Getting the Money Out: How Capital and Profits Actually Leave a Colombian Solar Investment
Executive summary
Colombia withholds 20% on dividends paid to a non-resident out of profits that already bore corporate income tax, and 48% on dividends paid out of profits that did not. Colombia and the United States have no income tax treaty, so a US investor holding directly pays the statutory rate. Law 1715, the incentive framework that makes Colombian solar attractive at the project level, is one of the more common reasons a distribution lands in the 48% bracket instead of the 20% one.
Most of what gets written about Colombian solar leaves that interaction out. Diligence packages model the asset: irradiation, tariff, capex, offtake. Getting a peso from a plant in Cesar to a dollar account in New York runs through a separate system with its own forms, withholding agents, calendar, and tail risk. A model that stops at project-level cash flow has modeled the asset without modeling the investment.
What follows walks through that system: registration, withholding, timing, and what 2026 added.
Registration is the permission slip
Colombia's exchange regime is compiled in Resolución Externa 1 de 2018 of the Banco de la República, which replaced the regime that had run since 2000. Foreign capital entering as an investment has to come through the regulated exchange market, meaning an authorized bank or broker acting as an intermediario del mercado cambiario, and be declared on the international investment exchange declaration, Form 4.
Registration is what gives you the right to send money back out. Once the underlying investment is registered, capital and profits move freely with no ceiling on amount. Capital that arrived unregistered, or that was contributed in kind or by capitalizing profits and never filed, has no such right. Colombian counsel sees this regularly, usually from someone who wired money to a Colombian company account three years ago and now wants to exit.
The outbound leg has its own paperwork. To remit profits, the Colombian vehicle produces a certificate from its revisor fiscal, the statutory auditor, stating the registered investment amount and the net profits generated. The bank executes against that certificate. That makes the auditor a hard dependency for the payment date, and a vehicle that has not appointed one tends to find out at the worst possible moment.
Twenty or forty-eight
Non-resident dividend withholding is 20% where the distributed profits already bore corporate income tax. Where they did not, the effective rate is 48%: the 35% corporate rate applied at distribution, then 20% on what remains.
A treaty can reduce that. Colombia has income tax treaties in force with Spain, Chile, Canada, Mexico, Switzerland, the United Kingdom, France, Italy, Japan, and others. It has none with the United States. A US investor holding Colombian assets directly pays the statutory rate. Any structure that claims a lower rate is routing through a treaty jurisdiction, which brings its own substance requirements and its own diligence questions.
Where Law 1715 turns into a distribution problem
Law 1715 of 2014 gives renewable projects a deduction of up to 50% of the investment against taxable income, plus five-year accelerated depreciation, VAT exemption, and customs duty exemption. These benefits are real, and they explain why Colombian project models look the way they do. I covered them in tax incentives for solar energy in Colombia.
That piece did not cover Article 49 of the Tax Statute, which governs how much of a distribution reaches the shareholder as non-taxed profit. The maximum distributable as non-taxed is capped by net commercial profit after tax, and special deductions whose treatment the law does not extend to shareholders do not enlarge that pool. A company that shelters income with the Law 1715 deduction books commercial profit while paying little or no corporate tax on the sheltered portion. When that portion is distributed, there is no corporate-level tax behind it.
In practice, the benefit stays at the company. The shield cuts corporate tax in the early years, and some of the later distributions carry higher withholding than the sponsor's spreadsheet assumed. Whether the combination comes out ahead depends on the size of the deduction, the distribution schedule, and the hold period, and someone has to run that calculation instead of assuming the answer either way. Presenting Law 1715 benefits as a shareholder-level saving is not defensible. They save tax at the company, and part of that saving is given back at distribution.
Ask a Colombian solar sponsor for the Article 49 calculation behind their projected distributions. The answer tells you how carefully the model was built.
Debt and equity do not leak at the same rate
Interest remitted abroad is withheld on a different schedule. The general rate on interest paid on a foreign loan is 20%, with 15% applying to loans with terms of a year or more, and 5% available on interest from loans of eight years or longer financing infrastructure projects structured under Law 1508 of 2012, Colombia's PPP framework. That last rate is conditional and does not apply automatically to any solar SPV. Whether a project qualifies is a legal question to ask early.
For a capital allocator, the debt and equity mix in a cross-border Colombian structure is a tax decision as well as a leverage decision, bounded by thin capitalization limits on how far interest deductibility can be pushed. A structure funded entirely with equity and distributing through dividends has ended up on the highest-withholding route by default, without anyone having analyzed it.
The fund wrapper does not change the character
A Colombian Fondo de Capital Privado administered by a licensed fiduciaria is the structure I described in currency risk and the Colombian solar opportunity. Article 23-1 of the Tax Statute makes an FCP a non-taxpayer for income tax and applies fiscal transparency: income keeps its character, cost basis, and tax treatment as it passes through to the participant, and the fund or its administrator acts as withholding agent at the moment of payment. Deferral applies only where the statute's conditions are met, and the withholding agent is responsible for confirming that they are.
