The nation, through the DIAN, collects this tax, as it is not a departmental or municipal tax.

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1 Legal update Relevant aspects of Colombia s new tax reform February 2015 Tax On December 23, 2014, Law 1739 (Reform) came into force, containing one of the most ambitious tax reforms in recent decades relating to tax collection. The main aspects of the Reform are summarized below. Chapter I Wealth tax The wealth tax, as it s now called, assesses net equity similar to the former equity tax. The economic circumstances that generate payment, the taxable person, the beneficiary of the payment (obligor) and the variables required determining the value or amount payable (taxable base and rate), are the following: Wealth tax collection The nation, through the DIAN, collects this tax, as it is not a departmental or municipal tax. Threshold triggering the wealth tax The wealth tax is triggered when a taxpayer s net equity (total assets less total liabilities) as of January 1, 2015, is equal or greater to $1 billion Colombian pesos (COP). Those who at January 1, 2015, possessed a net equity below this amount are not liable to pay this tax. When companies developed spin-off processes or the incorporation of companies between the date of the enactment of the Reform (December 23, 2014) and January 1, 2015, the split net equity or contributed assets shall be included for purposes of calculating the tax liability. Taxable person under the wealth tax Legal entities that fit into the following categories shall be liable to pay the wealth tax for the years 2015, 2016 and The individuals in some of the following categories will contribute for an additional year (2018). Once the economic circumstance of this tax has been established, the following persons must pay the wealth tax for the aforementioned years: Taxpayers of income tax and the complementary tax.

2 PAGE 2 National or foreign individuals, who do not have tax residence in the country, regarding their wealth possessed in the country, with the exceptions of the cases established in the law and international treaties. National or foreign individuals and legal entities whose residence is not located in the country, regarding their wealth possessed in the country through permanent establishments herein, with the exceptions established in the law and international treaties. Foreign entities directly possessing assets in the country, with the exceptions established in the law and international treaties. Non-assigned inheritances of deceased who at the time of their death had foreign residence but assets possessed in the country. The net equity of those who reside in countries with which Colombia has signed international treaties to avoid double taxation shall be governed by those special rules. On the other hand, we highlight the following that are considered non-liable for the wealth tax: (i) Consortiums (joint ventures) and temporary unions; (ii) entities that are in a liquidation process or bankruptcy processes, (iii) foreign investment portfolios, (iii) persons who are subject to insolvency procedures and (iv) certain foundations, corporations and non-profit associations. If the obligor enters any wind-up process meant to or with the intent to deceive or defraud the tax authority, the person or the corresponding entity may be punished with several administrative penalties. Taxable base of the wealth tax The reference point to calculate the taxable amount of every year is the net equity (total assets less total liabilities) as of January 1, For the following years, the taxable amount or the amount to which the tax rate is applied is the net equity at January 1 of the respective year; however, this base may not increase or decrease with regard to the 2015 taxable base by more than ¼ of the inflation rate from the previous year. Therefore, mathematically the taxable base at January 1, 2015, remains almost the same year after year; however, for accounting purposes the Reform states that the taxable amount is the net equity at January 1 of each year (limiting its decrease or increase to ¼ of the inflation rate) so the accounting expense may be taken on a yearly basis instead of calculating all the tax in the first year. Notwithstanding the above, the only event in which the taxable base can be increased without the aforementioned limitation is when for purposes of its calculation, the net equity includes assets that have been omitted in previous periods (i.e., assets whose inclusion in the income tax return was mandatory but were omitted). In this case, the obligor must pay the offshore and inshore disclosure tax, which we will refer to below, in the year in which the assets are included, but the taxable base of the wealth tax will increase thereafter without limitation. We highlight the following assets that may be excluded from the taxable base: a) In the case of individuals, the first 12,200 UVT (COP$345,003,800) of the value of their house or apartment. b) In the case of foreign financial entities, the value of active credit transactions made with Colombian residents or national entities as well as the revenues associated with those transactions. c) In the case of foreign entities with international leasing in the country, the value of payable accounts located herein and the revenues deriving therefrom. d) In the case of foreigners that have been residing in the country for less than five years, the total value of their net equity located abroad.

