How to pay taxes in Colombia

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This chapter includes a conceptual description of the country’s national, departmental and municipal taxes. It also includes the tax incentives offered by the Colombian legal system to promote certain productive activities.

It also includes general information on the taxation of natural persons in Colombia.

These are some of the key facts of taxes in Colombia:

  1. The income tax rate is 33%;
  2. The sales tax rate is 19% 
  3. Company profits as of the 2017 taxable year will be taxed at a rate of 5%, except for those distributed among national companies; 
  4. The Colombian Free Trade Zone regime contemplates a 20% income tax rate for certain eligible users. 
  5. There are tax benefits (exemptions, special credits, additional deductions, etc.), which seek to promote priority sectors for the national economy, strengthen social investments and assets of the country’s companies, as well as other which aim to generate more formal employment.

Special income tax deductions:

  • Investments in research, development, technology and innovation are 100% deductible within the taxable period in which they are made. In addition, there could be tax discounts for these investments, as indicated in more detail below;
  • An additional deduction equivalent to 50% of the investment made in the production and use of non-conventional renewable energy sources is also offered;
  • Accelerated depreciation (up to a rate of 20% per year) on machinery, equipment and civil works necessary for the preliminary studies, investment and operation of generation facilities with non-conventional renewable energy sources;
  • Industry and commerce, billboard advertising and real estate taxes actually paid can be deducted by 100% provided they have a causal relationship with the taxpayer’s economic activity;
  • As of the 2017 taxable year, taxpayers will be entitled to deduct the amounts paid as sales tax for the purchase or import of capital goods taxed at the general rate for the purposes of calculating the taxable base of the income tax.

Exempt income: 

  • The exempt income established in Decision 578 of the CAN (in this case revenue is only taxed in the source country, and exempt revenue only in the country of residence);
  • The payment of principal, interest, fees and other items related to external public credit operations, provided they are paid to nonresidents;
  • The sale of electric power generated using wind-based energy, biomass, solar, geothermal, agricultural waste or marine energy, provided the company itself carried out the sale and it meets the established requirements, for a term of fifteen (15) years starting in 2017;
  • The provision of fluvial transport services with boats and slabs of shallow draught for a term of fifteen (15) years as of the effective date of Law 1819 of 2016;
  • The exploitation of new forest plantations;
  • Income associated with affordable and low-income housing;
  • Proceeds from life insurance.

 

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Updated (mm/dd/yyyy): 02.22.2018