On 15 October 2026, DIAN released Concept 016345 confirming that profits of Colombian source transferred by a local branch to its foreign head office are subject to Colombian income tax. The ruling clarifies that such remittances cannot benefit from the exemption for dividends distributed to non-residents under certain tax treaties, as branch profits are not considered dividends but rather a distribution of branch earnings. This distinction triggers withholding tax obligations at the applicable rate.
Key Takeaways
- Withholding Obligation: The Colombian branch must withhold income tax on profit remittances at the statutory rate (currently 20% unless reduced by treaty).
- Treaty Analysis: Taxpayers must verify whether the relevant double tax treaty contains a specific branch profits article; most Colombian treaties do not.
- Compliance: Branches should review remittance policies and ensure timely withholding and reporting to avoid penalties.
Disclaimer: This article is compiled and summarized by the AI based on publicly available information and is for general information purposes only. It does not constitute any form of formal tax advice, legal opinion, or basis for performance. Please consult a qualified professional tax advisor or legal counsel for tax advice.
Source: Read Official Announcement