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BILL NO. __________ 2007

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CONDENSED ARTICLES

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By which the second housing free zones and other arrangements areset up to encourage the investment.REPUBLIC OF COLOMBIA CONGRESSDECREEGENERAL ARRANGEMENTSCHAPTER IFREE ZONE OF SECOND HOUSING IN COLOMBIA1

Article: Purpose:

Present law sets up the tax and special customregulations in investment matters, establish Free Zones of second housing inColombia, in order to generate employment, to develop geographical areaswhere they will be located, infrastructure improvement, demand of goodsand services within Colombia territory and in general to contribute witheconomical and social development of the country.

CHAPTER IIGENERAL DEFINITIONS2

Article: Free Zone of second housing in Colombia.

The free zone of second housing is a continuous geographical area, determined and delimitedwithin the national territory, suitable to be provided with utilities andinfrastructure, in which projects of urban-tourist housing will be developed bynational corporate or foreign branches destined to seasonally or permanentlyhousing of retired and financial foreigners under special taxes and customregulations.

Paragraph 1

: Investment in a Free Zone of second house must be equal orsuperior to USD 200 millions, availability or access to these resources mustbe accredited by the investor developer. He must guarantee it will be usedunder terms and conditions set forth in the construction project.

Paragraph 2

: Declaration of a Free Zone will be issued by the DIAN througha Resolution for a term of 20 years, extendable by the same time,certificated previously by local competent authorities that the area could beprovided with utilities and infrastructure, and a concept about tourist

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convenience, viability and incidence issued by Commerce, Industry andTourist Ministry.

Article: Second housing Free Zones’ investors:

For the purposes setforth in the law following are the investors of second housing:a) Retiree or capital rental investor: National or Foreign person no residentin Colombia, who purchase an apartment or house located in the Free Zoneof second housing, destined to his permanent or transitory personal house,with possibility of renting it to tourists no residents in Colombia.b) Investor Developer: National legal person or a Branch in Colombia of aForeign Corporate, whose corporate purpose is the construction,development and sales of their constructed buildings in Free Zones of secondhousing duly authorized by the Dian.The investor developer Corporate must be formed exclusively for thispurpose, and it must be located and developing its economical activity onlyand exclusively in the authorized free zone.

Paragraph

: For development of the projects and sale of buildings theinvestor developer could sign commercial fiduciary contracts.

Article: Manager of a second housing free zone.

It is the nationallegal person or branch in Colombia of a foreign corporate, which mainpurpose is the direction, management and supervision of one or severalsecond housing free zones in Colombia. The rank of manager is acquiredwhen the DIAN issued an authorization to act as such.The manager of a second housing Free Zone, could be at the same time aninvestor developer. For this purpose the Dian will emit a concept whenissuing the declaration of a Free Zone, authorizing the investor developer toact also as manager.Government will set up regulations on this matter.

5th Article

: For regulation of this chapter, national government should:1. Determine the related delimitation, requirements, authorization,functioning, and management of the second housing free zone inColombia2. Set up mechanisms to verify, by the seller, the compliance of requirements and conditions to qualify the investors as beneficiaries of treatment enshrined in the present law, as well as the changes of holding on these investments.3. Set up mechanisms to verify compliance of requirements andconditiosn to authorize the investor developers, as beneficiaries of treatment enshrined in the present law.

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TITTLE IITAX AND CUSTOM REGIMECHAPTER ITREATMENT OF INVESTORS6

Article

. Investor referred to in the literal a) of 3

article of present law,who purchase apartments or houses located in second housing free zone, areexcluded of presumptive income, it is not mandatory to declare income andcomplementaries in Colombia, neither they are payer of patrimonial tax, allof them related with that property, the house ware for first equipment, acar, an airplane, a sport or recreative boat under custom harmonizedclassification 89.03 destined to their personal use, introduced temporally inthe Free Zone

Paragraph 1

. Retired or financial investors referred to in this law are notsubject to income and complementaries taxes related to income forretirement and /or capital income earned abroad.

Paragraph 2

. Purchasing of a property in these free zone could be directlyor through a commercial fiduciary contract, in which the constituent partmust be the same beneficary.

Article

. Income received by investor or his couple for concept of sale of his apartment or house in the free zone in Colombia, is not consider incomeneither occasional profit as long as those who carried out the payment havecondition of retired or capital rental abroad.As well as, income received by these investors or his couple for concept of temporary rental of his apartment or house in the free zone in Colombia, isnot consider income neither occasional profit as long as those who carriedout the payment have condition of tourist no resident in Colombia.When they receive income or rental of a national source and a differentnature to those mentioned above, and/or possessing other different propertyinside or outside of the free zone, they must comply with obligations of ourtributary law about income and complementary tax and patrimonial taxrelated to these goods.

Article

. Investor developers of a second housing free zone in Colombiawill have following tributary treatment:- Exemption of income and complementary tax on income received forsale of properties built in the free zone sold to investor referred to inliteral a)- Exemption of income and complementary tax on income received forrental of properties built in the free zone sold to tourist no residents in