Colombia
This report analyses the implementation of the AEOI Standard in Colombia with respect to the requirements of the AEOI Terms of Reference. It assesses both the legal frameworks put in place to implement the AEOI Standard and the effectiveness of the implementation of the AEOI Standard in practice.
The methodology used for the peer reviews and that therefore underpins this report is outlined in Chapter 2.
Overall findings
AEOI legal framework
Colombia’s legal framework implementing the AEOI Standard is in place and is consistent with the requirements of the AEOI Terms of Reference. This includes Colombia’s domestic legislative framework requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (CR1) and its international legal framework to exchange the information with all of Colombia’s Interested Appropriate Partners (CR2).
Effectiveness of AEOI in practice
Colombia’s implementation of the AEOI Standard is on track with respect to the requirements of the AEOI Terms of Reference to ensure the effectiveness of the AEOI Standard in practice. This includes ensuring Reporting Financial Institutions correctly conduct the due diligence and reporting procedures (CR1) and exchanging the information in an effective and timely manner (CR2). Colombia is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
Overall rating in relation to the effectiveness in practice: On Track
General context
Colombia commenced exchanges under the AEOI Standard in 2017.
In order to provide for Reporting Financial Institutions to collect and report the information to be exchanged, Colombia:
enacted Law 1661 of 2013 and introduced articles 631-4 and 631-5 of the Colombian Tax Code;
introduced Resolutions 119 of 2015 and 31 of 2017, superseded by Resolutions 78 of 2020 and 44 of 2021, as issued by the Colombian Tax and Customs Authority; and
Under this framework Reporting Financial Institutions were required to commence the due diligence procedures in relation to New Accounts from 1 January 2016. With respect to Preexisting Accounts, Reporting Financial Institutions were required to complete the due diligence procedures on High Value Individual Accounts by 31 December 2016 and on Lower Value Individual Accounts and Entity Accounts by 31 December 2017.
Following the initial Global Forum peer review, Colombia made various amendments to its legislative framework to address issues identified, the last of which will be effective from 1 January 2021.
With respect to the exchange of information under the AEOI Standard, Colombia is a Party to the Convention on Mutual Administrative Assistance in Tax Matters and activated the associated CRS Multilateral Competent Authority Agreement in time for exchanges in 2017.
Table 1 sets out the number of Financial Institutions in Colombia that reported information on Financial Accounts in 2021 as defined in the AEOI Standard (essentially, because they maintained Financial Accounts for Account Holders, or that were related to Controlling Persons, resident in a Reportable Jurisdiction). It also sets out the number of Financial Accounts that they reported in 2021. In this regard, it should be noted that Colombia requires the reporting of Financial Accounts held by all non-residents and some accounts may be required to be reported more than once (e.g. jointly held accounts or accounts with multiple related Controlling Persons), which is reflected in the figures below. These figures provide key contextual information to the development and implementation of Colombia’s administrative compliance strategy, which is analysed in the subsequent sections of this report.
Table 2 sets out the number of exchange partners to which information was successfully sent by Colombia in the past few years (including where the necessary frameworks were in place, containing an obligation on Reporting Financial Institutions to report information, but no relevant Reportable Accounts were identified). These figures provide key contextual information in relation to Colombia’s exchanges in practice, which is also analysed in subsequent sections of this report.
In order to provide for the effective implementation of the AEOI Standard, in Colombia:
Colombia’s Dirección Nacional de Impuestos y Aduanas Nacionales (the tax authority) has the responsibility to ensure the effective implementation of the due diligence and reporting obligations by Reporting Financial Institutions and for exchanging the information with Colombia’s exchange partners;
technical solutions necessary to receive and validate the information reported by Reporting Financial Institutions were put in place by having a dedicated web platform for reporting that includes file and record validation of reported information; and
the Common Transmission System (CTS) is used for the exchange of the information, along with the associated file preparation and encryption requirements.
It should be noted that the review of Colombia’s legal frameworks implementing the AEOI Standard concluded with the determination that Colombia’s domestic and international legal frameworks are In Place. This has been taken into account when reviewing the effectiveness of Colombia’s implementation of the AEOI Standard in practice.
Findings and conclusions on the legal frameworks
The detailed findings and conclusions on the AEOI legal frameworks for Colombia are below, organised per Core Requirement (CR) and sub-requirement (SR), as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Domestic legal framework: Jurisdictions should have a domestic legislative framework in place that requires all Reporting Financial Institutions to conduct the due diligence and reporting procedures in the CRS, and that provides for the effective implementation of the CRS as set out therein.
Colombia’s domestic legislative framework is in place and contains all of the key aspects of the CRS and its Commentary requiring Reporting Financial Institutions to conduct the due diligence and reporting procedures (SRs 1.1 – 1.3). It also provides for a framework to enforce the requirements (SR 1.4).
