 of 2023, whereby the regulatory provisions regarding dividends were modified, in accordance with the provisions of Tax Reform Law 2277 of 2022, as follows:
Tax treatment of dividends and participations: in relation to the income tax return, dividends will be included in the general tax return, being subject to the progressive rate of article 241 of the Tax Statute (ET), assessed between 19% and 39% once the first 1,090 UVT ($46,229,080 for the taxable year 2023) are exceeded.
Tax treatment of withholding at source on dividends and participations
The following rates apply:
Earnings generated from 2017 and decreed as receivable as of January 1, 2023 | ||
Dividends | Not Taxed | Taxed |
Resident individuals and resident estates | 15% on the value exceeding 1,090 UVT ($46,229,080 for taxable year 2023). | General corporate income tax rate (35%) and, on the difference between the payment or credit on account and such withholding, apply 15% on the value exceeding 1,090 UVT. |
Non-resident individuals, legal entities and unliquidated successions | 20% | General income tax rate (35%) and, on the difference between the payment or credit on account and such withholding, 20% is applied. |
Domestic companies special rate | 10% | General income tax rate (35% for the year 2023 and subsequent years) and, on the difference between the payment or credit on account and the withholding applied 10%. |
Mega-investments with legal stability contract signed as of 12/31/2022 | NA | 27% |
It is important to take into account the following aspects regarding withholding at source:
- It shall apply without distinction to the number of installments in which the dividend decreed is divided.
- The withholding practiced to national companies shall be transferred to the final beneficiary, a resident individual, who may credit it in the income tax return according to the general rules of the ET. It shall also be transferable to the investor resident abroad.
- It does not apply when dividends are distributed to: non-taxpaying entities, entities that at the time of payment belong to the special income tax regime, companies under the Colombian Holding CHC regime, business groups or within a situation of control and to individuals or legal entities that belong to the Simple Taxation Regime.
Likewise, dividends distributed by a national company whose origin corresponds to dividends coming from a company domiciled in a member country of the Andean Community -CAN- and dividends and participations coming from projects qualified as mega investment with a legal stability contract and compliance with the requirements of article 235-3 of the ET are not subject to withholding at source.
Want to know more?
Carlos Andres Molano Camelo Managing Partner Colombia Bogota
