Tax Residency in Colombia
1. Criteria for Determining Tax Residency in Colombia
According to Article 10 of Colombia's Tax Statute, an individual is considered a tax resident if they meet any of the following criteria:
- Physical presence in Colombia for more than 183 days during a calendar year.
- Having a permanent home in Colombia.
- Having economic, personal, and social ties to Colombia that indicate a habitual residence.
For legal entities, tax residency is determined based on their place of incorporation or effective management.
2. Impact of International Tax Treaties on Tax Residency Criteria
Colombia has entered into several international tax treaties that may modify or provide exceptions to the standard criteria for tax residency. These treaties aim to prevent double taxation and promote cross-border trade and investment.
Key Provisions in Tax Treaties
- Article 4 of the Colombia-Spain Tax Treaty: Defines tax residency based on the individual's permanent home, habitual abode, or center of vital interests.
- Article 4 of the Colombia-Chile Tax Treaty: Introduces a tie-breaker rule for individuals who are considered residents of both countries under their respective domestic laws.
- Article 4 of the Colombia-Mexico Tax Treaty: Provides a specific definition of "permanent home" for determining tax residency.
Rationale for Treaty-Specific Modifications
These treaty-specific modifications aim to provide clarity and prevent double taxation by establishing clear rules for determining tax residency in cases involving cross-border activities. They reflect the mutual agreement between Colombia and the treaty partner country to facilitate tax compliance and enhance economic cooperation.
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