What is a Colombian Fiduciary (Fiducia) and How Does it Compare to a U.S. Trust?
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October 29, 2025A Colombian Fiduciary (Fiducia) is a popular financial structure used in Colombia for managing assets, investments, and real estate projects. While it might look similar to a U.S. trust, the two are not treated the same—especially by the IRS. For U.S. taxpayers with ties to Colombia, misunderstanding this difference can lead to serious tax reporting issues. This article explains how Fiducias work, how they compare to U.S. trusts, and why the IRS often classifies them as foreign trusts—triggering reporting obligations on Forms 3520 and 3520-A. If you’re investing or managing property in Colombia, understanding the U.S. tax implications of a Fiducia is essential to stay compliant and avoid costly penalties.
When individuals or businesses in Colombia want to protect assets, manage investments, or structure real estate projects, one of the most common tools they use is the Colombian Fiduciary, also known as a Fiducia. While the word “fiducia” might sound similar to the concept of a “trust” in the United States, these two structures have important legal and tax differences—especially when viewed through the lens of the IRS and U.S. tax compliance.
If you’re a U.S. taxpayer with ties to Colombia—through family, business, or investments—understanding these differences is crucial to avoid missteps that could trigger reporting obligations or IRS penalties.
What is a Colombian Fiduciary (Fiducia)?
In Colombia, a Fiduciary (Fiducia) is a contractual arrangement with a licensed fiduciary company (Sociedad Fiduciaria) that manages assets on behalf of individuals, companies, or investors. The fiduciary company acts as a neutral third party, ensuring that the assets are administered according to the terms of the agreement.
There are several types of Fiducias in Colombia, including:
- Fiducia Mercantil (Commercial Fiduciary): Used for asset management, investment, or business ventures.
- Fiducia Inmobiliaria (Real Estate Fiduciary): Common in construction and real estate projects to safeguard funds from buyers and ensure proper completion of the project.
- Fiducia de Administración (Administrative Fiduciary): Where the fiduciary company manages assets or funds for a specific purpose.
- Fiducia de Inversión (Investment Fiduciary): Focused on investment portfolios and financial products.
In practice, Colombians use fiduciary structures to provide security, transparency, and efficiency in asset and project management.
How Does a Fiducia Compare to a U.S. Trust?
At first glance, a Colombian Fiducia and a U.S. trust appear similar—they both involve one party holding assets for the benefit of another. But legally and practically, they function very differently:
| Feature | Colombian Fiduciary (Fiducia) | U.S. Trust |
| Legal Nature | A contract with a fiduciary company regulated by Colombian law. | A legal entity/arrangement created under state trust law. |
| Parties Involved | Fiduciary company (trustee), settlor, and beneficiaries. | Grantor/settlor, trustee, and beneficiaries. |
| Regulation | Overseen by the Colombian Financial Superintendence. | Governed by U.S. state trust law. |
| Flexibility | Used heavily in real estate and investment projects. | Commonly used for estate planning, tax planning, and asset protection. |
| Ownership | Assets are legally transferred to the fiduciary company. | Assets are legally held by the trustee for beneficiaries. |
How Does the IRS View a Colombian Fiduciary?
Here’s where things get complicated. The IRS does not treat Colombian Fiducias the same way Colombians do.
From the perspective of the IRS:
- Many Fiducias are considered foreign trusts under U.S. tax rules.
- If you are a U.S. citizen, resident, or green card holder with an interest in a Fiducia, you may be required to file Form 3520 (Annual Return to Report Transactions with Foreign Trusts) and Form 3520-A (Annual Information Return of Foreign Trusts).
- Even if the Fiducia is not a “trust” under Colombian law, the IRS can classify it as one for U.S. reporting purposes.
- Penalties for noncompliance are steep—up to $10,000 per missed form.
In some cases, depending on the structure and level of control, the Fiducia may be treated as an investment account rather than a foreign trust. However, this determination requires careful legal and tax analysis.
Why This Matters for U.S. Taxpayers
If you are a U.S. taxpayer with ties to Colombia, it’s essential to:
- Identify your Fiducia correctly – Determine whether it is likely to be treated as a foreign trust by the IRS.
- Comply with IRS reporting rules – File Form 3520/3520-A or other required disclosures.
- Avoid penalties – The IRS imposes heavy fines for unreported foreign trusts.
- Seek professional guidance – International tax law is nuanced. An advisor experienced in Colombian Fiducias and U.S. trust taxation can help you stay compliant.
A Colombian Fiduciary (Fiducia) is a powerful financial tool widely used in Colombia for asset management, investments, and real estate projects. But when viewed through the eyes of the IRS, a Fiducia may be treated as a foreign trust—bringing with it complex U.S. tax reporting obligations.
Understanding the distinction between a Colombian Fiducia and a U.S. trust is critical for anyone with cross-border ties. If you’re a U.S. person investing in Colombia, don’t assume that because the Fiducia is “just a contract” under Colombian law, the IRS will see it the same way.
✅ Key Takeaway:
If you hold or plan to invest in a Colombian Fiducia, consult an international tax advisor to determine your IRS reporting obligations. The cost of noncompliance far outweighs the cost of proper planning.., I’ve seen how proper planning transforms tax season from a source of stress into an opportunity for strategic growth and savings. Staying informed, proactive, and organized is the key to long-term financial success as a contractor.
