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20TRANSFER PRICING RULESThe Colombian Tax Authority, over the last decade, has been enforcing, on linkedforeign business partners, the obligation of preparing and presenting documentation incompliance with transfer pricing rules. Transfer pricing rules that closely follow theOECD guidelines and the arm’s length principle fully apply in Colombia.CREE – FAIRNESS INCOME TAXWith the last tax reform, Law 1607 of 2012, the new fairness tax was introduced.Specifically it is a tax on corporate income in benefit of social investment andemployment generation. The applicable rate for this tax is 9% for the years 2013, 2014and 2015; from there on the rate will be 8% on the taxable base. Regarding thedetermination of the taxable base, according to article 22 of Law 1607 of 2012, fromthe taxpayers’ net income, costs, expenses and exempt income amounts must bededucted. Nonetheless the taxable base cannot be inferior to 3% of the taxpayer’sassets as of December 31 st of the year prior to the current taxable year.The fairness income tax replaces the amounts that used to be levied from thecompany’s payroll at a rate of 9%. Thus, companies no longer need to contribute withthe formerly known parafiscal contributions and are only taxed on their income.TAXATION OF EMPLOYEESOnce again, the last tax reform implemented a special taxation regime for employeesin Colombia that should be taken into account. According to article 329 an employee isthe individual that receives at least 80% of his income from a labor contract. Now, inaccordance with article 330 of the same Statute, if any employee, that is a Colombianresident for tax purposes, has a yearly gross income equal or superior than 4700 UVTs(Tax value units), roughly USD$ 66.400, they must determine their income taxaccording to ordinary income tax procedure. Furthermore, the taxable base,determined by the taxpayer, cannot be inferior to the IMAN (National MinimumAlternative Tax), a presumptive taxable base and therefore the tax to be paid cannotbe lower than the one established by law.PERMANENT ESTABLISHMENTFurthermore, after the last tax reform, Colombia adopted new criteria so as todetermine the source of income for non Colombian residents, specifically; the conceptof “Permanent Establishment” was recently introduced into our legislation inaccordance with the OECD definition.DECREE 2193 OF 2013 – TAX HAVENSWith this recently issued Decree, the Colombian Government has compiled the list ofcountries that are to be considered tax havens. This qualification by the nationalGovernment has a direct impact on any and all businesses that have relation with a