COLOMBIA Law and Practice Contributed by: Jaime Trujillo, Juan David Velasco, Natalia Ponce de León and Angelica Navarro, Baker McKenzie S.A.S.
of 14 February 2025, issued pursuant to temporary exceptional state powers of national commotion. This amendment applied until 31 December 2025. As of 1 January 2026, the rate has reverted to 0%, and the tax is currently not effectively triggered in practice. According to recent doctrine by the DIAN and consist - ent with jurisprudence of the Council of State, for con - tracts with an undetermined amount, the triggering events are the signing, granting or acceptance of the document, while the taxable base is defined by each payment or credit made under the contract. Therefore, payments made before 22 February 2025 – the effec - tive date of the Decree – are subject to a 0% rate while those made from that date through the end of the year will be taxed at 1%. Starting 1 January 2026, the rate should revert to 0%. 5.3 Available Tax Credits/Incentives Colombia offers the following tax incentives to local and foreign companies. Double Taxation Treaties Colombia has entered into an extensive network of double taxation treaties. Foreign Tax Credit Applicable to All Colombian Companies Foreign income taxes may be credited by Colombian companies against their local CIT liability, subject to certain limitations. CIT Exemptions The following income generated locally by a Colom - bian company is exempt from CIT: • income obtained from eco-tourism services; • income related to the sale of social interest or priority housing, provided that the taxpayer obtains the corresponding governmental permit; and • income of companies incorporated in the depart - ments of La Guajira, Norte de Santander and Arauca (ZESE) until 2024 will have a five-year CIT exemption. Tax Credit Applicable to Certain Investments A 30% tax credit is available for investments made in certain scientific and/or technological projects or in
professional training projects of governmental, public or private institutions. Special CIT Rate for Free Trade Zones These are geographically delimited areas in the Colombian territory that have a special tax and cus - toms regime. Companies that have this status can access tax benefits such as the application of a pref - erential (lower) income tax rate, 0% VAT and tariffs on foreign goods, and 0% VAT on domestic goods, among others. Tax Benefits for Investments in Non-Conventional Energy Sources Tax incentives exist to encourage the generation of energy from clean and renewable sources. The fol - lowing are the main tax incentives: • income from the sale of electric power generated from wind, biomass or agricultural waste is exempt from CIT, provided the seller issues and negotiates greenhouse gas reduction certificates; • income tax deduction of 50% of the value of the investment made in energy generation projects from non-conventional sources; • VAT exemption on the acquisition of goods and services necessary for the development of non- conventional energy projects; • exemption from payment of import duties on machinery, equipment, materials and inputs neces - sary for the production of energy from non-conven - tional sources; and • accelerated depreciation incentive for machinery, equipment and civil works necessary for the devel - opment of non-conventional energy generation projects. The CFC and CHC Regimes Colombia offers two additional tax incentive regimes that are particularly relevant for multinational struc - tures and cross-border investments: the controlled foreign company (CFC) regime and the Colombian holding company (CHC) regime. The CFC regime The CFC regime is aligned with OECD BEPS Action 3 and targets foreign entities controlled by Colombian tax residents. Under the Colombian tax code, passive
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