A Colombian family or group that puts a Dutch company above its foreign interests usually expects the Colombian tax question to arrive with the first dividend. It arrives earlier. The controlled foreign entity regime, the ECE regime added to the Estatuto Tributario by article 139 of Ley 1819 de 2016 and sitting in articles 882 to 893, taxes certain income in the hands of the Colombian controller in the year the foreign entity earns it, whether or not anything is distributed. One of those articles has since been rewritten, and the rewriting is the part that matters most to a holding.
The regime is not a penalty aimed at opaque jurisdictions. It is a general timing rule, and the design work is not about escaping it. It is about knowing which euro of the Dutch company’s income it reaches and which it does not, because the answer is decided by what the Dutch company holds and what its subsidiaries do, and both are choices made at incorporation.
What makes an entity a controlled entity
Article 882 sets two cumulative conditions. The entity must be controlled by one or more Colombian tax residents, and it must not have tax residence in Colombia. Control is imported from the related party definitions of article 260-1, either as a subordinate under numerals i, ii, iv and v of literal b of the first numeral of that article, or as a foreign economic related party under any of the literals of its fifth numeral.
The first paragraph of article 882 is deliberately wide. Controlled entities include investment vehicles such as companies, autonomous patrimonies, trusts, collective investment funds, other fiduciary arrangements and private interest foundations, constituted, operating or domiciled abroad, whether or not they have legal personality and whether or not they are transparent for tax purposes. A Dutch B.V. is inside that definition without argument, and so is a Dutch cooperative and a foundation.
The second paragraph adds a presumption, and it has two limbs. Control is presumed over entities domiciled, constituted or operating in a non cooperative or low or nil taxation jurisdiction, and over entities subject to a preferential tax regime under article 260-7, whatever the participation held. Decreto 1496 de 2024, published in the Diario Oficial of 13 December 2024 and in force from 1 January 2025, substituted the list in article 1.2.2.5.1 of Decreto 1625 de 2016 and fixed it at 25 jurisdictions, none of which is the Netherlands. The first limb is therefore off. The second is not a list for these purposes, because article 260-7 defines a preferential regime by requiring at least two of five criteria and leaves the Government the option of listing such regimes rather than the duty. Control still has to be tested on the facts, and in most family structures it is met.
The third paragraph closes a familiar gap. For the purposes of the control test, holding call options over shares or participations in the entity is treated as holding the shares themselves.
The ten per cent that decides who files
Control and obligation are not the same test, and conflating them produces both over reporting and under reporting.
Article 883 says that once the entity is determined to be controlled by Colombian residents under article 882, the residents obliged to comply with the regime are all those holding, directly or indirectly, a participation equal to or greater than 10 per cent in the capital of the entity or in its results.
So a Colombian shareholder with 6 per cent of a Dutch company that is unquestionably controlled by his relatives is inside the control analysis and outside the filing obligation. And a shareholder with 12 per cent of an entity that no Colombian controls has no obligation at all, because control fails at the first step. The regime reaches a defined intersection, not everyone with an interest abroad.
The list of passive income
Article 884 defines passive income by enumeration rather than by principle, and the list is the working document.
It covers dividends and any other form of distribution or realization of profits from participations in other companies or investment vehicles, subject to the carve outs discussed below. It covers interest and financial yields, with an exception that has two alternative routes: the interest is not passive where the controlled entity is itself controlled by a Colombian company under the inspection and supervision of the Superintendencia Financiera de Colombia, and it is not passive where the controlled entity is a foreign financial institution and is not domiciled, located or constituted in a jurisdiction qualified as non cooperative or of low or nil taxation that does not effectively exchange information automatically with Colombia to international standards. It covers income from licensing intangibles, naming trademarks, patents, formulas, software and intellectual and industrial property among others. It covers income from the disposal or transfer of rights over assets that generate passive income, and income from the sale or lease of immovable property.
Two entries are wider than groups expect. Income from the purchase or sale of tangible goods is passive where all three conditions are met: the goods are bought from or sold to or on behalf of a related person, they are produced, manufactured, built, grown or extracted in a jurisdiction other than that of the entity, and their use, consumption or disposal takes place in a jurisdiction other than that of the entity. And income from technical, technical assistance, administrative, engineering, architectural, scientific, qualified, industrial and commercial services is passive where provided for or on behalf of related parties in a jurisdiction other than that of the entity.
A Dutch company invoicing group services from Amsterdam into a third country is squarely inside that last entry. The same company invoicing services it actually performs in the Netherlands, for third parties, is not.
The carve out a holding lives or dies by
The most important text in the regime is the exception inside the first numeral of article 884, because a holding company’s income is dividends and nothing else.
Dividends are not passive where the distributable profits correspond to active income of the entity, its subsidiaries or permanent establishments, provided that those profits originate principally in real economic activities carried on by the entity, its subsidiaries or permanent establishments in the jurisdiction where each is located or resident, and provided that in the case of subsidiaries or permanent establishments those are in turn indirectly controlled by one or more Colombian tax residents. The article defines originating principally in real economic activities as at least 80 per cent of the income not being passive.
