COLOMBIA Trends and Developments Contributed by: Jaime Trujillo, Juan David Velasco, Natalia Ponce de León and Angelica Navarro, Baker McKenzie S.A.S.
tained in the Colombian market and if it gener - ates a gross income from sales or services in Colombia over a certain threshold, which for 2025 is approximately USD378,000. A “deliberate and systematic interaction” is deemed to exist when the foreign entity or indi - vidual maintains a marketing interaction with 300,000 or more users or customers located in Colombia and/or when it allows payment in Colombian pesos or allows its customers to view its prices in Colombian pesos. Foreign entities and individuals that have a “sig - nificant economic presence” in Colombia are subject to income taxes in Colombia and have two options to comply with their tax obligations. One option is to apply a 10% withholding tax to all payments made from Colombian residents and remit these amounts to Colombian tax authorities. Alternatively, they may register with the Colombian tax authority, file an annual return and pay income tax at a rate of 3% on all gross revenues derived from their sales to Colombian customers. As this is an “income tax”, foreign entities or indi - viduals located in a jurisdiction that has a double taxation treaty in place with Colombia may not be subject to ”significant economic presence” rules. State powers regarding national commotion – national stamp tax Dormant since 2010 (when its rate was reduced to 0%), the national stamp tax was temporarily reactivated by the government at a 1% rate by Decree 175 of February 14, 2025, issued pur -
suant to temporary exceptional state powers regarding national commotion. This is an indirect levy triggered by the execu - tion of certain legal acts, documents and con - tracts that generate legal effects in the country and have a value of more than approximately USD73,000 for 2025. As a general rule, any pri - vate agreement may be subject to this tax, even if it does not require the involvement of a nota - ry or public authority. This amendment of the Colombian tax code will apply until 31 December 2025. Looking Ahead Growth of representations and warranties (R&W) insurance in M&A R&W insurance has been gaining traction in the Colombian and Latin American M&A markets. While still relatively new in the region, R&W insurance offers significant potential for growth. The market has become increasingly com - petitive, with insurers lowering premiums and deductibles to make R&W insurance more attractive to both investors and sellers. As more deals incorporate this type of insurance, it is expected to become a standard component of M&A transactions, providing greater protection and certainty for all parties involved. However, the novelty of R&W insurance in Colombia presents challenges. Many local law - yers and clients are still unfamiliar with its ben - efits and applications. As the use of R&W insur - ance becomes more widespread, it is expected that the market will continue to evolve, with more legal professionals and clients recognising its advantages and incorporating it into their deals.
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