The New Colombian Government
THE NEW COLOMBIAN GOVERNMENT proposed a series of tax reforms that are expected to take effect next January 1, assuming they are approved by Congress in December. Among the changes that would affect infrastructure investments in the country are the following. Colombia currently collects a 10% withholding tax on payments to foreigners for technical services performed offshore but 35% for such services performed in Colombia. The rate would be set at 10% for all technical services payments. Dividends paid to foreigners are subject currently to withholding taxes at a 7% rate, but the tax is waived to the extent earnings are reinvested in Colombia for at least five years. The reforms would forego the need to pay a dividend and reinvest to qualify for this benefit. It would be enough if earnings are merely retained in a Colombian company. The reforms would subject electricity to VAT. It is currently exempt. The general VAT rate would be set at 15% from November 1999. Colombian companies would also be able to deduct interest paid to Colombian banks as the interest accrues rather than waiting until the interest is actually paid.