A second exception disapplies the passive characterization where the dividends, had they been distributed directly to the Colombian residents, would have been exempt in Colombia under a double taxation convention. On a Dutch holding that exception has nothing to work with today, because the Dutch treaty register records the convention between the Kingdom of the Netherlands and the Republic of Colombia as concluded at The Hague on 16 February 2022 and records no date of entry into force.
That drafting rewards a specific architecture. A Dutch holding whose subsidiaries are real operating businesses in their own jurisdictions, each earning at least 80 per cent active income, passes dividends up without those dividends being passive at the Dutch level. A Dutch holding sitting above portfolio positions, or above subsidiaries that are themselves holdings, does not. The test looks through to what is happening on the ground, and the answer is set by the group’s operating map rather than by the Dutch company’s own documentation.
The presumption that turns eighty into one hundred
Article 885 is short and it is the provision that turns a partial problem into a total one. It no longer reads as it did when the regime was enacted: article 67 of Ley 2010 de 2019, a law in force from its promulgation on 27 December 2019, replaced it with two presumptions rather than one. Where the passive income of the controlled entity represents 80 per cent or more of its total income, it is presumed as a matter of law that the totality of its income, costs and deductions gives rise to passive income. Where the active income, meaning income from real economic activities, represents 80 per cent or more of the total, the presumption runs the other way and the totality gives rise to active income.
The presumptions are of law rather than of fact, so neither is rebuttable by evidence that a particular receipt was active or passive. That makes the article a pair of lines rather than a single cliff. A Dutch company at 81 per cent passive income attributes everything, including the profit on activities nobody disputes are real. The same company at 15 per cent passive income attributes nothing at all, because the second presumption characterizes the whole of its income as active. Where passive income is above 20 per cent and below 80 per cent of the total, neither presumption applies and the attribution follows the actual split.
Groups that operate close to either line manage it deliberately, by placing genuine operating functions in the Dutch company or by separating the passive holdings into a different vehicle. Both are structural answers, and both have to be in place before the year end that is measured.
What the Colombian regime does not contain
It is worth stating the absences, because advisers arriving from a neighbouring jurisdiction assume them.
Articles 882 to 893 set no monetary threshold, no minimum amount of passive income and no condition that turns on the rate at which the foreign entity is taxed abroad, so the fact that the Netherlands taxes the entity at a normal rate does not by itself disapply the regime. The one relief that works in the direction of a de minimis is the second presumption of article 885, and it is not a small numbers rule: it asks whether active income reaches 80 per cent of the total, which is a proposition about the whole company rather than about the size of the passive receipt. And there is no exclusion for entities in treaty countries as such, the whole of the treaty relevance inside the title being confined to the dividend exception in article 884.
The comparison that matters is with the Dutch side, which is generous where Colombia is not. Article 13 of the Wet op de vennootschapsbelasting 1969 keeps the benefits of a participation out of the taxable profit, a participation existing where the taxpayer holds at least 5 per cent of the nominal paid up capital, although the participation exemption does not apply to a participation held as a portfolio investment unless that participation qualifies. Article 22 taxes the taxable amount at 19 per cent up to 200,000 euros and 25.8 per cent above, on the text in force from 1 January 2026. Dividends that the Netherlands exempts are precisely the dividends Colombia may attribute. Relief in one country creates the exposure in the other.
Credit, and the distribution that follows
The regime is not designed to tax the same profit twice, and articles 892 and 893 carry the mechanics.
Article 892 gives a resident who has been obliged to include passive income the credit for taxes paid abroad under article 254, in proportion to the participation held. Where the Dutch company has exempted the income there is no foreign tax to credit, so the Colombian charge falls in full, and for a Colombian company that charge is the general rate of 35 per cent fixed by article 240 in the wording given to it by article 10 of Ley 2277 de 2022.
Article 893 then removes the second charge. Dividends and benefits distributed by the entity, and remainders distributed on its liquidation, that originate in profits already taxed under the regime are treated as non taxable income when realized by the person subject to the regime, in the proportion to which they were entitled. The same treatment applies to gains on the disposal of the shares in the entity to the extent they correspond to profits already taxed. That characterization of the dividends is subject to literal b of the second numeral of article 49, the rule on benefits that by express provision of law have to be passed on to shareholders.
Article 891 removes a symmetry. Passive income below zero is not subject to the loss carry forward rules of article 147, so the regime attributes gains without banking the losses.
Designing around the regime rather than against it
The regime is stable, it is enumerated, and it is therefore designable. The questions are the same in every file. Does a Colombian resident control the entity on the article 882 tests, options included. Which shareholders cross the 10 per cent in article 883. What proportion of the Dutch company’s income falls inside the article 884 list once group service fees and intra group trading are correctly characterized. Do the operating subsidiaries clear 80 per cent active income in their own jurisdictions, and are they indirectly controlled by Colombian residents, so that the dividend carve out is available. And where does the entity sit between the two article 885 lines, measured at year end rather than assumed.
A structure that answers those five questions in writing before the shares are issued is a structure whose Colombian position is known. A structure that answers them after the first attribution notice is a structure being reorganized under audit, at a moment when the facts are fixed and only the argument is left.
This article is informational and does not constitute tax or legal advice. The treatment of any structure depends on its facts and on the law of each jurisdiction involved. Each engagement is subject to scope and applicable regulation.