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Colombia - Taxation

Personal income tax (impuesto de renta) rates in Colombia range from 10% to 35% depending upon the level of income that you are on. The first 1090 pesos of income is considered to be tax free. Expats with residency status will find that for the first five years of their stay in the country they will only be taxed monies they earn in the country though after the five year deadline has passed they will have to pay taxes on all income, regardless of its country of origin. So those retiring to Colombia will not have to pay tax on their pension from the country of origin for the first five years but once the deadline is passed will need to submit the details to the Colombian tax office. It is also advisable to check the situation in your home country, as you may be required to pay taxes there too if there is no agreement in place with Colombia to avoid double charges.

Colombia has some tax treaties in place but these are mainly with other South American countries. If you are in a position where you are being charged tax in another country on income earned there then you may be able to offset that amount against what you would have to pay in Colombia.

Those that have the status of a non-resident will only need to pay taxes on those monies which have been earned within Colombia. A non-resident is someone who only spends short periods of time in the country and a resident is one who spends more than six months of the tax year living in the country.

VAT (Impuesto al Valor Agregado) in Colombia varies depending upon the item being bought although the standard rate is 16% and is applied to most goods which have been imported into the country. There are also some higher rates which apply to items which may be considered to be luxury goods. Residents are also liable for local municipal taxes and property taxes (impuesto sobre la propriedad). Property taxes cover all types of properties and there are sixteen different banding levels. The band your property will fall into will depend on the value of the property.

The tax year (año fiscal) in Colombia runs from January to December and if a person is resident for six months of that year then they are considered to be liable for taxes. Taxable income is anything that is earned from work or capital. This includes any commissions or bonuses, holiday pay and any other work related benefits. Some types of income are exempt from income tax including redundancy payments, social security benefits and death benefits.

Those who have shares in a Colombian company will only be required to pay income tax on the dividends if the company has not already paid tax on it as part of its profits. Capital gains tax (impuesto a las ganancias) is also payable on inheritances and sales of assets if the recipient is not already obliged to keep accounting records and would be taxed at the standard income tax rate. However, life insurance policies and royalties for copyrights are not subject to taxation.

Items such as mortgage loan interest are considered to be deductible expenses when calculating tax payments. Health insurance costs and school fees are also deductible as are contributions to pension funds. These deductions are not subject to nationality and can be claimed by anyone paying taxes in Colombia. There are no extra allowances for those who have children.

There are some tax incentives (estimulo fiscal) for those who invest in Colombian companies, particularly those in the agricultural industry or that import or export goods. The exact details can be obtained from the National Tax and Customs Office.

Inheritance tax (impuesto a la herencia) is not charged in Colombia but would depend a great deal on the type of bequest or gift. If it can be classified as income for the recipient then it should be taken into consideration when filing a tax return. As of 2010 there is also no stamp duty payable as this tax has gradually been phased out.

All those who do not have their tax payments automatically deducted from their salary must file a tax return (declaración de impuestos). Returns that are not filed on time are subject to fines for each month of delay.

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