3 PAGE 3 Nevertheless, it s important to bear in mind that the value to be excluded from the aforementioned taxable base shall be calculated using the following formula: a) Legal entities: Basis of the asset, multiplied by the percentage obtained by dividing the net equity by the gross assets of each year. Value to exclude = Equity value x % (net equity / gross assets at January 1, 2015; January 1, 2016; and January 1, 2017). b) Individuals: Value to exclude = basis of the asset x % (net equity / gross assets at January 1, 2015; January 1, 2016; at January 1, 2017, and January 1, 2018). Wealth tax rates While the taxable amount remains almost unchanged from year to year, the rate for legal persons is different for each year as follows: i) For legal entities: For the year 2015: WEALTH TAX FOR LEGAL PERSONS YEAR 2015 (AMOUNTS IN COLOMBIAN PESOS) TAXABLE AMOUNT RANGES IN $ MARGINAL TAX Lower limit Upper limit RATE >0 <2,000,000, % (taxable amount) * 0.20% >=2,000,000,000 <3,000,000, % ((taxable amount - $2,000,000,000) * 0.35%) + $ >=3,000,000,000 <5,000,000, % ((taxable amount - $3,000,000,000) * 0.75%) + $ >=5,000,000, % ((taxable Base - $5,000,000,000) * 1.15%) + $

4 PAGE 4 For the year 2016: WEALTH TAX FOR LEGAL PERSONS YEAR 2016 (AMOUNTS IN COLOMBIAN PESOS) TAXABLE AMOUNT IN $ MARGINAL TAX Lower limit Upper limit RATE >0 <2,000,000, % (taxable amount) * 0.15% >=2,000,000,000 <3,000,000, % ((taxable amount - $2,000,000,000) * 0.25%) + $3,000,000 >=3,000,000,000 <5,000,000, % ((taxable amount - $3,000,000,000) * 0.50%) + $5,500,000 >=5,000,000, % ((taxable amount - $5,000,000,000) * 1.00%) + $15,500,000 For the year 2017: WEALTH TAX FOR LEGAL PERSONS YEAR 2017 (AMOUNTS IN COLOMBIAN PESOS) TAXABLE BASE AMOUNT IN $ MARGINAL TAX Lower limit Upper limit RATE >0 <2,000,000, % (taxable amount) * 0.05% >=2,000,000,000 <3,000,000, % ((taxable amount - $2,000,000,000) * 0.10%) + $ >=3,000,000,000 <5,000,000, % ((taxable amount - $3,000,000,000) * 0.20%) + $2,000,000 >=5,000,000, % ((taxable amount - $5,000,000,000) * 0.40%) + $6,000,000

5 PAGE 5 ii) The rate for individuals remains the same year after year: WEALTH TAX NATURAL PERSON (AMOUNTS IN COLOMBIAN PESOS) TAXABLE BASE AMOUNT IN $ MARGINAL TAX Lower limit Upper limit RATE >0 <2,000,000, % (taxable amount) * 0.125% >=2,000,000,000 <3,000,000, % ((taxable Base - $2,000,000,000) * 0.35%) + $2,500,000 >=3,000,000,000 <5,000,000, % ((taxable amount - $3,000,000,000) * 0.75%) + $6,000,000 >=5,000,000, % ((taxable amount - $5,000,000,000) * 1.50%) + $21,000,000 Other important aspects of the wealth tax It should be noted that, among other provisions concerning this tax, the wealth tax or the offshore and inshore disclosure tax are not deductible from the income or CREE tax whatsoever, nor can the wealth tax be paid with an existing income or CREE tax credit. Individuals that are not obliged to file the wealth tax may voluntarily do so. The obligor may offset the payment of the wealth tax with reserves. Chapter II Income tax for equality (CREE) The CREE, like the income tax, levies the enrichment, also called profit. With the Reform, certain omissions by the legislator were corrected upon creating the CREE. Thus, the Reform provides that the recapture provisions (income generated on any amount previously depreciated or amortized) also apply to the income tax, as well as the thin capitalization rules, amongst others. Currently the differences between the CREE and the income tax are minor, with the following standing out: i) the CREE fully levies companies created under bill 1429, while the income tax only partially levies the same companies during the first five years after their incorporation, ii) increasing the CREE also affects those who had signed legal stability contracts to stabilize the rate of income tax rate and iii) all the exemptions applicable to the income tax are not applicable to the CREE. In those aspects expressly not covered by CREE rules, income tax provisions shall be applied. Carry forward of tax losses in the CREE The Reform establishes that tax losses registered in the CREE return may be carried forward to the future as of It also allows you to carry forward to the next five years any excess of CREE that has been paid due to the presumptive income.

