Corporate regulation of the beneficial owner

As of the issuance of Law 1819 of 2016 (penultimate tax reform), the concept of Beneficial Owner (BE) was enshrined in Colombia -for tax purposes. According to Article 133 of the aforementioned law, which amended Article 631-5 of the Tax Statute (E.T. ), it was indicated that BE was understood as the natural person that complies with any of the following conditions: a) To have effective control, directly or indirectly, of a national company, of an agent, of an autonomous patrimony, of a trust, of a collective investment fund or of a permanent establishment of a company abroad; or b) to be a beneficiary, directly or indirectly of the operations and activities carried out by the national company, the agent, and the other entities referred to above.

It will also be understood as a BE, according to Article 631-6 of the E.T., only for purposes of the obligations related to the automatic exchange of information, whoever owns, directly or indirectly, "25% or more of the capital or votes of the national company, of the autonomous patrimony, of the trust (...)".

In tax matters, with the last Financing Law (Law 1943 of 2018, Art. 51), the subject of the BE is again on the table, by indicating that the withholding tax on the first distribution of dividends between national companies will be credited to the "final beneficiary natural person resident or investor resident abroad".

It is here where it is necessary to be able to regulate the concept of beneficial owner, otherwise, multiple problems would arise when determining to whom the tax credit from the withholding of the dividend should be transferred.

Corporate regulation of the BE is a complex matter, since there is a fear -legitimate- that such information may be misused.

For this reason, some countries have recently opted to introduce systems that provide certainty to the government, the company and the partners as to who the BE of the companies are, without such information being made public.

Thus, Canada recently introduced the Canada Business Corporations reform, which aims to maintain an updated registry of individuals who maintain significant control (generally more than 25% of the votes and profits of the company), indicating their name, date of birth and address, jurisdiction of tax residence, date on which they became or ceased to be BE, among others.

This register, although private and confidential, must be kept available to the authorities and -in certain cases to the creditors- must be permanently updated and must be kept for a term of six years. In the event of non-compliance, the company and the administrators will be jointly and severally liable for the fines that this entails.

This regulation will come into force on June 13, 2019. The experience of Canada (also an OECD country) could be used to regulate this issue. Such regulation must comply with three fundamental postulates: to guarantee the BEs the right to privacy and sensitive treatment of sensitive information; to guarantee access to the Government when required; and to guarantee that society is fully aware of who they are, and of any changes that may occur with their effective beneficiaries.