SR 1.1 Jurisdictions should define the scope of Reporting Financial Institutions consistently with the CRS.
Colombia defined the scope of Reporting Financial Institutions in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.2 Jurisdictions should define the scope of Financial Accounts and Reportable Accounts consistently with the CRS and incorporate the due diligence procedures to identify them.
Colombia has defined the scope of the Financial Accounts that are required to be reported in its domestic legislative framework and incorporated the due diligence procedures that must be applied to identify them in accordance with the CRS and its Commentary.
SR 1.3 Jurisdictions should incorporate the reporting requirements contained in Section I of the CRS into their domestic legislative framework.
Colombia has incorporated the reporting requirements in its domestic legislative framework in accordance with the CRS and its Commentary.
SR 1.4 Jurisdictions should have a legislative framework in place that allows for the enforcement of the requirements of the CRS in practice.
Colombia has a legislative framework in place to enforce the requirements in accordance with the CRS and its Commentary.
CR2 International legal framework: Jurisdictions should have exchange relationships in effect with all Interested Appropriate Partners as committed to and that provide for the exchange of information in accordance with the Model CAA.
Colombia’s international legal framework to exchange the information is in place, is consistent with the Model CAA and its Commentary and provides for exchange with all of Colombia’s Interested Appropriate Partners (i.e. all jurisdictions that are interested in receiving information from Colombia and that meet the required standard in relation to confidentiality and data safeguards) (SRs 2.1 – 2.3).
SR 2.1 Jurisdictions should have exchange agreements in effect with all Interested Appropriate Partners that permit the automatic exchange of CRS information.
Colombia has exchange agreements that permit the automatic exchange of CRS information in effect with all its Interested Appropriate Partners.
SR 2.2 Such an exchange agreement should be put in place without undue delay, following the receipt of an expression of interest from an Interested Appropriate Partner.
Colombia put in place its exchange agreements without undue delay.
SR 2.3 Jurisdictions should ensure that the exchange agreements in effect provide for the exchange of information in accordance with the requirements of the Model CAA.
Colombia’s exchange agreements provide for the exchange of information in accordance with the requirements of the Model CAA.
Findings and conclusions in relation to effectiveness in practice
The detailed findings and conclusions in relation to effectiveness in practice of AEOI for Colombia are below, organised per Core Requirement (CR) and then per sub-requirement (SR) as extracted from the AEOI Terms of Reference (see Annex C).
CR1 Effectiveness in practice: Jurisdictions should ensure that in practice Reporting Financial Institutions correctly implement the due diligence and reporting procedures, which includes a requirement for jurisdictions to have in place an administrative framework to ensure the effective implementation of the CRS.
Colombia’s implementation of the AEOI Standard is on track with respect to ensuring that Reporting Financial Institutions are correctly conducting the due diligence and reporting procedures and are therefore reporting complete and accurate information. This includes ensuring effectiveness in a domestic context, such as through having an effective administrative compliance framework and related procedures (SR 1.5), and collaborating with exchange partners to ensure effectiveness (SR 1.6). Colombia is encouraged to continue its implementation process to ensure its ongoing effectiveness.
SR 1.5 Jurisdictions should ensure that in practice Reporting Financial Institutions identify the Financial Accounts they maintain, identify the Reportable Accounts among those Financial Accounts, as well as their Account Holders, and where relevant Controlling Persons, by correctly conducting the due diligence procedures and collect and report the required information with respect to each Reportable Account. This includes having in place:
an effective administrative compliance framework to ensure the effective implementation of, and compliance with, the CRS. This framework should:
be based on a strategy that facilitates compliance by Reporting Financial Institutions and which is informed by a risk assessment in respect of the effective implementation of the CRS that takes into account relevant information sources (including third party sources);
include procedures to ensure that Financial Institutions correctly apply the definitions of Reporting Financial Institutions and Non-Reporting Financial Institutions;
include procedures to periodically verify Reporting Financial Institutions’ compliance, conducted by authorities that have adequate powers with respect to the reviewed Reporting Financial Institutions, with procedures to access the records they maintain; and
effective procedures to ensure that Financial Institutions, persons or intermediaries do not circumvent the due diligence and reporting procedures;
effective enforcement mechanisms to address non-compliance by Reporting Financial Institutions;
strong measures to ensure that valid self-certifications are always obtained for New Accounts;
effective procedures to ensure that each, or each type of, jurisdiction-specific Non-Reporting Financial Institution and Excluded Account continue to present a low risk of being used to evade tax; and
effective procedures to follow up with a Reporting Financial Institution when undocumented accounts are reported in order to establish the reasons why such information is being reported.
