Deed in Lieu of Payment Colombia (Dación en Pago)

A Deed in Lieu of Payment Colombia (Dación en Pago) is a bilateral agreement governed by the Código Civil de Colombia — Ley 57 de 1887, specifically Articles 1625, 1626, and 1627, through which a debtor (deudor) extinguishes an existing obligation by delivering to the creditor (acreedor) an asset or performance different from the one originally stipulated, with the creditor's express consent to accept such substitution as complete satisfaction of the debt. Under Colombian civil doctrine and the jurisprudence of the Sala de Casación Civil of the Corte Suprema de Justicia, the dación en pago constitutes a mode of extinguishing obligations (modo de extinción de las obligaciones) analogous to payment (pago), regulated under Book Fourth, Title XIV of the Código Civil.

The legal foundation for dación en pago in commercial transactions rests in Código de Comercio — Decreto 410 de 1971, Article 887, which establishes that when the debtor delivers property or performs an act different from the one owed, the obligation is extinguished if the creditor accepts. Article 1627 of the Código Civil requires that payment must be made to the creditor or to the person authorized to receive on the creditor's behalf, and Article 1626 establishes that payment is the effective performance of the obligation. The Corte Suprema de Justicia, Sala de Casación Civil, in Sentencia SC5765-2019, confirmed that dación en pago requires the genuine and free consent of both parties, the existence of a prior valid obligation, the delivery of a substitute asset, and the express agreement that such delivery extinguishes the original debt in whole or in part.

When the dación en pago involves real property (bienes inmuebles), the agreement must be formalized through escritura pública before a Notaría Pública under Article 1857 of the Código Civil and registered with the Oficina de Registro de Instrumentos Públicos of the corresponding municipality or district under Ley 1579 de 2012 (Estatuto de Registro de Instrumentos Públicos). The Superintendencia de Notariado y Registro (SNR) oversees both notarial and registry functions. Transfer taxes — specifically the impuesto de registro under Ley 223 de 1995 Article 226 and the retención en la fuente por concepto de renta under the Estatuto Tributario (Decreto 624 de 1989) Articles 398 through 401 — apply to the transfer of real property through dación en pago at the same rates applicable to ordinary sales.

For movable property (bienes muebles), delivery follows the rules established in Código Civil Articles 740 through 745 (tradition) and Código de Comercio Articles 922 through 930 for commercial goods. When vehicles are involved, the transfer must be registered with the RUNT (Registro Único Nacional de Tránsito) under Ley 769 de 2002 (Código Nacional de Tránsito). For shares or corporate interests, the transfer follows the rules of the Código de Comercio Articles 406 through 418 for sociedades anónimas and Ley 1258 de 2008 for sociedades por acciones simplificadas (SAS).

The Dirección de Impuestos y Aduanas Nacionales (DIAN) treats dación en pago as a taxable event for income tax purposes under the Estatuto Tributario. The debtor may realize a gain or loss on the disposition of the transferred asset, calculated as the difference between the fair market value at the date of transfer and the adjusted tax basis. Where the transferred asset is subject to IVA (Impuesto sobre el Valor Agregado) under Estatuto Tributario Articles 420 through 424, the dación en pago triggers IVA obligations at the general rate of 19%.

Labour law applications of dación en pago arise under the Código Sustantivo del Trabajo (CST) when an employer and employee agree to settle outstanding wages, prestaciones sociales, or indemnización through the delivery of assets rather than cash. The Ministerio del Trabajo (MinTrabajo) and the Sala de Casación Laboral of the Corte Suprema de Justicia have held that such agreements must comply with the irrenunciabilidad principle of CST Article 14 — the worker cannot waive minimum statutory benefits. Conciliation proceedings before MinTrabajo or a centro de conciliación under Ley 640 de 2001 provide the procedural framework for validating labour-related dación en pago arrangements.

A Deed in Lieu of Payment Colombia (Dación en Pago) is needed whenever a debtor lacks sufficient liquid funds to satisfy an outstanding obligation in cash and proposes to deliver an alternative asset — real property, movable goods, corporate shares, or receivables — to the creditor in full or partial settlement of the debt. Article 1626 of the Código Civil de Colombia defines payment as the effective performance of the obligation, and Article 887 of the Código de Comercio permits the creditor to accept a different performance from the one originally stipulated.

The agreement is required when a borrower under a contrato de mutuo (loan agreement governed by Código Civil Articles 2221 through 2235) or pagaré (promissory note under Código de Comercio Articles 709 through 712) cannot meet scheduled repayment obligations and proposes to transfer real property, vehicles, equipment, or other assets to the lender in lieu of cash payment. Financial institutions supervised by the Superintendencia Financiera de Colombia (SFC) regularly employ dación en pago in restructuring distressed commercial and mortgage loans under the framework of the Estatuto Orgánico del Sistema Financiero — Decreto 663 de 1993.

