COLOMBIA Law and Practice Contributed by: Rodrigo Castillo Cottin, Ana María López and Alejandra Becerra, Rimon, P.C.
2.7 Transfer of Assets: Digital Assets Colombia has no regulations concerning the succes - sion of digital assets. However, general civil law princi - ples apply: digital assets qualify as intangible property under Article 653 of the Civil Code, and the general rules on succession by cause of death extend to both tangible and intangible assets. For tax purposes, the CTO’s Unified Ruling on Cryp - to‑Assets (2023) confirms that inherited crypto‑assets constitute capital gains under Articles 299 et seq of the CTC. In practice, the main challenges are operational rath - er than legal. Access to digital assets such as email accounts, cryptocurrency or other tokenised assets depends on the availability of private keys or seed phrases, which may be irrecoverable if the decedent left no instructions. For assets held through foreign platforms, the provider’s terms of service and the law of its domicile will typically govern the access and transfer process, often requiring a grant of representa - tion or court order. 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 USD49,469). 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, without any consideration of the trust/foundation’s irrevocable and discretionary character. Reporting of income If a trust/foundation were to be revocable and con - trolled by the settlor, then it would be considered as a controlled foreign corporation under Colombian law. Hence, net profits derived from passive income obtained by the trust/foundation must be recognised immediately in proportions equivalent to the participa - tion in the trust/foundation’s capital or profits, and not upon receipt of profits, which means no tax deferral is applicable in this case. Accordingly, Colombian tax residents must report the passive income realised by the trust/foundation in their income tax returns, considering the nature and characteristics of said income.
179 CHAMBERS.COM
Powered by FlippingBook