To Pay Tax in Colombia or Not

Bringing this back to life, hopefully.
I've been looking for the last few weeks unsuccessfully for a tax accountant and came across this discussion. I'm hoping for a recommendation to pay 2019 and last year.
Someone mentioned Paula Cruz. I was referred to her but decided against using  her. She asked for 250 mil just for a consult. Lousy communication, but this is Colombia.
I like the idea of a local, not a high priced firm. I'm living in envigado,but location isn't important.
Thanks.

Paula Cruz in one of her YouTube videos stated that pensions up to 105K USD are exempt - but this is not the case.  Only pensions obtained through the Colombian pension system, Colpensas, are eligible for the tax exemption.  I would pass her by and keep looking for a Colombian tax accountant who is familiar with and can cite the laws and statements by DIAN. 

You will have to do your own research for many things, you cannot count on others to know your situation - consult with several tax accountants and see who can show you the laws to back up what they say.

gsusser wrote:

I like the idea of a local, not a high priced firm. I'm living in envigado,but location isn't important.

Dear G. Susser,

If you want a local accountant who charges less than web-promoted accountants, be prepared to communicate in español.  Go in person to the business heart of Envigado .. and seek out business owners until you get a recommendation for an accountant utilized by one (or more) of them.

The recent year I spent in Colombia, I got a referral from a vitamin salesman.  He walked me over to a cable-TV company a block away and personally introduced me to the company accountant.  She asked me a couple of questions in Spanish and deduced on the spot that I did not owe any taxes under the rules then applicable.

There was no charge .. and she refused to accept any payment.

It happened in Ipiales, Nariño.

----

Por favor, estoy buscando servicios de un contador. 
Una recomendación me convendría.

Please, I am seeking accounting services.
A recommendation would suit me.

accounting = (la) contabilidad


  -- cccmedia

Good advice.
I lucked out with recommendations from acquaintances. Helpful discussions with 2 Spanish-speaking independent Medellin accountants with no initial charge. Compare to Paula Cruz who wants 250 mil to say hello, in English.
Thanks guys.

gsusser

It's all too very complicated for me to even think about it. My latina esposa is an accountant and she takes care of it for me. @ 2 years running now.
The fees you will get charged by an accountant will be according to how difficult and involved your individual case is. I am a simple case pensioner and it took her hours and hours to complete DIAN's requirements where I can complete my yearly income taxes in 15 minutes online for free in Canada.

if you are a Canadian citizen, havea principal residence in Canada and your source of income is in   Canada you are aCandian tax resident no matter how many days you reside inColombia per the Canada  Colombia tax treaty

The text of the Canada-Colombia tax treaty which entered into force in June 2012 may be found here:

https://www.canada.ca/en/department-fin … -2008.html

So I'm kinda curious on this law, so if you are a Canadian citizen and you pay taxes in Canada then you shouldn't have to pay taxes in Colombia per tax treaty with Canada-Colombia?

Is that correct? But I guess you still have to file

CanadaDoug wrote:

gsusser

It's all too very complicated for me to even think about it. My latina esposa is an accountant and she takes care of it for me. @ 2 years running now.
The fees you will get charged by an accountant will be according to how difficult and involved your individual case is. I am a simple case pensioner and it took her hours and hours to complete DIAN's requirements where I can complete my yearly income taxes in 15 minutes online for free in Canada.

Hey Doug, what's happening these days? I sent you a text message to your phone but haven't received a response. Also sent you a message on this site but also no response. Is it possible for us to get together again?

Chip did the right thing earlier by attempting to contact an individual member, (presumably) via PM or personal messaging.

No need to embarrass anyone by bringing such a matter to the forum .. if PM or texting doesn't draw a response to a personal matter.

Consider sending another PM if not getting a response from an individual member.

All are welcome to post on the topic of this thread, To Pay Taxes .. or Not

  -- cccmedia, expat.com experts team

Just curious cccmedia, even though the contadora said you did not owe any taxes, did you still have to file a return?

Question for US retirees who file taxes in Colombia - are US Social Security payments taxable as income in Colombia?  (My brother's comtador says no, I have read otherwise).

Adriana Gutierrez wrote:

Question for US retirees who file taxes in Colombia - are US Social Security payments taxable as income in Colombia?  (My brother's comtador says no, I have read otherwise).

Your brother's contador needs to look at the sources available to anyone on the internet.  DIAN itself says that foreign pensions are taxable in their entirety - the only pensions not taxable (up to a certain monthly limit) are those obtained through the Colombia pension system, Colpensa.  No other pensions are exempt from paying taxes.

From  https://www.gerencie.com/pensiones-exen … ombia.html

"Hay residentes fiscales en Colombia que reciben pensiones casadas en el exterior, como un colombiano que se pensionó en el exterior, o un extranjero que es residente fiscal en Colombia.

