EN EN Colombian Superintendency of Companies (insolvency judge) issues ruling relating to Cape Town Convention in Viva Air’s insolvency proceedings 20 August 2024 By: Bernardo Rodríguez Ossa, César Barajas Ruiz, Elisa Muskus Escamilla & Federico García Gutiérrez The Colombian Superintendency of Companies decided to recognize creditors’ claims arising out of international interests registered with the International Registry before the commencement of Viva Air’s insolvency proceedings as second-class credits, subordinated only to labor and fiscal debts. This decision marks a milestone for all lessors and financiers of aircraft objects in Colombia, providing them with the assurance that in the event of insolvency of a debtor, their claims (associated rights) arising out of international interests may be classified as preferential.  Legal background Colombia adopted the 2001 Cape Town Convention on International Interests in Mobile Equipment (“CTC”) and its Protocol on Matters Specific to Aircraft Equipment (“Aircraft Protocol”) pursuant to Law 967 of 2007. In accordance with the declaration made by Colombia under article 39(1)(a) of the CTC, only (i) employee rights and (ii) fiscal debts have priority over an international interest in insolvency proceedings. As per article 30 of the CTC, an international interest such as an aircraft lease agreement is effective in insolvency proceedings against a debtor if prior to the commencement of the insolvency proceedings that interest was registered with the International Registry (“IR”) in conformity with the CTC. In addition, Article 21 of the CTC states that an international interest remains effective if it has not expired or has not been discharged from the IR. This being so, any creditor claims in insolvency proceedings in Colombia arising out of international interests registered with the IR before the commencement of such proceedings should be paid after labour and fiscal debts and recognized as second-class credits. Viva Air’s insolvency As a result of Covid-19 pandemic, the Colombian low-cost carrier Viva Air voluntarily entered a Business Recovery Process (BRP) in February 2023. This was an out-of-court proceeding aimed to help the company maintain operations and stay in business. Despite this effort, the BRP was unsuccessful, and Viva Air was later admitted into reorganization proceedings before the Superintendency of Companies. Due to Viva Air’s inability to establish a feasible business plan to restart its operations, the company was admitted into liquidation proceedings on 21 June 2023. Several aircraft lessors filed claims before the Superintendency of Companies arising out of international interests registered with the IR. These claims included mainly unpaid rents under international aircraft lease agreements signed with Viva Air. Superintendency of Companies decision In a recent hearing, the Superintendency of Companies decided to recognize Viva Air’s creditors’ claims arising out of international interests registered with the IR before 21 June 2023 as second-class credits, subordinated only to labor and fiscal debts. This is the first time that the Superintendency of Companies recognizes credits arising from aircraft lease agreements as second-class credits. This precedent marks a milestone for lessors and financiers of aircraft in Colombia, providing them with the assurance that in the event of a debtor’s insolvency in Colombia, their claims and associated rights with an international interest may be classified as preferential. This classification is contingent upon the international interest being registered with the IR prior to the commencement of insolvency proceedings. The international interest must also remain registered with the IR at least until the approval of the credits ranking and qualification project of the debtor by the insolvency judge. Download Contacto Facebook-f Linkedin Map-marker-alt Síguenos     Carrera 9 No. 74-08 Oficina 504/ Bogotá, D.C. 110221, Colombia  Tel.: + 57 1 601 5185034 + 57 601 3764200 fax: +57 601 3761707 Contacto Síguenos Facebook-f Linkedin Map-marker-alt Carrera 9 No. 74-08 Oficina 504 / Bogotá, D.C. 110221, Colombia  Tel.: + 57 6013764200 +57(1) 3764200 + 57 1 6015185034 +57(1) 5185034 fax: + 57 6013761707 +57(1) 3761707

ES ES ES Double tax treaty between Colombia and France   1. Persons covered The Convention applies to residents of Colombia and / or France. 2. Taxes covered The Convention applies to taxes on income and on capital. 3. Permanent Establishment Permanent establishment means a fixed place of business through which an enterprise carries out its activity. The following are also understood as permanent establishments: a)   A building site or construction or installation project only if it lasts more than 183 days.  b)   The provision of services by a company of one State in the other State through employees or other personnel for more than 183 days within any 12 months.  c)   When a person other than an independent agent acts on behalf of an enterprise and, in doing so, habitually concludes contracts, or habitually plays the principal role leading to the conclusion of contracts on behalf of the company.  