Colombia country tax guide

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Corporate Tax Rate:

Colombian companies are taxed on Worldwide Income. A Permanent Establishment (“PE”) must determine its income tax based on its attributable worldwide income. Foreign companies are taxed only on their Colombian-Source income.

• The current Corporate Income Tax (“CIT”) rate is 35% for Fiscal Year (“FY”) 2022 onwards.
• Worldwide income earned by non-resident entities attributable to branches and the Permanent Establishment will be taxed at 35% for FY 2022 (increased from 31% for 2021) or 10%, depending on whether the income is treated as ordinary income or capital gain.

However, the Government has recently presented for the Congress of the Republic approval a tax bill that aims to increase the national public budget revenues by raising the corporate income tax rate from 30% to 35% from 2022 onwards.

Value Added Tax (“VAT”) rate:

The standard VAT rate is 19%, with a preferential rate of 0% applying to exports and certain domestic supplies. A reduced rate of 5% applies to certain goods and services.

Turnover Tax or Industry and Commerce Tax rate:

Rates ranging from 0.2% to 1%, depending on the business activity subject to taxation. A supplementary billboards tax of 15% of the Industry and Commerce Tax payable to billboards and others advertising boards in public spaces.

National Consumption Tax Rate:

Rates ranging from 2% to 16% depending on the service or goods.

Financial Transactions Tax Rate (“GMF”):

0.4%.

Real Estate Tax Rate:

It depends on the nature and use of the property and generally ranges from 0.5% to 1.2% of the fiscal assessment value. Main corporation tax characteristics

Registration Tax Rate:

Rates ranging from 0.3% to 0.7% for documents registered before the Chamber of Commerce and 0.5% to 1% for documents registered with the Registry of Public Deeds.

Carbon Tax:

Corporate entities may also be subject to a Carbon Tax based on the carbon content of fossil fuels, including all petroleum derivatives used for energy purposes. The Carbon Tax rate is based on the carbon dioxide (“CO2”) emitted by each specified fuel, expressed as “kilogram of CO2” per unit of energy, according to the volume or weight of the fuel.

Corporate Wealth Tax:

The latest tax reform does not extend the application of wealth tax to corporations for taxable year 2022.

Dividends:

Dividend distribution for Colombian companies:

1. Dividends paid out of non-taxed profits: the general corporate tax rate is applied 35% FY 2022 onwards. Then the 7.5% Withholding Tax (“WHT”) rate is applied once the CIT has been reduced.

2. Dividends paid out of taxed profits: taxed at a rate of 7.5%.

Dividend distribution for foreign companies and Permanent Establishment:

1. Dividends paid out of non-taxed profits: the general corporate tax rate is applied 35% FY 2022 onwards. Then the 10% WHT rate is applied once this tax has been reduced.
2. Dividends paid out of taxed profits: taxed at a rate of 10%.

Interest:

• The general WHT rate for outbound payments in short term loans is 20%.
• For long term loans /leasing agreements (1 year and above), the WHT applicable is 15%.
• Interest incurred in leasing agreements with foreign entities for ships, helicopters, and airplanes purchases is subject to a 1% WHT.
• Financial yields and interests from loan agreements with a term longer than 8 years, addressed to financing infrastructure projects, are subject to a 5% WHT.
• The WHT rate applicable to Colombian residents in domestic loan operations is 4%. — Thin capitalization rules apply to local debtors for the interest deduction.

Capital Gains:

1. The industrial and commercial companies of the State and the mixed economy companies of the departmental, municipal and district order: Income Tax rate of 9%.
2. Publishing companies based in Colombia as legal entities whose economic activity and corporate purpose is exclusively the publishing of books, magazines, pamphlets, or serialized collectibles of a scientific or cultural nature: Income Tax rate of 9%.
3. Hotels and theme parks that are built/remodeled/ expanded and that comply with the requirements of the law: Income Tax rate of 9% for a certain time.
4. Non-profit Entities Regime: Income Tax rate of 20% on the net profit or surplus will be exempt when it is destined to programs that develop the corporate purpose and meritorious activity such as education, health, culture, and social development.
5. Qualifying businesses located in Free Trade Zones have a reduced rate of 20%.
6. Exempt Income for the development of Colombian countryside, the sale of non-conventional energy sources and development of technological value-added industries and creative activities, among others.