Estas pensiones no gozan de exención de manera que en su totalidad son gravadas con el impuesto a la renta."

This site cites the laws by name and number:

https://accounter.co/normatividad/conce … -1993.html

"(Renta) Concepto DIAN 58213. Pensiones recibidas en el exterior por contribuyentes en Colombia no se consideran renta exenta (Art. 206 E.T.), al no cumplir los requisitos de la ley 100 de 1993."

Adriana, I have sent you a PM in response to your question, rather than post additional information about my personal tax situation on the forum.

cccmedia

Paula Cruz, a Medellín accountant who specializes in Expat returns, says most of her clients pay little in Colombian taxes.

Cruz was interviewed at the YouTube site How to Expat, which describes her as the best-known accountant serving Expats in the Paisa capital.

Cruz says Expats are generally poorly informed about the truth of Expats' tax obligations as there are "tons of misinformation" on the Internet.  She says she saves her clients money by applying deductions, including the exclusion of taxes paid in a home country.

At YouTube... enter in the searchbox paula cruz Medellin accountant how to expat

Cruz's contact information is shown below the video on the YouTube page.

I receive no compensation for recommending Paula Cruz or this video.

cccmedia

Could it be that they pay little taxes because her clients are deducting US pensions and social security, contrary to the laws cited above by Osage Archer that state that only Colombian pensions are deductible?

Adriana, you could send Paula Cruz an email asking a couple of questions such as this.

I suspect she would respond without asking a fee since you might be a taxpayer-client going forward.

Let us know if you learn the answers.

Her contact information is at her site, https://usatax.co  (under: Contact Us)

cccmedia

For US citizens filing a joint return in the US and also paying taxes in Colombia, how does Colombia credit taxes paid Jointly in the US to individual Colombian tax obligations?  Is there a schedule to disaggregate taxes paid down to  individuals?

We have used Paula Cruz and she was very thorough in explaining the Colombian tax laws to us in the first appointment ,which was totally worth the price she charges. It is a lot of detailed  information and she lays out the possible tax implications for you.
Although she is very busy we are happy with having her as our Tax advisor. She filed our Colombian taxes and was very prompt with all forms copied to us.
The little tax we paid and her fees are a small price to pay to have the privilege to live in this wonderful and affordable country.

sailcompania wrote:

We have used Paula Cruz and she was very thorough in explaining the Colombian tax laws to us...

Expat-accounting specialist Paula Cruz demonstrated her ability to answer questions about Expat taxes in a YouTube interview last year.

Search at YouTube.com... Paula cruz medellin accountant how to expat

CC, Great link on YT for Paula Cruz.

So let me ask.  Are American Expats getting double taxed?  Is this really the case?  Pay US taxes and then another 39% in Colombia?

Can the tax Pros wash this out somehow?

richiellamas wrote:

Are American Expats getting double taxed? ... Pay US taxes and then another 39% in Colombia?

Dear Richie,

Welcome to the Colombia forums of Expat.com.

In a typical year when normal deadlines apply, USA tax filings are due before Colombia's.

The paid income taxes from the USA can be deducted from one's tax basis in Colombia.

Naturally, there are some wrinkles in Colombia tax law that could be construed as exceptions.  See Osage Archer's analysis, above, about the taxable nature of foreign pensions, for instance.

----

Also, income earned in Colombia is deductible from USA taxes up to an amount per individual that exceeds $100,000 US.  (The amount varies by year, and typically -- as years go by -- the deductible amount increases.  The amount can be located at irs.gov ...)

Please let us know where you came upon the idea that Americans are double-taxed, so misconceptions can be corrected more widely.

cccmedia

Six observations and conclusions, after following the Colombia income-tax issue for years....

1.  The Colombia tax laws change relatively frequently.  For instance, a wealth tax for the top one percent has applied in some tax years, and not in others.

2.  Ask three Colombia accountants to review how much income tax you owe .. and you are likely to get three starkly different answers.

3.  Expats may be potentially more likely to get on La DIAN's radar by taking certain, sometimes inadvertent actions, such as obtaining a RUT number, buying/owning a residence in Colombia, obtaining -- or even failing to obtain -- a cédula, establishing a permanent address that is recorded by a national government agency or kicking up a fuss involving legal documents with some agency.

4.  Expats are not going to jail for non-compliance.  Anyone grabbed for non-compliance with income-tax laws will typically have an opportunity to pay restitution and-or a fine.

5.  I have not seen reporting that Colombia has ever crossed borders into another country to pursue a low-level tax avoidance target. 

