Colombia, through international cooperation and the signatory conventions corresponding to the Financial Action Task Force (FATF), has implemented through regulations and laws compliance with the so-called “40 Recommendations” in order to fight against corruption and money laundering at the national level and cooperate internationally. The obligation was established for commercial companies to submit effective and truthful information on the ultimate beneficial owners of their structures.
The foregoing corresponds to Resolutions 000164 of 2021 and 000037 of 2022 issued by the DIAN, which apply and implement FATF Recommendations 24 and 25 on the need to have a registry and monitoring of natural or legal persons who hold the status of ultimate beneficial owner of the operation of any entity in Colombia. The aforementioned resolutions impose the obligation on companies and entities to report through the Single Registry of Ultimate Beneficial Owners (RUB) who are effectively the persons who benefit from the activities carried out by such entities.
However, it is necessary to indicate what is understood by ultimate beneficial owner and who are the obligated parties, as well as the terms and sanctions in case of not carrying out said registration.
Ultimate Beneficial Owner
We have then that ultimate beneficial owner is defined as any natural person who ultimately owns or controls, whether directly or through other persons, a legal entity on whose behalf a transaction is carried out, or who exercises control or owns a percentage of ownership over an entity that may or may not be for profit or have legal status. However, Article 631-5 of the Tax Statute provides the following requirements to be considered as ultimate beneficial owners of an entity, these are:
- A natural person who holds 5% or more of the capital or voting rights or benefits from 5% or more of the assets, yields, dividends, or profits of a legal entity, whether directly or through a third party.
- A natural person who exercises control over the legal entity, whether directly or through a third party.
- In the event that there is no natural person holding the aforementioned qualities, then the legal representative or the person holding the status or having higher management or direction functions shall be considered the ultimate beneficial owner.
- The following natural persons holding the following status shall also be considered ultimate beneficial owners: settlor, trustor, constituent, trustee, trust committee, financial committee, beneficiary, principal or conditional beneficiary, and any person who exercises effective and/or ultimate control or who has the right to enjoy and/or dispose of the assets, benefits, results, or profits.
Then we have that ultimately any natural person who, directly or through other means, has control, direction, or benefits from the operation or results of the capital or assets of an entity, which in the corporate case is that person holding more than 5% of the share capital, will be considered as “ultimate beneficial owner”.
Obligated Parties
Now, in accordance with Resolution 00164 of 2021, the following legal entities or entities without legal status shall be obliged to register their beneficial owners:
- Any company whose principal domicile is in Colombia.
- Having been incorporated in Colombian territory.
- Foreign branches, agencies, offices, factories, mines, wells, including general agents that carry out activities on behalf of foreign companies (permanent establishments).
- Foreign legal entities whose value of assets held in Colombia is more than 50% of the total value of assets held according to their financial statements.
Therefore, we have that generally all companies that carry out any activity in Colombian territory, whether directly or through a third party, will be obliged to register their ultimate beneficial owners, with the exclusion of those public entities or state-owned companies that have 100% state participation.
Deadline
For the above, companies, in accordance with Resolution 000037 of 2022 issued by the DIAN, indicate the following deadlines to carry out the registration of ultimate beneficial owners in the Single Registry of Ultimate Beneficial Owners (RUB), which are: for companies incorporated prior to September 30, 2022, they will have until December 31, 2022; and for companies incorporated after September 30, 2022, they must register within the 2 months following their registration in the RUT.
Sanctions
However, it is important to note that this RUB registration system acquires a binding character in tax matters for companies in Colombia, becoming a mandatory obligation in order to provide transparency to their operations and that, in case of failure to do so, the following sanctions would proceed, by the DIAN:
- Persons or entities that do not provide information or that submit it with errors, will be subject to a fine of up to 15,000 UVT or a fine that may be graduated on 0.5% of net income or 0.5% of gross assets, of the immediately preceding year (Article 651-EST).
- Persons or entities that do not update the required information, will be subject to a fine of 1 UVT for each day of delay, or for reporting false data, the fine will amount to 100 UVT.
With this, we can observe that through Resolutions 000164 of 2021 and 000037 of 2022 issued by the DIAN[1], the registration of ultimate beneficial owners of their structures is elevated to the category of corporate and even administrative obligation, in order to reflect transparency in their activities and that, with this, we would have a much broader scheme that all companies incorporated in Colombia must comply with, avoiding sanctions of a tax and administrative nature and also advocating compliance with such information in favor of corporate transparency and good practices in the execution of the corporate purpose.
[1] Finally, we leave the following regulatory summary applicable in this matter: Laws 1819 of 2016, 2155 of 2021, 2195 of 2022, Resolutions 000164 of 2021 and 000037 of 2022 issued by the DIAN, the Tax Statute, the Basic Legal Circular of the Superintendence of Companies, and the Basic Legal Circular of the Financial Superintendence.
Luis C. Ramirez S. – AZC CONSULTING ATTORNEY