Colombia- Withholding tax
Based on the tax regulations effective in January 2026 , the "shortfall" is due to Colombian Withholding Taxes that the local affiliate is legally required to deduct before sending payment to the US. No enforced Double Tax Treaty between the US and Colombia, the Colombian entity cannot pay the full invoice amount without deducting these taxes. Here is the breakdown of why the payment is short . 1. The Main Cause: Income Tax Withholding (Retención en la Fuente) Colombia imposes a high withholding tax on payments sent abroad for services, specifically "technical services, technical assistance, and consulting." 1 The Rate: The standard rate is 20% . 2 Note: If the "administrative fee" is classified purely as management fees without a "technical" component, the rate could theoretically be higher (33%), but 20% is the most common rate applied to intercompany service charges. The Mechanism: If you invoice $10,000 , the Colombian entity must dedu...