The purpose of a joint venture agreement is to jointly undertake one or more specific commercial activities under the management of one of the participants, with the aim of generating economic results that will be distributed among the parties according to a previously agreed proportion, whether in terms of profits or losses.
It is important to note that, for tax purposes, joint venture agreements themselves are not subject to income tax or supplementary taxes. However, the parties to the agreement—who retain their legal independence and autonomy—are generally subject to these taxes.
In this regard, Article 18 of the Colombian Tax Statute regulates several key aspects of joint venture agreements:
a) Each party must independently declare the assets, liabilities, income, costs, and deductions attributable to the agreement, in accordance with their agreed participation.
b) A detailed record of the activities carried out under the agreement must be maintained to enable verification of the income, costs, and expenses incurred in its execution.
c) The parties must provide any information related to the agreement that is requested by the National Tax and Customs Directorate (DIAN).
d) The contract manager is responsible for certifying and providing the participants with financial and tax information related to the agreement. This certification must be signed by the legal representative (or their delegate) and by the corresponding public accountant or statutory auditor.
Consequently, this provision partially annulled DIAN Concept No. 008537 of 2018 and expressly authorized the proportional allocation of withholding tax.
Accordingly, through Concept No. 010470 of December 12, 2024, the DIAN adopted the position of the Council of State and confirmed that withholding tax on joint income must be allocated among the participants based on their respective participation percentages. This position was reiterated in subsequent interpretations, including Concept No. 007332 of June 2025.
In the latter, the DIAN was asked whether the manager may retain the entire amount withheld when the silent partner is not required to file an income tax return—such as in cases where the participant is a trust or a taxpayer under the Simple Taxation Regime. The DIAN’s response was clear: no. The withholding must be proportionally allocated even when a participant is not subject to the tax. The participant’s inability to benefit from the withholding does not invalidate their right to it, as it stems from their share in the jointly earned income.
This leads to the conclusion that, although the new jurisprudential and doctrinal framework clearly establishes that withholding tax on joint venture income must be proportionally attributed to each participant under the principle of tax transparency, it seems overly rigid to exclude the possibility of the parties agreeing to a different treatment—provided such treatment accurately reflects the contract’s true economic substance and the specific legal and tax circumstances of each participant.
To do otherwise would run counter to the purpose of the Council of State’s decision, which aims to avoid inequitable or unfair distribution of the tax burden within a joint venture. Indeed, as previously noted, the result would be that a participant may bear a withholding that, given their specific conditions, offers them no fiscal benefit.
Ultimately, this new interpretation by the Council of State and the DIAN not only enhances tax equity in joint venture agreements but also leaves room to consider more flexible arrangements in specific scenarios—so long as they respect the principles of transparency and tax fairness and reflect the economic reality of the agreement.