Obligation to enter data in the Beneficial Ownership Single Registry “RUB”
By: Juan Simon Larrea & Javier Moya
With the issuance of Law 2155 of September 14, 2021 “Social Investment Law”, articles 631-5 and 631-6 of the Tax Statute (hereinafter “ET”) were modified and the Single Registry of Final Beneficiaries (hereinafter “RUB”) was created, which was regulated by Resolution 164 of December 2021, subsequently modified by Resolution 37 of March 17, 2022, issued by the National Tax and Customs Directorate “DIAN”. In addition, the Identification System for Structures Without Legal Personality “SIESPJ” was created.
Acronyms and Abbreviations
- SWLP – Structure Without Legal Personality
- RUB – Single Registry of Beneficiary Owners
- RUT – Single Tax Register
- SIESPJ – Identification System for Structures Without Legal Personality
- BO – Beneficiary Owner / Final Beneficiary
- DIAN – Directorate of National Taxes and Customs
1. Single Register of Beneficial Owners “RUB”
1.1. What is RUB?
The RUB is the registry that is an integral part of the Single Tax Registry (RUT) that must be completed virtually and in which legal entities and unincorporated or similar structures must provide the information of their Beneficiary Owners.
1.2. Who are the Beneficiary Owners of legal persons?
The BO of Colombian legal entities, according to article 631-5 of the ET, is any individual who:
- Acting individually or jointly, holds, directly or indirectly (through third parties), five percent (5%), or more of the capital or voting rights of the legal person, and/or benefits in five percent (5%), or more of the assets, yields or profits of the legal person.
In order to better understand the above condition, by way of example we can establish that any individual who is a shareholder of any type of corporation with a percentage greater than 5% is a Final Beneficiary. Likewise, if he/she is a shareholder in this proportion, but indirectly (through a legal entity), he/she would also be considered as a Final Beneficiary.
- Acting individually or jointly exercises direct and/or indirect controls over the legal entity by any means other than those set forth in the preceding point.
Regarding this second condition, the Inter-American Development Bank’s Manual on Beneficial Ownership establishes that the individual may exercise direct or indirect control through a significant percentage of the voting rights, or the ability to appoint or remove members of the board of directors of an entity.
It can also be exercised in other ways. For example, through a power of influence or veto over the decisions made by an entity, through agreements between shareholders or partners through family or other ties with decision makers, or through the ownership of negotiable obligations or other debt securities of an entity convertible into shares.
Thus, according to the manual and the recommendations issued by the Financial Action Task Force (FATF), the beneficial owner must be identified through other means such as exercising control without having an ownership interest in a company.
Now, as a residual condition and only when no beneficial owner is identified (in non-corporate legal persons such as: national or foreign non-profit entities) under the criteria indicated above, the individual who holds the position of legal representative shall be considered as the beneficial owner, unless there is an individual who holds greater authority in relation to the management or direction functions of the legal person, in which case the latter individual must be reported.
1.2.1. Who are the BO in unincorporated or similar structures?
The Beneficiary Owner of an Unincorporated Structure o structures without legal personality (hereinafter referred to as “ESPJ”) are the individuals who hold the status of:
- Trustor(s), settlor(s), constituent(s) or similar or equivalent position.
- Trustee(s) or similar or equivalent position.
- Trustee committee, finance committee or similar or equivalent position.
- Trustee(s), beneficiary(ies), or conditional beneficiary(ies); and
- Any other individual exercising effective and/or final control or having the right to enjoy and/or dispose of the assets, benefits, results or profits.
Based on the above, a resident or non-resident individual who holds five percent (5%) or more of the capital of a legal entity and/or benefits from five percent (5%) or more of its assets, yields or profits, carries out transactions with the assets of another person or makes decisions in the administration, direction or management of a company or benefits from the activities of a private non-profit entity, is a beneficial owner and must be registered in the RUB. Likewise, if he/she holds the status of beneficiary in the ESPJ.
1.2.2. Who is obliged to provide information?
The following legal entities and structures without legal personality or similar, are required to provide information in the RUB, with respect to their beneficial owner:
- Corporations and national profit or non-profit entities in accordance with the provisions of Article 12-1 of the ET, including those whose shares are registered or listed in one or more stock exchanges.
