COLOMBIA Law and Practice Contributed by: Rodrigo Castillo Cottin, Ana María López and Alejandra Becerra, Rimon, P.C.
erty as they see fit. However, other dispositions may require, as a rule, the approval of the other spouse. This would be the case with real estate. Colombian law respects both prenuptial and postnup - tial agreements, although they must be granted by public deed. In the case of foreign agreements, the latter are recognised if they are duly notarised and apostilled. 2.5 Transfer of Property The cost basis of property transferred during an indi - vidual’s lifetime is the registered value of the legal act including attributable costs. However, the cost basis of property transferred at death is the cost basis declared by the deceased as of 31 December of the previous year. 2.6 Transfer of Assets: Vehicle and Planning Mechanisms From a tax perspective, there are no mechanisms available to help the transfer of assets to younger generations, tax-free. As a rule, inheritances or legacies are considered as capital gains, taxed at a 15% rate. However, cer - tain structures may be used to obtain tax deferral or reduce the taxable base. This should be analysed on a case-by-case basis. 2.7 Transfer of Assets: Digital Assets Colombia has no regulations concerning the transfer of digital assets. Access to digital assets such as email accounts or cryptocurrency belonging to a deceased person whose last place of domicile is Colombia, is usually subject to foreign regulations (due to the absence of regulations in Colombia) dealing with this type of situation. 3. Trusts, Foundations and Similar Entities 3.1 Types of Trusts, Foundations or Similar Entities Colombian law allows individuals to create trusts, private foundations, family companies, family part -
nerships or similar structures to hold, administer and regulate succession to private family wealth. Civil Law Colombian civil law does not provide rules on common law trusts or private foundations. However, there are rules on civil and commercial local trust agreements whereby a settlor transfers property or the adminis - tration of certain assets to a trustee in exchange for fiduciary rights. Local trusts are commonly used in Colombia as instru - ments to administer properties or businesses with a specific purpose, or to grant guarantees or collateral, considering that trustees are professional regulated entities. Common Law Trusts or Foreign Foundations There are no civil or commercial regulations regard - ing the establishment of common law trusts or for - eign foundations in Colombia. However, common law trusts are recognised in the CTC. The following requirements have to be observed. Distributions made by a foreign trust or foundation Colombian tax residents are subject to income tax based on their worldwide source income. Therefore, any distributions made by a foreign trust or foundation would be subject to tax in Colombia at a 15% rate as a capital gain. Life insurance indemnities are taxed as capital gains, but only on the amounts that exceed 3,250 Tax Units (approximately USD38,753). Reporting of assets Assets held by a trust/foundation (which is revocable and directed) are understood to be held directly by the unconditioned beneficiaries or by the settlor/founder and must be reported for all tax purposes as part of their own net worth. If the underlying assets of an irrevocable and discre - tionary foundation cannot be attributed to the ben - eficiaries, the settlor must report the latter. But if the settlor cannot be identified or determined, the report - ing obligation falls on the beneficiaries irrespective of whether they are conditioned or have control over the assets and income of the structure. This is the case,
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