Costs you should consider when buying or selling properties in Colombia

With the entry into force of Law 2277 of 2022, by which the tax reform was adopted in Colombia and with the update of the rates of notary and registry fees for 2023, the costs of the disposal of properties increased to a significant extent and new costs were generated, so it is essential to take them into account before making this type of transactions. Therefore, in the present article we will talk about the stamp tax, the registration and notary fees and the charity tax in order to present a clear picture to people who are interested in buying properties this year and who must assume these costs.

In addition to the registry and notary fees and the charity tax, the tax reform brings back the stamp tax for documents that have been elevated to public deed for the disposal of properties. The national stamp tax is a tax applied on public or private documents in which obligations are created, extinguished or modified, where wealth is transferred from one person to another. This tax was in force in Colombia until 2009, until the enforcement of Law 111 of 2006, which amended the Tax Statute at the time, gradually eliminated the stamp tax rate leaving it at 0% as of 2010. However, with the reform this tax was imposed again as of January 1, 2023.

Article 77 of Law 2277 of 2022, amended Article 519 of the Tax Statute stating in it´s third paragraph that, as from 2023, the stamp tax rate for documents that have been executed in a public deed for the disposal, in any title, of properties will be determined as follows:

However, this Law is not clear in determining who is the taxpayer of such tax. Therefore, on February 24, 2023, the National Tax and Customs Office ("DIAN") issued a general concept regarding the stamp tax in Law 2277 of 2022. In such concept, the DIAN defined the scope of the expression "disposal by any title" establishing that it must be understood as the action through which the ownership of a property is transferred regardless of the way or the title; either if it is onerous or gratuitous. Additionally, the concept establishes that the transfer of a property within the framework of a mercantile trust constitutes a disposal for stamp tax purposes.

Finally, the DIAN in the same concept referred to the taxpayer and the contributor of such tax, referring to Article 515 of the Tax Statute which establishes that the contributors are natural or legal entities, their assimilated and public entities not expressly exempted, who intervene as grantors, drawers, acceptors, issuers or subscribers of the documents, as well as the person in whose favor the document is issued.

The DIAN clarified that the stamp tax can be economically assumed by the parties (buyer and seller) or by only one of them, since Law 2227 of 2022 did not establish a form of distribution of the percentage of the tax, this remains in question.
Thus, at the time of the disposal of a property whose value exceeds 20,000 UVT, the parties are free to agree on who will pay the stamp tax and in which percentages.

In addition to the stamp tax, the parties involved in the purchase and sale of a property must consider the costs of the registration fees, which is the cost to be paid for the registration of the titles in the Public Instruments Registry Offices. The rates of registration fees were updated for legal transactions with quantity by the Resolution 00009 of January 6, 2023 of the Superintendence of Notary and Registry as follows:

In the sale and purchase of properties for values lower than the cadastral appraisal, the registration fees will be settled based on the cadastral appraisal. Normally in this type of transactions, these costs derived from the registry rights are assumed as a whole by the buyer.

There are also notary fees, which are the cost of preparing the public deed at the notary's office. The rates of notary fees were updated for legal transactions with quantity by the Resolution 00387 of January 23, 2023 of the Superintendence of Notary and Registry as follows:

•  For acts whose amount is equal to or less than COP$ 214,600, the fee is COP$ 25,500.
• For acts whose amount exceeds COP$ 214,600, the fee is 3 X ONE THOUSAND.

Normally, the costs of notary fees are paid by the parties in equal proportions. 

Finally, the registration and annotation tax, popularly known as the charity tax, is the cost paid at the departmental level when legal transactions are made on properties subject to registration, as it is the case of real estate properties. This tax is regulated by Chapter XII of Law 223 of 1995, in which Article 229 states that the taxable base on which the tax is settled for the sale and purchase of properties is the value incorporated in the public deed provided if the value is not lower than the cadastral appraisal, in which case the cadastral appraisal value would be taken as the basis. The registration tax rates are determined by each department according to the range set by Law 223 of 1995, which is between 0.5% and 1%, this tax is usually assumed entirely by the buyer.

In conclusion, it is important to take into account the costs related to the disposal of properties before taking the decision of buying or selling, since these are significant costs that may have an impact on the price of the property and impact the viability of the transaction.