| Colombia Income Tax Rates Colombia income tax rates in 2009 are progressive up to 33% as follows:
Taxable Income (UVT) / Tax Rate
Up to UVT 1,090 0%
UVT 1,091 to 1,700 19%
UVT 1,701 to 4,100 28%
over UVT 4,100 33%
The Colombian tax system is expressed on Tax Value Units, UVT. 1 Unidad de Valor Tributario (UVT) in 2009 equals $23.763
Colombia resident individuals are liable to income tax in respect of their worldwide income. Nonresident individuals are liable to income tax only on their Colombian sourced income. Newly resident individuals are taxed only on Colombian source income during the first four years of their stay in Colombia.
An individual is considered to be a resident of Colombia if he or she stays in Colombia for more than 6 months in a tax year regardless of whether or not the stay is continuous or for a period of more than 6 months ending in a tax year. Tax year in Colombia is the calendar year. A Colombian individual whose family lives in Colombia, or whose main place of business is in Colombia, is also considered a Colombian resident even if he or she does not remain in Colombia.
Capital gains in Colombia are normally subject to ordinary taxation except for a few items that may be subject to special taxation (e.g. gains from lotteries and similar sources) or exempt from income taxation, such as gains arising from inheritances, legacies and gifts up to a certain amount. No inheritance (estate) or gift taxes are levied at the federal or the local level in Colombia. However, certain gifts may be treated as income and therefore be subject to income tax in the hands of individual donees.
Tax Year: Colombia tax year is the calendar year.
Colombia Corporate Tax RatesColombia corporate tax rate in 2009 is 33%.
Companies resident in Columbia are subject to corporate income tax on their worldwide income. Resident corporations are those organised under Colombian law and that have their principal domicile in Colombia. The tax rate for which both domestic companies and branches of foreign companies are taxed is 33%. A reduced tax rate of 15% applies in the 'free-trade zone' areas.
Capital Gains Tax: Capital gains are taxed as ordinary income except for a few types of capital gains that may be subject to special taxation (e.g. gains from lotteries and similar sources) or exempt from income taxation. Equity: A net worth tax (impuesto al patrimonio) is payable between 2007 and 2010 by corporate and individual residents. The tax is imposed if the taxpayer's wealth is equal to or exceeds COP 3 billion on 1 January 2007. The taxpayer's net wealth includes both wealth located in Colombia and net wealth located abroad.
The tax rate is 1.2% on the value of the wealth, excluding the net worth of shares or interests in participations in national entities.
Stamp Tax: The stamp tax rate is reduced to 0.5% in 2009 and 0% in 2010.
Property Tax: Real estate property is subject to municipal taxation (impuesto predial unificado) in Colombia.
The tax is usually levied at rates within a band of 1 to 16 per thousand, with reference to the cadastral value of each property. Undeveloped plots of land may be subject to increased tax rates.
Dividends: Dividends paid to resident shareholders are exempt from income tax if the dividends are distributed out of profits that have been previously taxed at the corporate level. If the distributed profits were not previously taxed at corporate level, they are subject to a withholding tax at the rate of 20% when paid to resident persons.
Interest Deduction: Interest is generally deductible in full, although there are some restrictions where the recipient of the interest is not regulated by the banking authorities.
Foreign Source Income: Colombia taxes resident companies on worldwide income from all domestic and foreign sources. This includes capital gains from the sale of stock of foreign corporations.
Tax Incentives: Special tax incentives are provided to investors in certain specified industries such as agricultural plantations dedicated to the cultivation of fruits, anchovies, rubber and cacao. There are also a number of 'free-trade zones' and 'special import-export systems' which provide for the duty-free entry of capital goods and materials to be used in the production of export goods.
Double Tax Relief: Double taxation is relieved unilaterally by the granting of a foreign tax credit (FTC) against Colombian corporate income tax.
