Remote Work Tax Colombia
Assess your remote work corporate tax / Permanent Establishment (PE) risks in Colombia
Are you planning to hire in Colombia?
Launching a remote work policy?
Have your employees already spent time working in Colombia?
Or are you wondering whether you should approve a future trip by an employee to Colombia?
Through our remote work tax assessment, we cover all angles to ensure you remain compliant for all local regulations and avoid the costly mistake of creating PE in Colombia, which leads to corporate tax filing obligations.
How we can help
Schedule a call with our team to investigate the circumstances behind your in-country presence and resulting obligations.
Length of time. Frequency. Seniority of position. Type of work. Industry. Decision making process. Contract execution. IP generation. Data transfer.
All these things need to be considered to understand whether you create PE or have filing obligations.
Key Permanent Establishment tax risks in Colombia impacted by remote work
The Colombian legislation follows the OECD definition of PE and means a fixed place of business through which an entity carries out its activity, whether partially or totally.
A PE will also be incorporated when a person (other than an independent agent) has the capacity to execute contracts on behalf of the foreign entity, except for preparatory and auxiliary activities.
Colombian law upholds the triggering of a PE upon the presence of a fixed place of business that is located in a given place and features a certain degree of permanence (no cut-off timeline is provided) where a non-resident entity conducts part or the whole of its business.
The regulations reiterate that a PE is subject to income tax on worldwide income attributable to its course of business as well as on any income directly earned.
Also, a PE will be subject to domestic withholding tax (WHT) rates whenever engaged with resident parties.
Creating a PE will require the entity to make annual CIT filings. Entities with PE are given the capacity to withhold and remit taxes as well as to charge and collect value-added tax (VAT) to the extent of taxable transactions.
Registration of a PE require good standing documentation or proof of existence as well as an active account at a local bank or financial institution.
An entity will need to prepare contemporaneous documentation (in addition to transfer pricing compliance requirements) with a functional and technical analysis of the assets, liabilities, capital, risks income, costs, and expenses attributable to its business in Colombia. In addition, an entity must, for tax purposes, prepare separate accounts for purposes of the attribution of income and capital gains.
Branches and PEs are subject to income tax on worldwide source income that is attributable.