d)   When a company from one State carries out activities in the other State concerning the exploration or exploitation of natural resources located in that State, for more than 60 days within any 12 months.   4.Taxation of income   4.1 Income from immovable property Income derived from an immovable property can be taxed in the state where the real estate is situated. The term immovable property also includes accessory assets such as livestock, agricultural equipment and rights to receive payments. 4.2 Business profits Profits of an enterprise from a State will only be subject to taxation in that State unless the company carries out its activity in the other State through a permanent establishment. In this case, the profits that it could have had if it were an independent company will be attributed to the permanent establishment. 4.3 International Shipping and Air Transport  Profits from the operation of ships or aircraft in international traffic are subject to taxation only in the State where the enterprise’s effective administrative headquarters are located. 4.4 Associated enterprises The Convention establishes a definition of associated enterprises mainly for the application of the transfer pricing regime. If the associated companies are linked in their commercial or financial relations by agreed conditions that differ from those that would be agreed by independent companies, the profits may be subject to taxation. 4.5 Dividends Dividends may be taxed in the State of the recipient of the dividends. Likewise, dividends can be taxed in the State of the enterprise that pays the dividends. However, in the latter case, if the beneficial owner is a resident of the other State, this tax may not exceed: 5% of the dividends if the beneficial owner is an enterprise that directly owns at least 20% of the capital of the enterprise paying the dividends. 15% of the dividends in all other cases. In the case of dividends paid by a Colombian enterprise charged to profits that have not been subject to income tax at the enterprise level, the tax cannot exceed 15% of the dividends. 4.6 Interest Interest may be taxed in the state of the recipient. Likewise, interest can be taxed in the State from which the interest originates: However, in the latter case, if the beneficial owner is a resident of the other State, this tax cannot exceed 10% of the interest. This rate is more beneficial than the Colombian rate for payments abroad of 15% or 20% depending on whether the credit is greater than one year. Notwithstanding the foregoing, the interest will be taxable only in the State of the recipient of the interest, if that person is the beneficial owner of the interest and one of the following conditions is met: Said person is a Contracting State of the Convention, territorial authority or public entity, including the Central Bank; or if such interest is paid by one of those States or public law entities; Such interest is paid in respect of credit guaranteed, insured, or subsidized by a Contracting State or by someone acting on its behalf; Such interest is paid in connection with credit sales of industrial, commercial, or scientific equipment, or connection with credit sales of goods or merchandise from one company to another company; Said interests are paid by a credit of any nature granted by a bank, but only if the credit in question is granted for no less than 3 years; Said interests are paid by a financial institution of a State to a financial institution of the other Contracting State. 4.7 Royalties Royalties may be taxed in the State of the beneficial owner. However, they can also be submitted in the State from which they come, in which case the tax cannot exceed 10% of the royalties. This withholding rate is more favorable than the general rate of 20% for royalties of the Colombian Tax Statute. 4.8 Capital Gains Capital gains from the sale of immovable property may be taxed in the state where the property is located. When the shares or similar rights directly or indirectly represent more than 50% of their value in immovable property, the gains from the alienation may be taxed in the State where the real estate is situated. Gains from the sale of a permanent establishment or movable property attributable to it can be taxed indefinitely in the State of the source. The sale of ships or aircraft is only taxed in the Contracting State where the administrative headquarters of the enterprise is situated. Profits obtained by a resident of a state from the sale of shares or other rights of a company resident in the other state, when the alienator, alone or with related parties, has direct or indirect participation of 25% or more in the enterprise, may be taxed in the other State. 4.9 Income from employment Salaries and other similar remuneration obtained by a resident of a State for his work as an employee are only taxed in that State unless the work is done in the other State, in which case he must comply with the requirements contemplated in article 14 of the Convention. 4.10 Directors’ fees The remuneration of