On July 28, 2025, the Colombian Tax Administration (Dirección de Impuestos y Aduanas Nacionales, DIAN) released Concepto 010065 int 1127 DE 2025,1 providing general guidance on the income tax treatment of interest paid to individuals who are tax residents in Portugal under the Colombia-Portugal tax treaty (“the Treaty”). The doctrine was published on DIAN’s website on August 4, 2025.
WHY THIS MATTERS
This ruling has direct implications for organizations and globally mobile employees with financial ties between Colombia and Portugal. Portuguese tax residents earning Colombian-sourced interest are subject to tax capped at 10 percent under the Treaty, and notably, the inflationary component of financial yields cannot be excluded from taxable interest income.
Colombian residents can exclude the inflationary component from taxable interest income. This helps mitigate the tax burden for such taxpayers on this type of income; in contrast to non-residents, who are unable to exclude the inflationary component of interest income from taxation by Colombia under the Treaty. Individuals within the scope of this Treaty and the new guidance should take note, as should their tax service providers completing and filing their returns. The ruling clarifies that this does not apply to non-residents, including those covered under tax treaties like Portugal’s. As a result, non-residents are taxed on the full amount of interest, including the inflation adjustment.
Background
- Residency Determination: Individuals are considered non-residents in Colombia if they do not meet any of the criteria in Article 10 of the Tax Code and must provide a tax residence certificate from the foreign tax authority.
- Source of Income: Interest paid to Portuguese residents by Colombian payors is considered Colombian-sourced income under Article 24 of the Tax Code.
- Treaty Application: Under Article 11 of the Treaty, interest payments to Portugal residents can be taxed in Colombia up to a maximum of 10 percent of the gross amount.
- Withholding and Filing Obligations: The Portuguese resident may evidence Colombian tax paid via a withholding certificate. If withholding is not performed, the non-resident must file an income tax return in Colombia (Formulario 110).
Key Issue Dealt with by Concepto 010065 int 1127 DE 2025
- Inflationary Component Fully Taxable: Non-residents are not eligible for the exclusion of the inflationary component of financial yields from taxable income, as this benefit is reserved for Colombian tax residents under Article 38 of the Tax Code.
KPMG INSIGHTS
In light of the change, organizations may wish to:
- check that withholding on interest paid to Portuguese residents is correctly applied and documented, including issuance of withholding certificates;
- advise affected individuals to obtain and retain Portuguese tax residence certificates for purposes of Treaty benefits; and
- prepare for additional compliance, as non-residents must file a Colombian tax return if withholding is not performed.
Affected taxpayers and their tax service providers should be having discussions about whether they are compliant with the new guidance, and if not, take steps to come into compliance. The GMS tax team with KPMG in Colombia (see the Contacts section) can help.
FOOTNOTE:
1 (In Spanish) Dirección de Impuestos y Aduanas Nacionales (DIAN) (National Directorate of Taxes and Customs), CONCEPTO 010065 int 1127 DE 2025, released on July 28, 2025.
Contacts
Disclaimer
The information contained in this newsletter was submitted by the KPMG International member firm in Colombia.
GMS Flash Alert is a Global Mobility Services publication of the KPMG LLP Washington National Tax practice. The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.
© 2025 KPMG S.A.S. y KPMG Advisory, Tax & Legal S.A.S., sociedades colombianas por acciones simplificadas, adscritas a la organización global de firmas miembro independientes de KPMG International Limited, una entidad inglesa privada limitada por garantía. Todos los derechos reservados.