Major investments benefits (“Mega Inversiones”): a reduced rate of 27%.

Personal Income Tax:

Colombian tax residents are taxed on their worldwide income, whereas non-residents are taxed only on their Colombian-source income. The personal income rate ranges from 0% to 39%.

Value Added Tax (VAT) rate:

The standard VAT rate is 19%, with a preferential rate of 0% applying to exports and certain domestic supplies. A reduced rate of 5% applies to certain goods and services.

Turnover Tax or Industry and Commerce Tax rate:

Rates ranging from 0.2% to 1.4%, depending on the business activity subject to taxation. A supplementary billboards tax of 15% of the Industry and Commerce Tax payable to billboards and others advertising boards in public spaces.

National Consumption Tax Rate:

Tax range from 2% to 16% depending on the service or goods.

Financial Transactions Tax Rate (“GMF”):

0.4%.

Real Estate Tax Rate:

It depends on the nature and use of the property and generally ranges from 0.5% to 1.2% of the fiscal assessment value.

Registration Tax Rate:

Rates ranging from 0.3% to 0.7% for documents registered with the Chamber of Commerce and 0.5% to 1% for documents registered with the Registry of Public Deeds.

In Colombia, there are no mechanisms considering the family position.

The latest tax reform of 2021 does not extend the application of wealth tax for individuals for taxable year 2022.

In Colombia, there are no other beneficial regimens or incentives for individuals.

Dividends for Colombian Residents.

1. Dividends paid out of taxed profits: taxed according to the following table:

2. Dividends paid out of non-taxed profits: the general Corporate Tax rate is applied 35% FY 2022 onwards. Then the 10% WHT rate is applied once this tax has been reduced.

For interest and capital gains: the same rules indicated for CIT are applicable.

Note: In Colombia, there is no specific tax on inheritance and gifts. For tax purposes, inheritance and gifts are considered extraordinary income taxed with Capital Gains tax at a rate of 10%.

Colombia does not have a Golden Visa or an equivalent regime.

Colombia does not have any investment immigration program. However, foreign investors who comply with the minimum amounts required by the Colombian Government may apply for an Investor Visa in Colombia, depending on the amounts invested and the corresponding registration at the Colombian Central Bank (“Banco de la República”).

Nowadays, there are two types of investment visas in Colombia: i) Migrant’s Visa and ii) Residence Visa; for each of them, it will be necessary to comply with a minimum amount of investment in Real Estate and with a minimum permanence in Colombian territory:

1. Migrant’s Visa: 350 Colombian Minimum Wages – COP 317.984,100 (approx. USD 83,680). Valid for three years.
2. Residence Visa: 650 Colombian Minimum Wages – COP 590.541,900 (approx. USD 155,406). Valid for five years.

N/A

Yes, these vehicles are currently recognized by Colombian law and are used for the implementation of various business activities.

No. However, there is a specific tax regime for the trust in Colombia, which have the following main characteristics:

1. The trustee must comply with the formal duties; therefore, he is responsible for penalties arising from the breach of those duties.
2. The trust company must attend the payment of the taxes and interest charges with the trust resources.
3. At the end of each FY, a settlement of the results obtained in the respective period by the trust and each beneficiary must be made.
4. The beneficiaries must include in their income tax returns the income, costs and expenses accrued in the trust in the same FY. They accrue in favor or against the trust with the same fiscal conditions of the revenues, costs and expenses incurred by the trust.
5. The settlor will be liable for the income tax or capital gains tax whenever the assets integrating the trust are transferred to persons or entities other than the settlors.