In order to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, Colombia implemented most of the requirements in accordance with expectations. However, an issue was identified. The key findings were as follows:
Colombia implemented an overarching strategy to ensure compliance with the AEOI Standard developed after conducting a risk assessment that took into account a range of relevant information sources, such as the information held by the tax administration, the financial regulators, industry associations, input from exchange partners and reports from citizens. Colombia’s compliance strategy focuses particularly on the correct formatting of the information reported and ensuring Reporting Financial Institutions include all the relevant information when reporting the information. It also incorporates a credible approach to enforcement. Colombia intends to keep its compliance strategy and risk assessment under review to ensure its effectiveness on an ongoing basis.
Colombia has worked effectively to understand its population of Financial Institutions, including relevant non-regulated entities, utilising various relevant information sources, such as tax administration databases, financial regulator’s databases, industry associations and the Foreign Financial Institution list for FATCA purposes. Colombia is taking action to ensure that Reporting Financial Institutions are classifying themselves correctly under its domestic rules and reporting information as required. Colombia intends to keep its understanding of its Financial Institution population up to date on a routine basis.
The institutions responsible for implementing Colombia’s compliance strategy appear to have the necessary powers and resources to discharge their functions. With respect to resourcing, Colombia’s tax authority has assigned the equivalent of 16 full time staff to monitor and ensure compliance by Reporting Financial Institutions, including an exchange team, an IT team, an analytics team and an audit team. They have access to IT systems and tools to conduct risk assessments (e.g. AEOI training and IT system for CRS reporting). Overall, they appear to have effectively implemented an operational plan to verify compliance with the requirements, incorporating appropriate compliance activities.
It appears that Colombia effectively implements compliance activities through inspection of records of Reporting Financial Institutions, ensuring self-certifications are obtained as required and following up on all Financial Institutions that report undocumented accounts. These have so far consisted mainly of desk-based checks of the information reported, although Colombia has also commenced further activities in relation to ensuring Reporting Financial Institutions have appropriate policies and procedures. Audit procedures have also commenced and in-depth reviews and the inspection of records held by Reporting Financial Institutions are anticipated to commence shortly. Colombia has also applied sanctions for non-compliance identified in the review of exchanged information. It also appears that Colombia is ready to take effective action to address circumvention of the requirements if such circumvention is detected.
It is noted that Colombia does not have a jurisdiction-specific list of Non-Reporting Financial Institutions or Excluded Accounts.
Table 3 provides a summary of the specific activities undertaken, or that are planned to be undertaken, in relation to each of the key parts of the framework described above.
With respect to the Financial Account information collected and sent by Colombia, the presence of the key data points of the dates of birth appeared to be in line with most other jurisdictions, as did the level of undocumented accounts. However, it was found to include a significantly lower proportion of Tax Identification Numbers with respect to the individuals associated with the accounts when compared to most other jurisdictions. This is a key data point for exchange partners to effectively utilise the information. Follow-up discussions confirmed that Colombia is aware of this issue and is taking steps to address it.
Two exchange partners highlighted issues with respect to the information received, such as irregular interest payments. More generally, many of the exchange partners that received a significant number of records from Colombia indicated that they achieved a success rate when matching the information received from Colombia with their taxpayer database that was broadly equivalent to, or better than, what they usually achieve.
Based on these findings it was concluded that, overall, Colombia is meeting expectations in ensuring that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures, including by having in place the required administrative compliance framework and related procedures. It was also noted that there is room for improvement with respect to taking further actions to ensure the due diligence procedures are being correctly implemented by the Financial Institutions. Colombia is therefore encouraged to continue its implementation process accordingly, including by addressing the recommendation made.
Colombia should continue to implement its framework to verify that Reporting Financial Institutions are correctly carrying out the due diligence and reporting rules, including through in-depth reviews.
SR 1.6 Jurisdictions should collaborate on compliance and enforcement. This requires jurisdictions to:
use all appropriate measures available under the jurisdiction’s domestic law to address errors or non-compliance notified to the jurisdiction by an exchange partner; and
have in place effective procedures to notify an exchange partner of errors that may have led to incomplete or incorrect information reporting or non-compliance with the due diligence or reporting procedures by a Reporting Financial Institution in the jurisdiction of the exchange partner.
In order to collaborate on compliance and enforcement, it appears that Colombia implemented all of the requirements in relation to issues notified to them (i.e. under Section 4 of the MCAA or equivalent) in accordance with expectations. While no such notifications have yet been received, Colombia has the necessary systems and procedures to process them as required. It also appears that Colombia will notify its partners effectively of errors or suspected non-compliance it identifies when utilising the information received.
