Taxation – Personal/Corporate
Excerpt from an Overview of Colombia’s Financial System
For personal taxation you are considered a resident for tax purposes if you are present in the country for more than 183 days (cumulative) in a 365 day period. This means you will be taxed on your worldwide income. Taxes must be filed singly, not jointly. If you own property jointly, this will allow you to reduce your tax exposure. The tax process here is called ”Declaration of Rent” – Declaracion de Renta and is managed by the DIAN.
Most income is subject to taxes. In principle pension funds are not taxed and 25% of labour income is exempt. Capital gains, that is inheritance, gifts and sales of real estate are taxed at 10%. The sale of Colombian stocks, through a stock exchange are exempt as long as they are not more than 10% of the total shares of the issuing company. There are provisions for health expenses up to a maximum of 32.209.000 COP in 2013, providing the individuals income does not exceed 96.000.000 It is also possible to deduct the interest related to a purchase of a home.
As tax avoidance is not uncommon in Colombia, the government assesses an annual 3% tax on a resident’s net worth, based on the previous year. Assets such as shares in Colombian stocks and the individual’s residence, up to a certain value, are exempt.
Any foreign entity is required to pay capital gains and income tax on any capital gain or Colombian source income received in the country whether directly or through branches within the country.
Foreign investors who receive dividends from a Colombian company are not taxed providing the dividends are issued from profits that have been subject to a corporate income tax in Colombia. If dividends are issued from profits not taxed at the corporate level they face a withholding tax of 33 %.
Generally a capital gains generated by selling shares of Colombian companies are taxed at rate of 10 %.
The information in this article is general. As Colombia is a developing country the government is continually modifying laws and regulations to make improvements within the country and to make investing easier and more secure. We do are best to ensure that the details that EA Colombia provides is accurate and current. You are strongly advised before you make any steps to invest personally or corporately within Colombia that you do your due diligence and seek the advice of professional accountants and lawyers.