Final Beneficiaries of Foreign Investors

On December 27, 2021, the DIAN issued Resolution Number 000164 through which it regulated (which should have been done by means of a regulatory decree) the concept of beneficial owner established in Article 631-5 of the Tax Statute and the duty to register the beneficial owners in the Sole Registry of Beneficial Owners -RUB-, which is an integral part of the Sole Tax Registry -RUT-. This regulation, among other things, defined which foreign investors must register, through certain responsible persons in charge, their beneficial owners in the RUB and under what circumstances they must do so.

In order to understand which foreign investors are obliged to comply with the above, the aforementioned Resolution indicates, in its article 4, that, in the first place, "national companies or entities, whether for profit or not-for-profit, in accordance with the provisions of article 12-1 of the Tax Statute". If this article is analyzed, it will be understood that the rule refers to foreign companies and entities that are treated as tax residents due to the fact that they have their effective seat of administration in Colombia. Thus, if the commercial and management decisions of a foreign company are adopted from Colombia, this company will be obliged to report its beneficial owners in the RUB.

Permanent establishments of foreign companies or individuals without residence in the country will also be obliged to do so.  This measure will mainly affect the branches of foreign companies, which will have to report in the RUB those individuals who meet the criteria to be considered as beneficial owners of their parent company (with the obvious difficulties that this entails).

Likewise, unincorporated or similar structures that are managed from Colombia, or whose trustees (or similar figures) are national legal entities or natural persons resident in Colombia for tax purposes, will be obliged to report their beneficial owners in the RUB. Thus, entities such as private equity or venture capital funds, private interest foundations, foreign trusts or trusts (and other less known entities such as communities of property abroad and partnerships), which are administered (to any degree) from Colombia or whose trustees or similar are considered nationals (even for tax purposes), will have to report their beneficial owners in the RUB.

Finally, foreign legal entities and unincorporated and similar structures whose value of assets located in Colombia represent more than 50% of the value of the total assets held by such company or structure, according to its financial statements, will be required to comply with this obligation. This means that all foreign investors with assets in Colombia must be able to report their beneficial owners to the RUB or prove -with financial statements that meet minimum international standards- that they are not obliged to do so.

To avoid the imposition of sanctions for not registering the beneficial owners before the RUB, it is advisable that the foreign investor has in Colombia an attorney-in-fact who can comply with the legal obligations that this regime brings or support, with evidence, the non subjection of the investor to such regime.