- Permanent establishments, i.e., those that have a fixed place of business in the country, through which a foreign company, whether a corporation or any other foreign entity, or individual without residence in Colombia, performs all or part of its activity.
- National companies and entities, including those listed on the stock exchange and registered in its respective list, that have their main domicile in Colombian territory; or that make effective commercial, administrative or management decisions in Colombia; or that have been incorporated in Colombia.
- All structures without legal personality or similar that were created or that are administered in Colombia or that are governed by Colombian regulations or whose trustee or similar is a national legal person or individual resident for tax purposes. An example of the above are trusts or trusteeships, if these are administered or were created in Colombia, their beneficial owner must be in the RUB.
- Foreign legal entities, when the totality of their investment in Colombia is not made in legal entities, permanent establishments and/or ESPJ obliged to provide information in the RUB.
1.2.3. Who is not obliged to provide information?
Public entities, establishments or agencies or national entities or corporations in which one hundred percent of their capital is public are not required to provide information in the RUB. Neither are embassies, diplomatic missions, consular offices or international organizations and agencies accredited by the National Government. Nor are foreign legal entities or structures without legal personality that do not operate in Colombia or are not incorporated in the territory, and even less foreign legal entities whose assets value in Colombia represents less than 50% of their total assets. In addition, any other situation that does not meet the requirements described in the preceding paragraphs.
1.2.4. What information must be provided and what is the procedure to register data for legal entities in the RUB part of the RUT?
The RUB is an integral part of the Single Tax Registry (RUT) before the DIAN, for legal entities, and the information that must be submitted is the following, according to article 8 of resolution 164 of 2021 DIAN:
- Type of document
- Identification number and country of issuance
- NIT or functional equivalent and country of issuance.
- Names and Surnames
- Date and country of birth
- Country of Nationality
- Location: Country of residence, department or state, city, zip code, e-mail address
- Criteria for determining the final beneficiary
- Percentage of participation in the capital of the legal entity.
- Percentage of benefit in the yields, results or profits of the legal entity, structure without legal entity or similar.
- Date from which it has been the beneficial owner or the condition exists.
- Date from which it ceases to have the quality of beneficial owner or the condition no longer exists.
1.2.5. Deadline for registration of information by legal entities in the RUB
According to the same Resolution 164 of 2021 of the DIAN, modified by Resolution 37 of 2022 and Resolution 1240 of 202, the information must be provided no later than July 31, 2023, by legal entities, structures without legal personality or similar structures constituted or created prior to September 30, 2022.
In the case of legal entities, unincorporated structures or similar that are constituted after September 30, 2022, they will have 2 months from the registration in the Single Tax Registry RUT or in the Identification System of Unincorporated Structures SIESPJ.
1.2.6. What is the due diligence principle?
This principle is developed in Article 12 of Law 2195 of 2022 through which measures of transparency, prevention and fight against corruption are adopted and provides that anyone who has the obligation to deliver information to the RUB, must carry out due diligence measures that allow identifying the final beneficiary(ies) taken these criteria:
- Identify the individual, legal entity, ESPJ or similar that enters into legal business or state contract.
- Identify the beneficial owner(s) and the ownership and control structure of the legal person, legal entity, JSE or similar and verify the information.
- Request and obtain information on the purpose of the legal business or state contract when the state entity is the contracting parties and in order to obtain information on the corporate purpose of the contractor.
- Perform ongoing due diligence on the business or contract by examining that the transactions are consistent, its business activity, risk profile and source of funds.
1.2.7. Which authorities have access to the RUB?
According to Article 13 of Law 2195 of 2022, the Comptroller General of the Republic, the DIAN, the Prosecutor´s General’s Office, the Superintendence of Industry and Commerce, the Superintendence of Finance, Attorney General’s Office and the Financial Information and Analysis Unit UIAF will have access to the RUB.
We also remind you that failure to register the data on time may result in the penalties contemplated in Article 658-3 of the Tax Statute, ranging from fines to the temporary closure of the establishment, office, business or headquarters of the owner.
1.2.9 How do I register my beneficial owner in the RUB?
The following link refers to the infographic that explains how individuals and ESPJs, with prior registration in the Unincorporated Structures Identification System as developed below, can register their BO in the RUB.
