Tax Statute (Estatuto Tributario)

Article added by article 98 of Law 1607 of 2012. The new text is as follows: A contribution in cash or in kind to domestic companies shall not generate taxable income for such companies, nor shall the contribution be considered a disposition, nor shall it give rise to taxable income or deductible loss for the contributor, provided that the following conditions are met:

1. The company receiving the contribution shall not realize income or loss as a consequence of the contribution, when in exchange for the contribution new shares or quota interests are issued. In the case of placement of reacquired treasury shares or quota interests, the income of the company receiving the contribution shall be determined in accordance with the general rules applicable to the disposition of assets.

2. For the company receiving the contribution, the tax basis of the contributed property shall be the same as the contributor had with respect to such property, which shall be recorded in the document containing the legal act of contribution. For purposes of tax depreciation or amortization by the company receiving the contribution, there shall be no extensions or reductions in the useful life of the contributed property, nor modifications to the tax basis for depreciation or amortization.

3. The tax basis of the shares or quota interests received by the contributor shall be the same tax basis that the contributed property had at the time of contribution in the hands of the contributor.

4. The contributed property shall retain for tax purposes in the receiving company the same character as fixed or movable assets that they have for the contributor at the time of contribution.

5. In the document containing the legal act of contribution, the contributor and the receiving company shall expressly declare their submission to the provisions of this article, and the Tax Administration may require from each of them compliance with the conditions established herein as applicable to each.

PARAGRAPH 1. For commercial and accounting purposes, the value of the contribution shall be that assigned by the parties in accordance with commercial and accounting rules.

PARAGRAPH 2. The contributor shall realize income subject to income tax and complementary taxes when disposing of the shares or quota interests received as a consequence of the contribution. Such income shall be determined in accordance with the general rules regarding disposition of assets.

PARAGRAPH 3. The company receiving the contribution shall realize income subject to income tax and complementary taxes when disposing of the property received by way of contribution. Such income shall be determined in accordance with the general rules regarding disposition of assets.

PARAGRAPH 4. If the receiving company disposes of assets received by way of contribution that have the character of fixed assets within two (2) years following the contribution, it may not offset accumulated tax losses or excesses of presumptive income over net taxable income with respect to the taxable income generated by the disposition of such assets.

PARAGRAPH 5. If the contributor disposes of the shares or quota interests received as a consequence of the contribution within two (2) years following the contribution, the contributor may not offset accumulated tax losses or excesses of presumptive income over net taxable income with respect to the taxable income generated by the disposition of such shares or quota interests.

PARAGRAPH 6. In the case of contributions of services, the tax basis that the contributor shall have with respect to the shares or quota interests issued to the contributor, if applicable, shall be the intrinsic value of such shares or quota interests once the issuance is made, which must be recognized by the contributor as income in kind for the provision of services. Such value shall constitute a deductible expense for the receiving company, provided that the general requirements for deductibility of the expense are met, and withholding taxes are applied for income taxes and payroll contributions, if applicable.