COLOMBIA Law and Practice Contributed by: Jaime Trujillo, Juan David Velasco, Natalia Ponce de León and Angelica Navarro, Baker McKenzie S.A.S.
• income of companies incorporated in the departments of La Guajira, Norte de San - tander 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 customs regime. Companies that have this sta - tus can access tax benefits such as the applica - tion of a preferential (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 following are the main tax incentives: • income from the sale of electric power gener - ated 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 necessary for the production of energy from non-conventional sources; and
• accelerated depreciation incentive for machinery, equipment and civil works neces - sary for the development of non-conventional
energy generation projects. The CFC and CHC Regimes
Colombia offers two additional tax incentive regimes that are particularly relevant for mul - tinational structures and cross-border invest - ments: 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 Colom - bian tax code, passive income obtained by such entities may be attributed and taxed in Colom - bia. However, the regime offers an incentive by excluding active income from taxation. In addi - tion, income effectively distributed is not subject to additional taxation if already reported, allow - ing for deferral and avoidance of double taxa - tion. These features position the CFC regime as a compliant yet flexible structure for managing offshore investments. The CHC regime The CHC regime offers a full income tax exemp - tion on dividends and capital gains derived by a CHC from qualifying foreign subsidiaries, as long as the CHC holds at least 10% participa - tion and meets certain substance requirements. Dividends paid by the CHC to non-residents are considered foreign-sourced and may ben - efit from WHT relief. This regime is a powerful incentive to set up regional holding platforms in Colombia, aiming to boost inbound and out - bound foreign direct investment.
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