2. IDENTIFICATION SISTEM OF STRUCTURES WITHOUT LEGAL PERSONALITY “SIESPJ”
The SIESPJ is the identification mechanism, for tax purposes, of unincorporated structures that are not required to register in the RUT. The operation and administration of the System will be the responsibility of the Special Administrative Unit of the DIAN.
2.1.1. What information must be provided and what is the procedure for the registration of data for unincorporated structures in the RUB by SIESPJ
The RUB is an integral part of the Unincorporated Structures Identification System (SIESPJ), for unincorporated structures, before the DIAN and the information to be submitted is the following, according to article 15 of resolution 164 of 2021 DIAN:
1. Type of structure without legal personality or similar.
2. Name and alphanumeric code assigned internally for the identification of the unincorporated or similar structure.
3. Date of creation of the unincorporated or similar structure.
4. Date of termination of the unincorporated or similar structure.
5. Identification number of unincorporated structures – NIESPJ assigned by the Special Administrative Unit of the National Tax and Customs Directorate – DIAN.
6. Start date of administration of the unincorporated or similar structure.
7. End date of administration of the unincorporated or similar structure.
8. Change of administrator of the unincorporated or similar structure.
These percentages are individual and the information must be provided through the electronic system of the Single Registry of Beneficial Owners. Learn the step by step in the following link:
In order to register Structures without legal status in the RUB, they must first be registered in the SIESPJ and with the identification provided by the SIESPJ, proceed to register in the RUB.
2.1.2 Deadline to register the information of an unincorporated or similar structure
For unincorporated or similar structures, updates can be made within the month following the event that generated the update.
What is meant by “exercise control”?
To understand what is meant by control, we refer to different sources, among them, the Code of Commerce Arts. 260-261, the Tax Statute Art. 260-1 and Resolution 164 of 2021. It is understood that there is control when a person or a group of persons, natural or legal, exercises dominant influence in the decisions of the administrative bodies. For example, when the shareholders’ meeting makes decisions for the management to implement and the whole company or foundation to undertake new paths. In addition to the influence, these persons must have the right to cast votes constituting the minimum majority of votes in the shareholders’ meeting or in the assembly; or the number of votes necessary to elect the majority of the members of this board of directors. In these cases we may be talking about direct control.
Individuals exercising indirect control, i.e., through an intermediary person or company, are also obliged to be included in the RUB. For example, the owner or sole shareholder of a company that is the parent company of a subsidiary in Colombia that meets the requirements mentioned in previous sections. In this case, it should be registered in the RUB.
As a complement, a situation of control is also present when any of the following situations arise:
- that more than 50% of the capital of a company, directly or through or with the assistance of several of its subordinates or at the same time those that these may have.
- When the parent company and subordinates have in common or separately the right to issue votes.
- When the parent company exercises a dominant influence in the decisions of the administrative bodies of the subordinate company.
One or several legal entities may also be understood as a Parent Company and these parameters apply to them to determine whether they exercise control or not.
“From the above rules it is possible to infer when control is consolidated with respect to commercial companies in Colombia, and the form in which it can be exercised; that is, directly and indirectly; individually or jointly; by participation or simply by dominant influence.” (Concept 220 081921, 2015, S.I.C)
In conclusion, control exists when the decision-making power of a controlled company is subject to the will of another or other persons that will be its parent or controlling company. For example, if a company X in Colombia is controlled by a parent company abroad, and this meets the requirements described in previous paragraphs, the individual who is the ultimate beneficial owner of the parent company must be sought and this person must be registered in the RUB by the controlled company.
New Measures to Control Energy Prices in Colombia
On September 16, 2022 the government announced the following specific measures, to be implemented as of November 2022, to contrul the rising prices resulting from workshops with different actors in the sector:
- Draft resulution 701 017, for a 12-month period. This resulution seeks:
- To invulve all sector actors in the reduction of tariffs.
- To assist traders by implementing an 18-month deferral of their obligations with generators and distributors, in at least 20% of from September to December 2022. The interest rate of such deferred obligations shall be the lowest between that reported by the market administrator XM and a preferential rate.
- To renegotiate regulated market agreements between traders and generators, including the modification of payment terms and consumption periods in 12 months.
- Draft resulution 701 018, to be enforced in 5 months. This resulution seeks:
- Optimize thermal plants’ operation according to their number of units and capacity.
