Colombia: Ultimate Beneficial Owners In Colombia: What Information You Must Register And Why

Compliance requirements around transparency are on the rise globally, and public ultimate beneficial owner (UBO) registers are one aspect of this that are becoming more commonplace. Colombia is one jurisdiction that has already adopted regulation to properly identify and screen all parties involved in business operations.

On 27 December 2021, the Colombian tax authority (Direccion de Impuestos y Aduanas Nacionales - DIAN) issued Resolution No. 164, which outlines the criteria for determining the UBO of legal entities or structures without legal status. The resolution details what information must be reported to DIAN, the technical requirements for reporting, and the deadlines for submitting the information.

As a result of the resolution coming into effect, Colombian entities must identify and declare their own UBOs, as UBO registration is now mandatory. The resolution was introduced as part of efforts to prevent money laundering, financing of terrorism, and financing the proliferation of weapons of mass destruction. However, the complex legal structures of today's companies make this process difficult to carry out quickly, efficiently, and completely.

The importance of UBOs lies in underlying individuals, since the legal structures in entities' chains of ownership may hide or make it difficult to identify said individuals, thus evading the applicable controls.

What is an ultimate beneficial owner?

Broadly speaking, a UBO is an individual who owns, controls, or benefits - either directly or indirectly - from a company. Under Colombian law, they are usually somebody with a 5% stake or more in the company. UBOs can be one or more individuals but can never be a legal entity.

However, this article does not seek to focus on the definition of a UBO, which can be widely found in Colombian regulations.

What is the RUB?

In short, the RUB is the registry through which legal entities and structures without legal status or similar structures must provide information of their beneficial owners.

In recent years, Colombia has been actively working to strengthen its transparency policies by implementing different money laundering prevention systems. One such system created to contribute to the fight against corruption, money laundering, financing of terrorism and tax evasion is the Single Registry of Beneficial Owners (RUB by its Spanish acronym).

Companies must enter the information of their own UBOs into this registry. Even if a company determines that it does not have any UBOs, it must register its legal representative or the individual who has the highest authority in relation to the management or direction functions of the legal entity or structures without legal status.

Who is obliged to provide information in the RUB?

The following entities must identify, obtain, retain, maintain, provide, and update information in the RUB:

• Companies, national for-profit, and non-profit entities, in accordance with the provisions of Article 12-1 of the Tax Statute, including those whose shares are registered or listed in one or more stock exchanges.
• Permanent establishments in accordance with the provisions of Article 20-1 of the Tax Statute.
• Structures without legal status or similar, in the following cases:
  • those incorporated or administered in Colombia;
  • those governed by the regulations of Colombia;
  • those whose trustee or similar or equivalent position is a national legal entity or individual resident for tax purposes in Colombia.
• Foreign legal entities, when the totality of their investment in Colombia is not made in legal entities, permanent establishments and/or structures without legal status or similar structures obliged to provide information in the RUB.
• Legal entities with a mixed capital structure between public (Colombian government) and private funding (sociedades de economía mixta).

Who is NOT required to provide information in the RUB?

The following should not register any information before the RUB:

• Public entities, establishments or agencies, decentralised bodies, and national companies with capital structure funds 100% originating from the public sector.
• Embassies, diplomatic missions, consular offices, international organisations or agencies accredited by the government.

What exactly must be reported to the RUB?

UBOs must be reported before the tax authority's RUB. The following information should be included:

• type of document
• identification number and country of issue
• tax identification number or equivalent and country of issuance
• first names and surnames
• date and country of birth
• country of nationality
• location (country of residence, department or state, city, address, zip code, e-mail address)
• criteria for determining as UBO
• percentage of participation in the capital of the legal entity
• percentage of gains in the yields, results or profits of the legal entity, structures without legal status, or similar
• date from which the individual is considered a UBO or the condition exists
• date from which the individual ceases to be a UBO, or the condition ceases to exist.

When must the information be reported to the RUB?

The date of the report depends on the incorporation of an entity, as follows:

Any event that changes the information registered before the RUB must be updated by the first business day of January, April, July, or October, whichever happens immediately after the occurrence of the change.

What is the penalty for not submitting information, or submitting it inaccurate or incomplete?

Penalties for not reporting or providing incomplete or inaccurate information before the RUB, are stated in articles 651 and 658-3 of the Tax Statute. The RUB is considered an integral part of the single tax registry and failure to report information before the RUB can result in the forced closure of a legal entity's premises for one day for every month or for a portion of a month that the information is delayed.

Additionally, individuals, legal entities, structures without legal status, or similar entities that fail to provide information and/or provide false information before the RUB, may be subject to civil and/or criminal penalties in accordance with national legislation.

Talk to us

The identification of UBOs is a vital step towards transparency and accountability for businesses operating in Colombia. Companies must comply with the regulation by reporting accurate UBO information to the tax authority's RUB and updating whenever necessary to avoid penalties and fines.

TMF Group has the experience and local knowledge to guide your company on how to register your UBOs and to establish processes to gather UBO information on your counterparties.

Our experts can advise on how to file the information, as well as how you can keep your company's UBO register updated to ensure compliance obligations are met.

If you need help with any issues related to UBOs, make an enquiry.