Historically, a corporate tax deduction for the cost of equity awards granted to employees in Colombia by a non-Colombian parent company was available to the Colombian employer only if the Colombian employing entity reimbursed the parent company for the cost of the equity awards. If reimbursement took place, it triggered a tax withholding and reporting obligation for the Colombian employing entity (which did not exist absent reimbursement).
On December 29, 2016, the Colombian Congress enacted Law 1819 of 2016, reforming the Colombian tax code. Among other changes, effective for the tax year beginning on January 1, 2017, a corporate tax deduction is now available regardless of whether the Colombian employing entity reimburses the foreign parent company for the cost of the equity awards.
By contrast, it is our position that the changes did not affect the Colombian employing entity's tax withholding and reporting obligations. This means tax withholding and reporting continue to be required only if the Colombian employing entity reimburses the foreign parent company for the equity awards.