On 23 September 2024, the enactment of Law No. 20,367 approved the “Convention between the Oriental Republic of Uruguay and the Republic of Colombia for the Elimination of Double Taxation with respect to Taxes on Income and on Capital and the Prevention of Tax Evasion and Avoidance.”
The agreement had been signed in Bogotá on 19 November 2021, at the “5th Meeting of the High-Level Political Mechanism between Colombia and Uruguay”, where bilateral and multilateral matters were discussed (see article, in Spanish).
The main maximum withholding rates allowed are listed below:
- Dividends (art. 10): (i) 0% for recognised pension funds, (ii) a 5% limit if the beneficial owner is a company holding, directly or indirectly, at least 20% of the capital of the company paying the dividends, or (iii) a 15% limit in all other cases.
- Interest (art. 11): (i) 0% if the creditor is a recognised pension fund, if the creditor is a Contracting State, or if both debtor and creditor are financial institutions, or (ii) a 15% limit in all other cases.
- Royalties (art. 12): 10% limit.
- Fees for technical services (art. 14): 10% limit.
Under domestic legislation, the maximum withholding rate in Uruguay is 7% for dividends and 12% for interest, royalties and technical services. Colombia generally withholds up to 20% on payments of dividends (which may be higher depending on whether the income was taxed in Colombia), interest, royalties and technical services.
Double taxation of income tax and wealth tax is eliminated through the tax credit method.
The agreement is not yet in force, as approval by Colombia and the notifications between the Contracting States are still pending. Its provisions will take effect from the calendar year following the year in which the treaty enters into force.
The text of the tax treaty is available at the following link: Law No. 20,367
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