COLOMBIA Law and Practice Contributed by: Rodrigo Castillo Cottin, Ana María López and Alejandra Becerra, Rimon, P.C.
Foreign Trusts Regarding the use of corporate fiduciaries or other professional fiduciaries, there are no civil or commer - cial regulations establishing a higher standard of con - duct or additional supervision or regulations. Colombian law authorises individuals residing in Colombia and legal entities created under the laws of Colombia to invest and hold assets outside Colombian territory without the need to obtain further permits or authorisations. However, said tax residents and local entities must comply with all tax and foreign exchange reporting regulations. 6.2 Fiduciary Liabilities In Colombia, the piercing of the corporate veil has been developed by case law and seeks to identify the individuals or legal persons who are beneficiaries of the legal entity. However, this procedure must be ordered by a judge and is not common on a day-to- day basis. From a tax perspective, Article 869-2 of the CTC, allows the CTO to pierce the corporate veil of any entity used by its shareholders, partners, directors or administrators to commit tax abusive conduct under Article 869, mentioned in 1.6 Transparency and Increased Global Reporting . The CTO may also obtain information regarding ulti - mate beneficial owners using the following mecha - nisms: • SARLAFT – financial entities are required to iden - tify and report to the CTO the ultimate beneficial owners in accordance with SARLAFT regulations mentioned in 1.6 Transparency and Increased Global Reporting ; and • electronic tax information – Article 631 of the CTC requires Colombian affiliates or subsidiaries of national or foreign entities to identify and report the ultimate beneficial owners to the CTO electroni - cally. 6.3 Fiduciary Regulation There are no specific laws that encourage fiduciar - ies to invest assets prudently. However, and as men - tioned in 6.1 Prevalence of Corporate Fiduciaries ,
current regulations set forth a number of legal duties for trustees to invest and maintain assets that cannot be delegated to third parties or waived. 6.4 Fiduciary Investment Generally, parties involved in a fiduciary agreement will determine the risks and limitations in the invest- ment of assets. Colombian law does not require the diversification of assets or the application of modern portfolio theory. Certain exceptions may apply if gov - ernment assets or pension funds are involved. 7. Citizenship and Residency 7.1 Requirements for Domicile, Residency and Citizenship It is understood that a foreigner is a resident in Colom - bia when they are the holder of a residence visa. An individual, whether Colombian or foreign, is a tax resident in Colombia if they remain in the country, continuously or discontinuously, for more than 183 calendar days in any period of 365 days. When a dis - continuous residence of more than 183 days occurs between two taxable periods, the individual will be considered a resident as of the second taxable period. Colombian nationals are considered as tax residents if: • their spouse, life partner or dependent children are Colombian residents; • 50% of the individual’s income is Colombian sourced; • 50% of the individual’s assets are managed or deemed located in Colombia; • the individual is unable to prove tax residency in another jurisdiction; and • the individual is resident in a jurisdiction consid - ered as a tax haven by the Colombian government. Colombian individuals who meet the above-mentioned requirements will not be considered tax residents if: • 50% or more of the individual’s income is sourced in the jurisdiction in which they are domiciled; or
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