Taxpayers may credit the amount of foreign tax paid on income from abroad, up to a maximum of the Colombian tax that would be due on the amount of income received from abroad.
Colombian resident companies receiving dividends from foreign companies may credit against both foreign withholding taxes paid on the dividends and also the amount of the underlying foreign income tax paid by the foreign company on the profits from which the dividends were paid.
Corporate Groups: There is no concept of group relief for Colombian tax purposes.
Colombia Withholding Tax: The following domestic withholding tax rates apply in respect of payments to non-residents:
- Dividends 33%
- Interest 33%
- Royalties 33%
- Service fees and commissions 33%
- Payments for technical services 10%
None of the double taxation agreements between Colombia and other countries reduce the withholding tax rates below the domestic rates.
Colombia Real Property Tax: Colombian real estate is subject to municipal taxation, which is usually levied at rates within a band of 1 to 16 per thousand based on the value of the property without regard to the number of owners or the taxpayer's personal wealth.
Inheritance Tax / Estate Tax in Colombia: Gifts are treated as capital gains and are subject to tax as ordinary taxable income.
Net Wealth / Net Worth Tax: A presumptive minimum income is calculated annually at a tax rate of 3% on the taxpayer's net worth held in the year immediately preceding the taxable year at issue. Certain assets may be excluded from this calculation, such as shares in Colombian companies and the individual's residence (up to a certain maximum value). Taxpayers with assets valued more than COP 3 billion also are assessed a 1.2% assets tax.
Colombia Social Security Contributions: The employee amounts are 3.875% and 4% of salary for pension and health contributions, respectively.
Financial Transactions Tax
This is a tax that covers all the financial transactions including banknotes, promissory notes, processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other means, bank drafts and bank cheques, money on term deposit, overdrafts, installment loans, documentary and standby letters of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures, safekeeping of documents and other items in safe deposit boxes, currency exchange, sale, distribution or brokerage, with or without advice, unit trusts and similar financial products.
Tax Year: Colombia tax year is the calendar year.
Free Trade Zones and Other Incentives in Colombia
1. Permanent Free Trade Zones: Colombia has the most competitive Free Trade Zones in Latin America: 15% income tax rate and they allow the possibility to sell to the national market.
2. Single Enterprise Free Trade Zones: This type of Free Trade Zone allows companies to establish themselves anywhere in the country.
3. Legal Stability Agreements: These agreements provide the insurance that the laws and their interpretation that the investor found determining for his investment will not be modified.
4. Other Incentives: The Colombian government has created income tax exemptions in priority sectors.
5. Special Import - Export System "Plan Vallejo" for Services: This import-export system allows service exporting companies to import capital goods exempt from custom duties and sales tax (VAT).
Colombia Value Added Tax (VAT) RatesThe standard rate of VAT in Colombia is 16%.
Colombia Value Added Tax is levied on taxable supplies of goods and services by a taxable person within Colombia and on the importation of goods into Colombia by any person. Exports (and some specific items) are zero rated.
Reduced VAT rates: There are two reduced VAT rates in Colombia: 10% applies to commercial air transport and 7% applies to certain foodstuffs.
Exempted items including insurance, healthcare, leasing of property for housing, financial leasing and utilities.
Higher rates from 20% to 25% apply to wines, other alcoholic beverages, pleasure boats and certain vehicles.
The Value-added tax (IVA) is a variant of the sales-tax. This tax charges 16% of the price of sale of all kind of merchandise, goods, and services, with some exceptions: the public transportation, the Water supply and sanitation, and the transportation of natural gas and hydrocarbons. The Dian recognizes two separated categories (regimenes) of IVA responsibles: The common and the simplified. The first refers to commercers with estimated patrimony over 68 million Colombian pesos (about 34,000 dollars), and the second refers to those with patrimony lesser to that. Although both are obligated to pay the same percentage, the simplified responsibles are not obligated to carry separated bookkeepings for the IVA or to generate sale bills.
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