UK, Colombia In Double Tax Deal
The UK and Colombia signed a double tax agreement (DTA) on November 2, which is intended to support trade and investment by capping withholding tax on cross-border income.
The agreement was signed by the Financial Secretary to the Treasury, Jane Ellison, and the Colombian Finance Minister, Mauricio Cardenas, during President Juan Manuel Santos’ state visit to the UK.
Income derived across an international border can potentially be subject to taxation in two countries, giving rise to the problem of double taxation. DTAs ensure that this is remedied and income earned in one country is only taxed once, rather than twice. Eliminating this risk of double taxation will give greater certainty to employees and businesses operating between the UK and Colombia over what taxes they pay and where. The agreement will reduce the barriers to cross-border trade and investment, as well as promote growth and jobs. The DTA also includes provisions which will help both countries work together to tackle tax avoidance and evasion.
The agreement provides that dividends accruing to a pension fund in certain circumstances will be subject to dividends withholding tax at a rate of zero percent. Where the recipient holds a stake of at least 20 percent in the company paying the dividend, the tax rate will be capped at five percent. Otherwise withholding tax on dividends income will be capped at 15 percent.
For interest income, withholding tax will generally be capped at 10 percent, except where exemptions apply. Royalties, too, will be generally subject to a 10 percent rate, providing the necessary conditions are met.
The UK’s Financial Secretary to the Treasury, Jane Ellison, who signed the agreement with Colombia’s Finance Minister, said: “Today’s agreement between the UK and Colombia emphasizes our shared commitment to increasing trade and investment between our countries. As well as encouraging growth and jobs, this agreement will enable both governments to work together to fight against overseas tax evasion and avoidance.”