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Capital Markets

Colombia

Overview
Includes: Legal Framework; Superintendency of Securities; Register of Securities and Intermediaries; Stock Exchange; Public Offers; Securitization.

The government has issued new rules on investors' rights and flexibility terms for foreign portfolio investments. The new rules facilitate the entrance and repatriation of capital and profits from foreign portfolio investments. Pursuant to these new rules, short-term foreign portfolio investments will be accepted without minimum duration restrictions.

Corporate Tax

Colombia

Local stamp duties can have the effect of raising overall taxation rates without any centralized control, since local authorities have broad discretion to determine their attributes, including deciding on taxable events. However, two recent decisions of the Council of State show an interest in limiting the reach of local stamp duties.

Technical assistance contracts must be carefully reviewed in order to ensure that they reflect the intentions of the parties and include any details with relevant tax effects, since their content will be a fundamental piece of evidence in any related judicial process.

A Tax Authority ruling that foreign companies are obliged to declare and pay taxes on assets held in Colombia even if those assets do not produce income has been overruled by the Council of State. Tax returns filed under the ruling have no effect and foreign companies may request a refund for payments made under the ruling.

Ruling 46320 of May 8 2008 states that a special deduction does not apply to the mere acquisition of a productive asset. For the 40% deduction to apply, the asset must have been effectively used to produce income during the taxable year. Such income will grant the right to the deduction.

In recent rulings Colombian tax authorities have clarified how to interpret Andean Community rules so as to avoid double taxation regarding services, dividends and labour payments. Two of the rulings also state that regulations issued by the Andean Community are directly applicable in Colombia and have pre-emptive effect.

Ratification notes for a double taxation treaty with Spain were exchanged between governments in July 2007. The treaty will enter into force in October 2008 and will be applicable in 2009. Before the exchange of ratification notes, the Constitutional Court issued Decision C-383 which declared the validity of Law 1082/2006, approving the treaty.

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Trade & Customs

Colombia

The Andean Community recently issued Decision 671, which harmonizes customs regimes in the four countries of the sub-region. Although many important aspects of those regimes are not regulated due to the lack of consensus among member countries, it is expected that the Andean Customs Code, which the countries plan to draft in the near future, will address some of them.

The government has recently published regulations for the Plan Vallejo de Servicios, an inward duty relief programme for the export of services. Under it, a provider of services may import certain capital goods and spare parts under a temporary regime with duty reductions or exemptions and value added tax deferral until the end of the programme.

Importers and exporters in the mining and hydrocarbons sectors may qualify for a number of trade programmes and customs advantages, including short and long-term temporary import regimes which offer value added tax and duties benefits. In addition, oil or mineral extractors may benefit from duty relief on raw materials and large importers are included in a more advantageous customs category.

Although Colombia's international trading companies were originally designed to benefit Colombian exporters, foreign investors may also benefit from these entities when exporting Colombian products. International trading companies are good legal vehicles for foreign investors wishing to purchase finished products to be exported to their country of domicile or to third countries, among other things.

The free trade zone regime has been reformed in order to promote investment and generate employment in industrial and service activities. The new Free Trade Zone Act and its decrees provide significant legal benefits for new investment projects in Colombian free trade zones, and set forth the conditions and requirements to obtain such benefits.

The foreign trade regime - which provides for the administrative control of import licences by governmental authorities and the registration of imports under the free import regime - was recently amended by means of Decree 3803/2006. The administrative control regime, which applies to all merchandise to be imported into Colombia, divides goods into several categories (eg, prohibited imports).

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