- Draft resulution 701 019, also projected for a 12-month period. This resulution seeks:
- To determine the percentage of variation of the tariff option for hte first month after the resulution is approved. After that, a tariff option increase rate will be defined. Before the resulution this may not be less than 0.6. Now it may be equivalent to “0” or even negative.
- To adjust distribution and transmission charges at the Producer Price Index (PPI) of December 2020. These values shall be brought to present value and may vary according to the Consumer Price Index (CPI).
- Moving forward and as a transitory measure, one the sector index is defined, charges shall be updated with the lowest between the CPI, PPI or any other index proposed by the operators. These will have a 5 business day deadline to inform CREG about their adjustment acceptance.
New Rules on Data Protection
Through Decree 255 (23 February 2022), the Colombian government has issued the following new binding corporate rules regarding data protection:
- Binding Corporate Rules (“BCR”) are policies, corporate governance principles or good business practices of mandatory compliance by any party treating personal data located in Colombia in order to be able to transfer such data to a third party abroad and belonging to the same business group.
- Transfer of data abroad between companies belonging to the same economic / business group must be governed by BCR that must guarantee compliance with data protection principles and regulation in Colombia.
- BCR must ensure that all data is:
- Treated in a licit, loyal and transparent manner in relation to the data owner.
- Collected for specific, explicit and legitimate purposes and that it shall not be treated later on with purposes incompatible with the original purpose.
- Adequate, pertinent and limited to what is required for its purpose.
- Exact and regularly updated thus taking all reasonable measures to delete or rectify inexact data.
- Kept in such a way that the data titleholder may be identified during the specific period required for its purpose.
- Treated under control of the party responsible for its treatment who must guarantee and evidence compliance with the above rules.
- Each of the entities forming the business group shall be jointly and severally liable for compliance with the group’s BCR.
- The Colombian Superintendence of Industry and Commerce (SIC) may impose sanctions to the Colombian member for defaults by other members of the business group abroad.
BCR must contain at least the following requirements:
- Structure and contact details of the business group and each one of its members to which the BCR apply.
- Data transfers or series of transfers including categories, type of treatment and purposes, type of affected titleholders and name of the third party or third countries.
- Its legally binding character, for all entities forming the corresponding business group.
- Application of legal principles for data protection as envisaged in Law 1581 of 2012 and its regulation.
- Reference to titleholders’ rights pursuant to Law 1581 and its regulation as well as the means to exercise such rights.
- Measures adopted to avoid transfer to other entities not belonging to the same business group.
- Reference to the staff in charge of compliance with BCR as well as claims’ supervision and processing.
- Mechanisms established within the business group to guarantee verification of compliance with BCR. This must include data protection auditing and methods to guarantee corrective measures to protect the right of data titleholders.
- Mechanisms to communicate and record modifications introduced to policies and to notify such modification to the SIC.
- Data protection training for the staff having permanent or regular access to personal data.
- Procedures for titleholders to be able to file consultations or claims and to be timely processed.
- Adoption of accountability measures to evidence that useful, timely, pertinent and efficient measures have been implemented to comply with BCR.
- Additional requirements and specifications to be issued by the SIC regarding this matter.
Approval by the SIC
The SIC shall approve the BCR complying with the following requirements:
- Are legally binding and apply to all members of the business group responsible for the transfer and treatment of personal data.
- Expressly confer the data titleholders the power to exercise the rights envisaged in Law 1518 of 2012.
- Meet the requirements established in Decree 255
BCR may be submitted to approval by the SIC once approved by the corresponding corporate bodies. Those filed for approval by the SIC shall be in force upon the approval date. The business group that obtains such approval must inform about it in its web page
We will keep you posted on the regulation that will follow this decree containing specific requirements.
The Constitutional Court of Colombia has declared constitutional the Agreement between the Government of the Republic of Colombia and the Government of the French Republic to avoid double taxation
The Constitutional Court (C-443-21 Corte Constitucional) of Colombia has declared constitutional the Agreement between the Government of the Republic of Colombia and the Government of the French Republic to avoid double taxation and prevent tax evasion and avoidance with respect to taxes on income and on assets and their protocol, signed in Bogotá on June 25, 2015. The Agreement is expected to enter into force in a few weeks.
What does the IBA mean to you?
“We asked Gabriela Mancero Bucheli Mancero, Partner, Peña Mancero Abogados, based in Colombia, what the IBA means to her.
