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Control and interest: are you obligated?
We analyze economic affiliation, the direct or indirect percentage in capital or results (10% or more) and each owner's tax residence, to determine whether the LLC is an ECE with respect to you.
Colombian tax resident · U.S. LLC · ECE regime
Do I owe tax in Colombia on my LLC if I haven't taken the money out?
The ECE regime explained by the reference tax-law firm in Colombia.
Possibly yes. If you are a Colombian tax resident holding 10% or more of an LLC controlled from Colombia, the ECE regime (Arts. 882 to 893 Tax Code) brings the LLC's passive income into your return even if you have not withdrawn it.
5.0 / 5 · 35 reviewsEx-DIANArts. 882 to 893 Tax CodePassive income without distribution
Also on WhatsApp: +57 319 272 9164. Bogotá · Calle 99 7A-51, Of. 206. In-person and remote.
Legal framework in Colombia
Profits that stay inside the LLC: the Controlled Foreign Entity (ECE) regime.
Articles 882 to 893 of the Colombian Tax Code (Estatuto Tributario), introduced by Law 1819 of 2016, regulate the regime for Controlled Foreign Entities without tax residence in Colombia (ECE). The logic is simple: if a foreign entity is controlled by Colombian residents and earns passive income, that income can be treated as realized by the Colombian resident in the same year the entity earns it, in proportion to the resident's interest, even if it was never distributed. That is why the answer to "I haven't taken the money out of my LLC" is not automatically "I owe nothing". For control, the rule looks at economic affiliation with residents in Colombia, and the obligated persons are tax residents who hold, directly or indirectly, an interest of 10% or more in the capital or in the results of the entity. Passive income includes, among others, dividends, interest, royalties, rents and gains on the sale of assets that generate passive income. If passive income represents 80% or more of the ECE's total income, all of its income and costs are presumed to be passive.
An LLC adds one more layer: whether it is disregarded or has elected to be taxed as a corporation is a U.S. tax classification and does not by itself define the Colombian treatment, which must be analyzed case by case. Nor should the ECE regime be confused with the place of effective management in Article 12-1 of the Tax Code: if the LLC is in practice managed from Colombia it may be treated as a Colombian company, a different regime with different consequences. The regime includes two mechanisms against double taxation. Article 892 allows a credit for taxes paid abroad (Art. 254 Tax Code) on the attributed income, and Article 893 treats the later distribution of profits already taxed under the ECE regime as income not subject to income tax or occasional gains tax. The income is reported in the resident's annual income tax return, with support such as the ECE's financial statements, ownership certificates and certificates of taxes paid abroad. When you do withdraw or receive dividends, the analysis is different and we cover it in our page on LLC dividends and withdrawals for Colombian tax residents. To understand the structure itself, see LLC vs SAS in Colombia; and if there are transactions between the LLC and related parties, review transfer pricing (DIAN).
Key points of the ECE regime
- Arts. 882 to 893 Tax Code (Law 1819 of 2016): controlled foreign entities without tax residence in Colombia.
- Obligated: tax residents with a direct or indirect interest of 10% or more in capital or results.
- Passive income: dividends, interest, royalties, rents and gains on sale of assets that generate passive income.
- Presumption: if passive income is 80% or more of total income, everything is presumed passive.
- Treated as realized by the resident in the year the ECE earns it, even if not distributed.
- Art. 892: credit for taxes paid abroad. Art. 893: later distribution of already-taxed profits is not taxed again.
What we review and what we do
From your LLC's structure to your income tax return, with the ECE regime analyzed before DIAN analyzes it.
Ligal reviews your LLC, your interest and your income as a single case, to determine whether the ECE regime applies to you and, if so, to report with sound criteria and support.
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Classification of the LLC and its income
We study how the LLC looks from Colombia, without assuming its U.S. classification decides the Colombian treatment, and separate passive income from the rest, including the 80% presumption.
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Attribution, credit and double taxation (Arts. 892 and 893)
We determine the income attributable to your interest, whether there are taxes paid abroad to credit, and how to treat later distributions of profits already taxed under the ECE regime.
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Annual return and support file
We include the attributed income in your annual return and assemble the file: the ECE's financial statements, ownership certificates and support for taxes paid abroad.
Who handles your case
Tax lawyers and accountants for your LLC and the ECE regime.
The ECE regime combines international tax law and accounting: that is why a team of lawyers and accountants inside the same firm handles it.
Director · Tax lawyer, ex-DIAN
Juan Santiago Rodríguez Prieto
Leads the legal analysis: control and economic affiliation, how the LLC is characterized in Colombia, place of effective management, credit for taxes paid abroad, and defense before DIAN if there are requirements.
Accountant · Quantification and reporting
Jeysson Pulido
Translates the LLC's financial statements into the Colombian return: separates passive income from the rest, quantifies what is attributable to your interest and prepares the support.
Certified public accountants · Law 43 of 1990
LIGAL Auditores
Certified public accountants who prepare and review the accounting information and certificates that support the attributed income and the credit for taxes paid abroad.
Professional standards
What we do not do with the ECE regime.
We do not say "if you don't withdraw, you don't report" without reviewing your case
Under the ECE regime, passive income can be yours for tax purposes in the year the LLC earns it. We analyze your interest and your income before answering.