A dación en pago is needed when parties to a commercial contract governed by the Código de Comercio seek to resolve outstanding accounts payable without resorting to judicial collection proceedings (procesos ejecutivos) before the Juzgados Civiles del Circuito. Under Article 422 of the Código General del Proceso — Ley 1564 de 2012 — a creditor holding a título ejecutivo may initiate compulsory collection; the dación en pago agreement avoids such litigation by providing voluntary satisfaction of the debt.

Construction and real estate developers in Colombia frequently use dación en pago to settle obligations with contractors, subcontractors, and suppliers by transferring finished units or building lots. The Superintendencia de Sociedades has recognized the validity of dación en pago between related companies (vinculadas económicas) under its supervision powers granted by Ley 222 de 1995.

Tax authorities also accept dación en pago: under Estatuto Tributario Article 820, the DIAN may accept assets in payment of outstanding tax obligations through a procedure established by Decreto 2275 de 2017. Municipal tax authorities in Bogotá D.C. under Decreto Distrital 352 de 2002, Medellín, Cali, and Barranquilla maintain similar mechanisms for settling predial (property tax) and industria y comercio (business tax) obligations through asset transfers.

A valid Deed in Lieu of Payment Colombia (Dación en Pago) under Código Civil Articles 1626 and 1627 and Código de Comercio Article 887 must contain the following essential elements to be enforceable and to produce the legal effect of extinguishing the underlying obligation.

Identification of Parties: Full legal name, cédula de ciudadanía (for natural persons) or NIT — Número de Identificación Tributaria assigned by the DIAN (for legal entities), and domicile of both the debtor (deudor) and creditor (acreedor). Where a party is a legal entity — a Sociedad por Acciones Simplificada (SAS) under Ley 1258 de 2008, a Sociedad de Responsabilidad Limitada (SRL/Ltda.), or a Sociedad Anónima (SA) — the Certificado de Existencia y Representación Legal issued by the corresponding Cámara de Comercio must verify the representante legal's authority to bind the entity.

Description of the Original Obligation: Precise identification of the debt being extinguished — including the source (contrato de mutuo, pagaré, factura de venta, sentencia judicial), the original amount, accrued interest calculated under the rules of Código de Comercio Article 884 (intereses de mora comerciales) or Código Civil Article 1617 (intereses legales civiles), and the outstanding balance as of the date of the agreement.

Description of the Substitute Asset: Detailed identification of the asset being delivered in lieu of payment. For real property: matrícula inmobiliaria number from the Oficina de Registro de Instrumentos Públicos, cédula catastral, exact location, area, and boundaries (linderos). For vehicles: license plate, RUNT registration number, brand, model, year, VIN. For corporate shares: company name, NIT, number and class of shares, and percentage of capital represented. For movable assets: serial numbers, condition, and agreed valuation.

Agreed Valuation: The value assigned to the substitute asset by mutual agreement of the parties. Under Colombian law, the parties may agree on a value through a commercial appraisal (avalúo comercial) performed by a registered appraiser listed in the Registro Nacional de Avaluadores under Ley 1673 de 2013 and Decreto 556 de 2014. The Superintendencia de Industria y Comercio (SIC) oversees the Registro Nacional de Avaluadores. Where the agreed value exceeds the outstanding debt, the creditor must return the difference; where it falls short, the debtor remains liable for the balance unless the parties expressly agree otherwise.

Express Consent to Extinguish: A clear declaration by the creditor accepting the substitute asset in full or partial satisfaction of the outstanding obligation. The Corte Suprema de Justicia, Sala de Casación Civil, has consistently required that the creditor's acceptance be unequivocal — silence or implied consent is insufficient under Colombian civil law principles established in Código Civil Article 1502 (requisitos de validez del consentimiento).

Delivery and Transfer Mechanism: The procedure for delivering possession and transferring title. Real property requires escritura pública before a Notaría Pública and registration with the Oficina de Registro de Instrumentos Públicos under Ley 1579 de 2012. Vehicles require RUNT transfer under Ley 769 de 2002. Shares require endorsement and registration in the libro de registro de accionistas under Código de Comercio Article 406.

Tax Obligations: Allocation of transfer taxes — impuesto de registro (Ley 223 de 1995 Article 226), retención en la fuente (Estatuto Tributario Articles 398-401), IVA where applicable (Estatuto Tributario Article 420), and notarial fees (derechos notariales under Decreto 2148 de 1983 as updated). The parties should specify which party bears each cost.

Forms-legal.com provides this Dación en Pago Colombia template as a practical starting point for documenting debt extinguishment through asset transfer. Every dación en pago agreement should be reviewed by a licensed abogado civilista or comercialista to confirm compliance with applicable registry, tax, and regulatory requirements specific to the type of asset being transferred.