Opportunity. The opportunity, to support initiatives that matter, like #HumanRights or #ClimateChange and to contribute to projects that make a difference in the development of the legal profession”.
The proposed regulation of franchises, a legal problem in Colombia
By: Daniel Peña Valenzuela & Juan Simon Larrea – Peña Mancero Abogados Colombia
The Colombian government intends to issue a regulatory decree to regulate the franchise agreement in Colombia under the framework of an entrepreneurial-fostering law. This has given way to a new debate on the constitutionality of this type of regulation by means of a regulatory decree and the establishment of limits to the autonomy of the will by the executive branch.
Franchise agreements have existed for decades in Colombia. Even though they were not contemplated in our statutes or regulation, they were still broadly used mainly on the basis of international templates and the free will of the parties involved. The big international brands have their stores and commercial establishments open to the Colombian public in full competition with other international players and also with local merchants. Almost no activity or branch of commerce escapes from this business scheme.
Local entrepreneurs have found in franchising a collaborative relationship model that allows them to expand their businesses without having to assume the total investment to participate in regional markets, other cities and to grow their income. The franchising offer is not risk-free for those who have achieved brand recognition, as well as the development of know-how, and in general, have managed to package a successful business model. Nor is the franchise market risk-free for those who take on the business of another with independence, but also with close ties to replicate the success. Not infrequently the expectation and the reality of the business, both for the franchisor and the franchisee, do not materialize.
In this business scenario and without the existence of a specific and proper regulation of the franchise agreement in the Code of Commerce (dating back to 1971) or in subsequent amending laws, Law 2069 of December 31, 2020 has intended to establish a regulatory framework fostering entrepreneurship, growth, consolidation and sustainability of companies.
Within this framework, the government is empowered to present, via regulatory decree, the technical conditions that define the franchise, the obligations and the liability regime of the franchisor and the franchisee. In other words, it is intended that the Colombian government regulate a category of commercial contract that has no regulation of its own in the Colombian legal system.
The first major debate focuses on the fact that this regulatory power is unconstitutional. For the government, limiting the contractual exercise of the autonomy of the will by means of a regulatory decree and not by means of a bill, as it should be in accordance with the constitutional provisions that guarantee the freedom of enterprise. Article 333 of the Constitution states that economic activity and private initiative are free. Its requirements, as in this case to limit its exercise and to regulate the content and fundamental characteristics of the franchise agreement, are reserved by law. Article 151 of the Constitution, in paragraphs 21 and 24, stipulates that only the Colombian Congress may issue laws on economic intervention. Even more so when it expressly refers to the intellectual property regime, patents and trademarks or other forms of intellectual property that are inherent to the franchise, since a structural element of this contract is the license of the trademark, trade name and commercial name. Therefore, it is the Colombian State, through the legislature, and not the executive branch, who has the exclusive power or competence to delimit the scope of economic and/or contractual freedom.
As of the date of writing this article, the Colombian Constitutional Court has not passed any judgment with respect to the aforementioned defects of Law 2069. Rather, recently, the draft regulatory decree has been published by the Ministry of Commerce, Industry and Tourism. Through this draft several objectives and purposes are intended:
(a) To define the franchise contract.
b) To establish the characteristics, elements and requirements of the franchise contract.
It is clear that the requirements are restrictive and contain broad limitations in practice for franchises that had been operating with full exercise of contractual autonomy, in the exercise of commercial custom, under the postulate of good faith between the contracting parties. To mention one of the requirements of the pre-contractual phase, the Franchise Offering Circular is one of the different documents that will be requested in order to carry out the business. It requires that, at least twenty working days prior to the date of execution of the franchise contract or the date of initial payment, the franchisor must deliver in writing a set of information that must be clear and truthful.
It is important for the Government to consider that this regulation may be an obstacle to foreign investment, as well as establish unbalanced conditions compared to other similar contracts such as trademark licensing, distribution and commercial agency. The additional requirements may affect the legal traffic of goods and services vital for the economic reactivation of the country and excessive burdens on individuals at the time they plan to plant a franchise. For now, the decree is subject to comments and we will see if the government weighs correctly the different interests at stake: (a) the protection of franchisees, (b) legal certainty, (c) respect for private autonomy in business between individuals, and (d) the stimulation of foreign investment and economic reactivation.
Let´s wait and see.