Based on these findings it was concluded that Colombia is fully meeting expectations in relation to collaborating with its exchange partners to ensure that Reporting Financial Institutions correctly conduct the due diligence and reporting procedures. Colombia is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
CR2 Effectiveness in practice: Jurisdictions should exchange the information effectively in practice, in a timely manner, including by sorting, preparing, validating and transmitting it in accordance with the AEOI Standard.
Colombia’s implementation of the AEOI Standard is on track with respect to exchanging the information effectively in practice, including in relation to sorting, preparing and validating the information (SR 2.4), correctly transmitting the information in a timely manner (SRs 2.5 – 2.8) and providing corrections, amendments or additions to the information (SR 2.9). Colombia is encouraged to continue its implementation process accordingly, to ensure its ongoing effectiveness.
SR 2.4 Jurisdictions should sort, prepare and validate the information in accordance with the CRS XML Schema and the associated requirements in the CRS XML Schema User Guide and the File Error and Correction-related validations in the Status Message User Guide (i.e. the 50000 and 80000 range).
11 exchange partners highlighted particular issues with respect to preparation and format of the information sent by Colombia (representing 14% of its partners). These generally related file and record validation errors. More generally, seven (or 9%) of Colombia’s exchange partners reported rejecting more than 25% of the files received, of which four (or 5%) reported rejecting more than 50% of files received, due to the technical requirements not being met. This is a relatively high amount when compared to other jurisdictions, although it has reduced over time. It was noted that Colombia has already successfully addressed many of the issues.
Based on these findings it was concluded that Colombia is partially meeting expectations in relation to sorting, preparing and validating the information. However, significant issues have been identified, including with respect to properly sorting, preparing and validating the information exchanged. Colombia should therefore continue its implementation process accordingly, including by addressing the recommendations made.
Colombia should review its systems and procedures to sort, prepare and validate the information to ensure they meet the requirements of the AEOI Standard.
Colombia should continue to work with its exchange partners to address the issues raised.
SR 2.5 Jurisdictions should agree and use, with each exchange partner, transmission methods that meet appropriate minimum standards to ensure the confidentiality and integrity of the data throughout the transmission, including its encryption to a minimum secure standard.
In order to put in place an agreed transmission method that meets appropriate minimum standards in confidentiality, integrity of the data and encryption for use with each of its exchange partners, Colombia linked to the CTS.
Based on these findings it was concluded that Colombia is fully meeting expectations in relation to agreeing and using appropriate transmission methods with each of its partners. Colombia is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.6 Jurisdictions should carry out all exchanges annually within nine months of the end of the calendar year to which the information relates.
Two exchange partners highlighted delays in the sending of information by Colombia (representing 3% of its partners). This represents a relatively high proportion of exchange partners when compared to other jurisdictions. It was noted that Colombia successfully addressed the issues and sent the information as soon as possible thereafter.
Based on these findings it was concluded that Colombia is fully meeting expectations in relation to exchanging the information in a timely manner. Colombia is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.7 Jurisdictions should send the information in accordance with the agreed transmission methods and encryption standards.
Feedback from Colombia’s exchange partners did not raise any concerns with respect to Colombia’s use of the agreed transmission methods and therefore with Colombia’s implementation of this requirement.
Based on these findings it was concluded that Colombia is fully meeting expectations in relation to sending the information in accordance with the agreed transmission methods and encryption standards. Colombia is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.8 Jurisdictions should have the systems in place to receive information and, once it has been received, should send a status message to the sending jurisdictions in accordance with the CRS Status Message XML Schema and the related User Guide.
Four exchange partners highlighted delays in the sending of status messages by Colombia, representing 4% of its partners. It was noted that Colombia appears to be successfully addressing the issues to ensure that status messages are sent in accordance with the requirements.
Based on these findings it was concluded that Colombia is fully meeting expectations in relation to the receipt of the information. Colombia is encouraged to continue to ensure the ongoing effectiveness of its implementation.
SR 2.9 Jurisdictions should respond to a notification from an exchange partner as referred to in Section 4 of the Model CAA (which may include Status Messages) in accordance with the timelines set out in the Commentary to Section 4 of the Model CAA. In all other cases, jurisdictions should send corrected, amended or additional information received from a Reporting Financial Institution as soon as possible after it has been received.
Colombia appears ready to respond to notifications and to provide corrected, amended or additional information in a timely manner and no such concerns were raised by Colombia’s exchange partners and therefore with respect to Colombia’s implementation of these requirements.
Based on these findings it was concluded that Colombia appears to be meeting expectations in relation to responding to notifications from exchange partners and the sending of corrected, amended or additional information. Colombia is encouraged to continue to ensure the ongoing effectiveness of its implementation.