The relevance of the OECD and UN Model Conventions and their Commentariesfor the interpretation of Colombian tax treaties

Colombia's entrance into the double taxation agreement world has been fairlyrecent and thus its involvement with the existing Model Conventions is limitedto a few treaties and even fewer administrative and judicial decisions. Thedecision to begin the creation of a double taxation treaty network was promotedby President Álvaro Uribe Vélez in 2004, after a long period ofnon-treaty policy implemented under the philosophy of protecting the Colombiantax base. President Uribe's policy of creating a competitive businessenvironment for investors caused the re-evaluation of Colombia's positionregarding double taxation agreements. Both DIAN (the Colombian TaxAdministration) and the Colombian Ministry of Finance gave up their reluctanceto negotiate treaties, convinced by the idea that revenue loss caused by theconcessions granted in a treaty by a capital importing state like Colombia wouldbe compensated by the increase in foreign direct investment (FDI) that thetreaty would be thought to bring.

In 2005 the Ministry of Trade thus issued a priority list of major tradingpartners for the parallel negotiations of bilateral investment treaties (BITs)and treaties. Based on this list, the Colombian Ministry of Finance created ateam of public employees (a DIAN director and two other DIAN employees in chargeof domestic audits) for the immediate negotiation of a treaty with Spain. Due tothe urgency of negotiations, Colombian officials decided to implement the OECDModel Tax Convention on Income and on Capital (OECD Model) as the only availabletool for negotiating with OECD Member countries. Although Colombia was at thetime – and still is – a party to the Andean Community of Nations(CAN), the government decided not to implement the source-based CAN Model, asnone of the other Members had applied it in their treaties and it was a knownfact that most OECD Member countries would not even consider the CAN Model as areference for negotiating a bilateral treaty with Colombia. Furthermore, thedifficulties associated with integration in South America were often reflectedin the lack of application of Andean Community Decision 578. The withdrawal ofChile and Venezuela left only Bolivia, Colombia, Ecuador and Peru, and most ofthe above were constantly discussing whether the decision would be applicablewithout a domestic law to adopt it.