Tax Statute (Estatuto Tributario)

Article added by article 111 of Law 1607 of 2012. The new text is as follows: For purposes of the income tax and complementary taxes, a relationship (*vinculación*) is deemed to exist when a taxpayer is in one or more of the following cases:

1. Subsidiaries

a) An entity shall be subordinate or controlled when its decision-making power is subject to the will of another person or persons or entities that shall be its parent or controlling entity, either directly, in which case the former shall be called a subsidiary (*filial*), or with the concurrence or through the intermediary of the parent's subordinates, in which case it shall be called a subsidiary (*subsidiaria*);

b) A company shall be subordinate when it is in one or more of the following cases:

i) When more than 50% of its capital belongs to the parent, directly or through the intermediary or with the concurrence of its subordinates, or the subordinates of those subordinates. For this purpose, shares with preferential dividends and without voting rights shall not be counted;

ii) When the parent and the subordinates jointly or separately have the right to cast the votes constituting the minimum decisive majority in the partners' meeting or in the assembly, or have the number of votes necessary to elect the majority of members of the board of directors, if any;

iii) When the parent, directly or through the intermediary or with the concurrence of the subordinates, by reason of an act or transaction with the controlled company or with its partners, exercises dominant influence in the decisions of the administrative organs of the company;

iv) Likewise, there shall be subordination when control in accordance with the assumptions provided in this article is exercised by one or more individuals or legal entities or entities or schemes of a non-corporate nature, either directly or through the intermediary or with the concurrence of entities in which they hold more than fifty percent (50%) of the capital or constitute the minimum majority for decision-making or exercise dominant influence in the direction or decision-making of the entity;

v) Likewise, there shall be subordination when the same individual or the same individuals or legal entities, or the same non-corporate vehicle or the same non-corporate vehicles, jointly or separately, have the right to receive fifty percent of the profits of the subordinate company.

2. Branches, with respect to their principal offices.

3. Agencies, with respect to the companies to which they belong.

4. Permanent establishments, with respect to the enterprise whose activity they carry on in whole or in part.

5. Other Cases of Economic Relationship:

a) When the transaction takes place between two subordinates of the same parent;

b) When the transaction takes place between two subordinates that belong directly or indirectly to the same individual or legal entity or entities or schemes of a non-corporate nature;

c) When the transaction is carried out between two enterprises in which the same individual or legal entity participates directly or indirectly in the administration, control, or capital of both. An individual or legal entity may participate directly or indirectly in the administration, control, or capital of another when i) it holds, directly or indirectly, more than 50% of the capital of that enterprise, or, ii) it has the capacity to control the business decisions of the enterprise;

d) When the transaction takes place between two enterprises whose capital belongs directly or indirectly in more than fifty percent (50%) to persons linked to each other by marriage, or by kinship up to the second degree of consanguinity or affinity, or sole civil kinship;

e) When the transaction is carried out between related parties through unrelated third parties;

f) When more than 50% of gross income comes individually or jointly from its partners or shareholders, co-owners, associates, subscribers, or the like;

g) When there are consortia, temporary unions, joint accounts, other associative forms that do not give rise to legal entities, and other business collaboration contracts.

The relationship is predicated of all companies and vehicles or non-corporate entities that make up the group, even if their parent is domiciled abroad.