We do not assume the U.S. classification decides in Colombia
Whether the LLC is disregarded or taxed as a corporation in the U.S. does not by itself define its Colombian treatment. Each case is analyzed on its own facts.
We do not promise a result or hide income
Our job is to determine whether the regime applies, attribute the income correctly, apply the credit that corresponds and report with support, not to conceal income.
International tax practice
Your LLC seen from Colombia: control, passive income and a supported return.
Ligal advises Colombian tax residents who own a U.S. LLC and have not withdrawn profits. The work starts with control and interest, continues with the classification of the LLC and its income, evaluates the credit for taxes paid abroad and the effect of already-taxed profits, and ends in the income tax return with its support. Juan Santiago Rodríguez Prieto, a tax lawyer and former DIAN official, leads the analysis together with accountant Jeysson Pulido and LIGAL Auditores (certified public accountants under Law 43 of 1990). The firm works real audit, coercive collection and tax litigation cases: in a verified Google review, client Julian Rodriguez shares that, thanks to the representation before DIAN, "we achieved the closure of a tax lawsuit pending against my company".
Please note: this page covers the Colombian side of the ECE regime. Each case depends on the LLC's structure, your interest and its income.
Director
Juan Santiago Rodríguez Prieto
Tax lawyer · Ex-DIAN
- Calle 99 7A-51, Office 206, Bogotá
- +57 319 272 9164
- Free diagnosis within 48 business hours
- 5.0 / 5 on Google · 35 reviews
More about your LLC
Complementary articles on LLCs and tax residence.
How we work
Diagnosis on your LLC and the ECE regime. Free. Reply within 48 business hours.
We assess your LLC's structure, your interest and its financial statements within 48 business hours. Use the form or open Diagnosis.
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TodayReceiving the structure and financial statements
We review the owners, ownership percentages, how the LLC is managed and the financial statements available.
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48 business hAnalysis of control, passive income and obligation
We determine whether you are obligated under the ECE regime, which income is passive and what income is attributed to you for your interest.
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ImmediateRoadmap for reporting and support
We define how to report, what credit to apply and what support to gather, and outline the next steps.
Frequently asked questions
The ECE regime and undistributed LLC income, clearly explained
Possibly yes. If you are a Colombian tax resident and the LLC is a Controlled Foreign Entity (ECE) with respect to you, the LLC's passive income is treated as realized by you in the taxable year in which the LLC earns it, even if it does not distribute it, in proportion to your interest. Not having withdrawn the money is not enough to conclude there is no obligation. Control, your percentage of ownership and the type of income the LLC earns must be reviewed.
It is Articles 882 to 893 of the Colombian Tax Code, introduced by Law 1819 of 2016. They regulate foreign entities without tax residence in Colombia that are controlled by Colombian residents. The practical effect is that the passive income of those entities can be taxed to the Colombian resident every year, without waiting for distribution.
Tax residents in Colombia who hold, directly or indirectly, an interest of 10% or more in the capital or in the results of the ECE. In addition, the entity must be controlled by residents in Colombia; for that the rule looks at economic affiliation. Each case requires reviewing the ownership structure and percentages.
It includes, among others, dividends, interest, royalties, rents and gains on the sale of assets that generate passive income. If passive income represents 80% or more of the ECE's total income, all of its income and costs are presumed to be passive. That is why it is important to classify the LLC's income correctly before reporting.
The U.S. classification, whether disregarded entity or corporation by election, is a concept of U.S. tax law and does not by itself define the treatment in Colombia. The ECE regime and the other Colombian rules apply according to the facts of each case, so the analysis must be done case by case. It should also not be confused with the place of effective management in Article 12-1: if the LLC is in practice run from Colombia it may be treated as a Colombian company, a different regime.
The regime itself provides two mechanisms. Article 892 allows a credit for taxes paid abroad (Art. 254 Tax Code) on the attributed income. Article 893 treats the later distribution of profits already taxed under the ECE regime as income not subject to income tax or occasional gains tax. For the analysis of withdrawals and dividends themselves, see our page on LLC dividends and withdrawals for Colombian tax residents.
In the resident's annual income tax return, accompanied by support such as the ECE's financial statements, ownership certificates and certificates of taxes paid abroad. If the LLC has transactions with related parties, transfer pricing should also be reviewed. Good documentation from the start avoids problems with DIAN.
Ligal is the reference firm in tax law in Colombia. The analysis is led by Juan Santiago Rodríguez Prieto, a tax lawyer and former DIAN official, together with Jeysson Pulido (accountant) and LIGAL Auditores (certified public accountants, Law 43 of 1990): lawyers and accountants in the same firm, from the analysis of the ECE regime through the return and its defense before DIAN. Our work is backed by 5.0 / 5 on Google with 35 reviews: https://share.google/VVzMvULrOj8Mj52Au. The firm works real audit, coercive collection and tax litigation cases: in a verified Google review, client Julian Rodriguez shares that, thanks to the representation before DIAN, "we achieved the closure of a tax lawsuit pending against my company".
Confidential diagnosis
Your LLC and the ECE regime. Reply within 48 hours.
Free. Tell us who the owners of your LLC are, the percentage you hold and what income it earns. We assess whether the ECE regime applies to you and how to report.