6 PAGE 6 With this measure the discussions about the possibility of taking the CREE as a tax credit in the income tax return of other countries such as the United States, is eliminated. Tax credit in CREE due to taxes paid abroad With the limitations applicable to the income tax, the Reform allows to discount (tax credit) from the CREE to be paid any income tax that had been paid abroad on that same income, up to the rate of the CREE and its surplus (the rate varies each year as the surplus is slated to be increased year by year until 2018). The carry-forward of this tax credit is allowed for four years. CREE rate and surcharge The CREE rate remains at 9% and an extra rate (the so-called surplus) is imposed for the years 2015 to Therefore, any profit exceeding COP$800 million will be taxed with an additional CREE rate of 5% for 2015, then 6% by 2016, increasing to 8% in 2017 and finally to 9% by Therefore, any profit equal or greater to COP$800 million will be levied in 2015 at 39% (25% income tax, plus 9% CREE, plus 9% of surplus), 40% in 2016, 42% in 2017 and 43% in Advance payment of the CREE surplus For taxable periods 2015, 2016, 2017 and 2018, the taxpayers of this surplus must make an advance payment of 100% of the value of it, calculated based on the CREE taxable amount of the immediately preceding fiscal year, which must be paid in two annual installments according to what is established by decree by the government. Prohibition of offsetting the CREE with other tax positive balances It is prohibited to pay the CREE and its surplus by offsetting it with positive balances registered in other tax returns. Any CREE positive balance cannot be used to pay other taxes. Chapter III complementary tax of offshore and inshore disclosure Economic issue of the complementary tax of offshore and inshore disclosure The Complementary tax of offshore and inshore disclosure is triggered whenever tax payers possess assets which basis or value has been omitted in the past (in previous tax returns). This tax is triggered as well, when tax payers included non-existing liabilities in their tax returns. These tax payers must include in 2015, 2016 or 2017 the aforementioned omitted assets, paying the complementary tax of offshore and inshore disclosure. Taxable person of the complementary tax of offshore and inshore disclosure The taxable persons of this tax are the same as the payers of the wealth tax (including voluntary payers of the wealth tax), whenever they have omitted assets or have registered non-existing liabilities. Thus, whoever at January 1, 2015, had a net equity of less than COP$1 billion and is exempt from paying the wealth tax, but would like to include assets omitted from prior periods (both wealth tax and the complementary tax of offshore and inshore disclosure are filed by means of the same form) may voluntarily declare wealth tax and include omitted assets.

