The beneficial owner dilemma

The concept of beneficial owner ("BE"), besides being essential to combat transnational crimes such as money laundering and financing of terrorism ("LA/FT"), has a decisive importance in the operation of the tax system in a globalized environment. Based on this determination, countries exchange tax information and are allowed (or not) the application of certain agreements to avoid double taxation, the application of certain tax effects and benefits (such as tax deferral) and the possibility of taking certain income as not constituting income.

Until the issuance of Law 2155/2021 (last Tax Reform), the rules on "BE" were scattered in several articles of the Tax Statute and its implementation was made according to the subject matter (exchange of information, private equity funds, indirect disposals, disposal of shares in the stock exchange, payment of dividends, etc.). For this reason, in the explanatory memorandum it was stated that "currently, the concept of beneficial owner does not have a single definition and the practical implementation for citizens today is difficult as the elements in the different definitions do not coincide and are not in accordance with international standards".

Law 2155/2021 adopted then a definition of "BE" very similar to the one established by the Financial Action Task Force ("Gafi"), which is closely linked to the prevention of international crimes such as "ML/FT". From such definition it is clear that BE's are natural persons who finally control a legal person (being joint, direct or indirect owner of 5% of the capital or of its assets or economic benefits, or who control it by any other means) or an unincorporated or similar structure (being fiduciaries, trustors, settlors, trustees, constituents, members of the fiduciary or financial committee, advisors thereof, beneficiaries -conditioned or not- or any person entitled to enjoy and/or dispose of the assets or of their economic benefits).

The dilemma of the beneficial owner is that, in his eagerness to find him, many innocent people may be sacrificed. This happens, for example, with the aforementioned conditional beneficiaries who -even without knowing that they have such status (as in the case of a beneficiary of a trust who would be entitled to some resources if another person dies)- could end up being declared BE's and even -according to the current tax normalization rules- could be omitting to declare assets, a conduct that could become punishable. This is also the case when the law indicates that, in case the BE is not detected in a company, the legal representative or the natural person who exercises a greater degree of interference in the corporate administration (de facto administrator) will be considered as such. This contradicts the constitutional principles of justice, equity and contributive capacity.

Finally, following the provisions of Actions 11 and 12 of BEPS, for the purpose of coordinating - domestically and internationally - the tax information of Colombians and articulating it with all the information exchange and tax evasion prevention systems, the law creates a "Sole Registry of Beneficial Owners" (RUB) and a "System for the Identification of Unincorporated Structures".