The wrapper helps with some things and not others. It gives you regulatory oversight and an independent administrator, and it resolves the captación masiva question that blocks a lot of early-stage Colombian climate finance. It does not let a Colombian dividend leave the country untaxed. If a pitch implies it does, read the structure carefully.
The calendar nobody models
A solar plant generates revenue monthly. A Colombian company distributes annually, after the ordinary shareholders' meeting that the Commercial Code places in the first three months of the year, and once a dividend is declared it must be paid within a year. Every revenue route available to the asset pays in pesos, whether spot, bilateral, or auctioned, as covered in how Colombian solar sells power.
Put those together and cash sits in COP for months between generation and remittance. The TRM that counts is the one on the day the money converts, not the day the board declared. That gap is the exposure window a hedging program is protecting, and you size it from the distribution calendar, not the generation profile. An NDF struck against an assumed payment date that then slips two quarters hedges the wrong date.
What 2026 added
Congress rejected the government's tax reform bill in December 2025. In February 2026 the government declared an economic, social and ecological emergency under Decree 0150 of February 11, and through Decree 0173 of February 24 created a temporary equity tax on legal entities holding net equity of 200,000 UVT or more, roughly COP 10.47 billion, as of March 1, 2026. The general rate is 0.5%, rising to 1.6% for financial institutions, insurers, brokerages, and coal and crude oil extractives. Declarations were due April 1, with payment in two installments on April 1 and May 4.
Two consequences follow. A Colombian holding vehicle of any real size crosses that threshold easily, since COP 10.47 billion is on the order of USD 2.6 million. And a tax created by emergency decree after a reform failed in Congress is less durable than one passed by statute. For underwriting, this means Colombian fiscal policy in 2026 is being made through instruments that can appear between one distribution and the next.
The tail everyone cites and nobody prices
Colombia's foreign investment statute reserves the government's right to restrict remittances if international reserves fall below three months of imports. Country risk sections quote that clause and almost never size it.
Here is the sizing. Colombia's reserves cover more than nine months of imports and exceed annual external debt service including amortization and interest. On the IMF's reserve adequacy metric the country stood at 1.24 in January 2026, inside the adequate range, and following the central bank's accumulation program reserves sit near USD 74 billion. The trigger is three months, and coverage is above nine. The risk is real but remote, and calling it either a non-issue or a deal-breaker skips the analysis. The coverage ratio is the number to track.
What to diligence
Is the foreign investment registered with the Banco de la República, and can the sponsor produce the Form 4 filings covering every contribution, including in-kind contributions and capitalized profits?
Who is the revisor fiscal, and has the vehicle completed a remittance before? You do not want to learn the answer at the first distribution.
What does the Article 49 calculation show for projected distributions? What share of each distribution falls in the 20% bracket versus the 48% one, and how does the Law 1715 deduction schedule move that split across the hold?
If the structure claims treaty rates, through which jurisdiction, and what substance supports it? There is no US-Colombia treaty to fall back on.
What is the debt-to-equity split of the cross-border funding, at what withholding rate on interest, and does it clear thin capitalization limits?
What is the distribution calendar, and does the hedging program reference those dates or generation dates?
Does the vehicle cross the 200,000 UVT equity tax threshold, and is that cost in the model?
What to watch
I am watching three things. The first is how long the Decree 0173 equity tax lasts, since an obligation created by emergency decree is a weaker commitment in both directions than one created by law. The second is whether the administration that took office in August 2026 brings a new reform bill to Congress, and whether dividend withholding is part of it. The third is the reserve coverage ratio, the number underneath the only clause in this system that can halt payments outright.
None of this changes the asset. Irradiation of 5.5 kWh/m2/day on the Caribbean coast, some of the highest electricity prices in Latin America, and a 13.5 GW approved pipeline are facts about the resource and the market. The repatriation path decides how much of what the asset earns reaches the investor who funded it, and on what date. That path is where a plausible project can turn into a disappointing investment.
Nuentero is software for the full solar project lifecycle, from planning and underwriting through capitalization and execution, in Colombia and the United States. Contact [email protected] or visit app.nuentero.com.
Disclaimer. This article is for general informational and educational purposes only. It does not constitute investment, legal, tax, or financial advice, and it does not take into account the objectives or circumstances of any particular person. Nothing here is an offer to sell or a solicitation of an offer to buy any security or interest in any fund, and no such offer or solicitation will be made except through definitive offering documents (such as a private placement memorandum) to qualified investors in jurisdictions where permitted. Any examples are illustrative of how solar project economics work and are not projections, forecasts, or guarantees of performance. Past or modeled performance is not indicative of future results, and no return is promised or guaranteed. Investments of this kind involve significant risk, including currency risk, regulatory risk, and possible loss of capital. Readers should consult their own professional advisers before making any investment decision.