7 PAGE 7 Taxable amount of the complementary tax of offshore and inshore disclosure The taxable amount is constituted by the net equity of the missing assets. The rights of private foundations abroad, trusts or other fiduciary agreements are treated as trusts rights for Colombian purposes. Rate of the complementary tax of offshore and inshore disclosure: Year Rate % % % The assets of the taxable person that are subject to the complementary tax of offshore and inshore disclosure must be included as well in the income tax and CREE returns, in the taxable year in which the complementary tax of offshore and inshore disclosure is filed and of the subsequent years; once this has been made those assets will no longer be deemed as omitted assets. The generated increase of the net equity will not result in the determination of taxable income by the system of patrimonial comparison, nor will it generate taxable income due to omitted assets in the year in which they are included, nor in the preceding years with respect to the income and CREE returns. This inclusion will not trigger currency exchange penalties. The complementary tax of offshore and inshore disclosure referred in this Reform does not generate the legalization of assets that have been illegally obtained. The complementary tax of offshore and inshore disclosure is paid only once (in the year in which the omitted asset is included). However, the inclusion of the omitted assets does affect the taxable base of the wealth tax, not only in the year in which the asset is included, but during all subsequent years when that is the case. Chapter IV Annual statement of assets abroad This is a disclosure statement whose presentation starts as of the fiscal year Assets held abroad at January 1 of each year must be reported in this statement, whenever their fiscal value exceeds 3,580 UVT (COP$101,239,000, 2015). Assets held at January 1 of each year that do not meet the minimum amount indicated should be reported in an aggregate manner according to the jurisdiction where they are located, for their fiscal value. Due to the generality with which this rule was written, it may be subject to extensive regulation by the government. Chapter V Banking tax (GMF) GMF rate The GMF rate is set at 4 per thousand (4 x 1,000) until 2018, 3 x 1,000 for 2019, 2 x 1,000 for 2020 and 1 x 1,000 for 2021, scheduling its elimination as of January 1, Before the Reform, the 4 x 1,000 was scheduled to be reduced to 2 x 1,000 starting in Chapter VI Tax residence of natural persons Through the Reform the following two criteria are introduced so Colombian nationals will no longer be considered as tax residents in Colombia despite having met the criteria set forth in paragraph 3 of Article 10 of the Tax Code, namely: 50% or more of their annual revenues have their source in the jurisdiction in which they are domiciled, or

8 PAGE 8 50% or more of their assets are located in the jurisdiction in which they are domiciled. The government shall determine how people may accredit such circumstances if they are not considered as tax residents. Chapter VII Income tax rate for foreign companies and organizations The income earned by foreign companies and organizations, which are not attributable to a branch or permanent establishment of such companies or foreign entities for fiscal years 2015 to 2018, shall be subject to the following rates: YEAR RATE % % % % Chapter VIII Infrastructure benefits Interest or revenues paid abroad for credits of a term equal to or greater than eight years will be withheld at 5%, provided it is intended for infrastructure projects under the Public Private Partnership scheme. For further information, please contact one of the following lawyers: > Mauricio Zagarra Bogotá mauricio.zagarra@nortonrosefulbright.com > Sebastian Rodriguez Bogotá sebastian.rodriguez@nortonrosefulbright.com Norton Rose Fulbright Canada LLP, Norton Rose Fulbright LLP, Norton Rose Fulbright Australia, Norton Rose Fulbright South Africa Inc and Norton Rose Fulbright US LLP are separate legal entities and all of them are members of Norton Rose Fulbright Verein, a Swiss verein. Norton Rose Fulbright Verein helps coordinate the activities of the members but does not itself provide legal services to clients. References to Norton Rose Fulbright, the law firm, and legal practice are to one or more of the Norton Rose Fulbright members or to one of their respective affiliates (together Norton Rose Fulbright entity/entities ). No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any Norton Rose Fulbright entity (whether or not such individual is described as a partner ) accepts or assumes responsibility, or has any liability, to any person in respect of this communication. Any reference to a partner or director is to a member, employee or consultant with equivalent standing and qualifications of the relevant Norton Rose Fulbright entity. The purpose of this communication is to provide general information of a legal nature. It does not contain a full analysis of the law nor does it constitute an opinion of any Norton Rose Fulbright entity on the points of law discussed. You must take specific legal advice on any particular matter which concerns you. If you require any advice or further information, please speak to your usual contact at Norton Rose Fulbright. Norton Rose Fulbright Canada LLP 2015