6.  The degree to which La DIAN is able to determine which non-filing Expats are out of compliance and pursue them effectively .. is unknown to participants on Expat forums.  The DIAN system is opaque;  anyone who has speculated that the agency has stepped up its coordination with Inmigración to locate and dun tax evaders -- "Well, that's just like your opinion, man."

cccmedia

See this first paragraph.
https://www.taxsamaritan.com/us-expat-t … 0Colombia.

Worldwide Income and Citizenship-Based Taxation
The United States is one of the few countries that taxes worldwide income for all of its citizens, no matter where they live and regardless of how long they have been overseas. While some countries have treaties that avoid double taxation, Colombia is not one of them.

You are not "double-taxed" in Colombia.  You are simply taxed on your world-wide income if you are a fiscal resident.  The US does exactly the same.

Yes, you may pay tax in the US and then still owe tax in Colombia due to the higher rates.  Just an example showing the principle with made-up figures:

You are present in Colombia for more than 183 days total in a 365 day period.  You are then considered a tax resident, a fiscal resident, of Colombia and your world-wide income is subject to taxation.  But you only had income from a US pension, say about $40,000 in that year in which you became a Colombia tax resident, and you paid $2000 in income tax to the US.

Since Colombia has higher tax rates - the person above would have some of their income in the 28% bracket as well as some in the 33% bracket - you would owe income tax in Colombia.  Just for the example let's say it comes out to $5000 USD total that you owe.

But that $5000 is before any deductions, you should (may) be able to deduct 25% right off the bat.  And also, per Article 254 of the Estatuto Tributario, you may discount the income tax you paid to the US so you would owe Colombia $5000 minus the $2000 you already paid, for a $3000 income tax bill to Colombia.  Note again these are just made-up numbers to illustrate the point that yes, you may deduct your US taxes already paid, from whatever amount is determined for your Colombia income tax.

This 2019 article states the above very clearly in the heading and the very first paragraph:

https://www.contadia.com/co-blog/impues … cion-renta

My bolding of the salient wording:

Impuestos pagados en el exterior pueden ser descontados en el impuesto de renta

Las personas naturales residentes fiscales en Colombia se encuentran sujetas al impuesto de renta por sus ingresos ordinarios y ganancias ocasionales tanto de fuente nacional como de fuente extranjera, y por su patrimonio poseído dentro y fuera del país. Sin embargo, con el ánimo de evitar la doble tributación, la legislación fiscal colombiana, a través del artículo 254 del ET, establece que los contribuyentes del impuesto de renta que sean residentes fiscales en Colombia, que perciban rentas de fuente extranjera sujetas al impuesto de renta en el país de origen tienen derecho a descontar del monto del impuesto colombiano, el impuesto sobre la renta pagado en el país en el cual se originaron dichos ingresos.

A rough translation:

Taxes paid in the exterior can be deducted from the income tax

Natural persons who are fiscal residents in Colombia are subject to income tax on their ordinary income and occasional income from national sources as well as foreign sources, and for their patrimony possessed inside and outside the country.  Nevertheless, with the spirit of avoiding double taxation, the Colombian fiscal legislation by Article 254 of the ET, establishes that those contributors of income tax who are fiscal residents of Colombia, who receive income from foreign sources subject to the income tax in the country of origin have the right to deduct from the amount of Colombian tax, the income tax paid in the country in which the said income originated.

Whew!  So, there is no "double-taxation".

As far as the 25% deduction on your income that you may take, see this article:

https://colombia.as.com/colombia/2021/0 … 50462.html

And you can do a search for
colombia impuesto de renta descontar 25%
...to see many other articles which discuss this.  However I cannot guarantee that you can do this so consult with a Colombia tax professional to make sure it applies to foreign sources of income.

"The United States... taxes worldwide income for all of its citizens....

"While some countries have treaties that avoid double taxation, Colombia is not one of them."

---

The part about the USA taxing its citizens' worldwide income is correct.

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USA individuals with income under $12,400 (see irs.gov for a given year's limit;  limit varies by age, marital status and other factor/s) do not have to file a federal return with IRS.  However, to receive covid-stimulus payments, a filing may be required.

---

Whether Colombia has a treaty with another country regarding double taxation does not change this fact: Colombia allows USA Expats to deduct federal income tax paid to the USA from their Colombia tax obligation.

cccmedia

Beating a dead horse. Watch the video that CCC posted about Paula Cruz and consult a tax person here in Colombia.

There is no treaty with USA/Colombia, and it's ugly if there for more than half a year over any consecutive 365 day period. It's not and option for me with Colombian tax rates, and curious what most do? Everything I read says all foreign income is taxed as a resident, and the rates get high in a hurry.

Hello,

I am also  UK national living in Colombia for about a year now, on a matrimonial visa.

I urgently need to find a good accountant, to sort out my registering myself for tax purposes in Colombia.

Yours sounds good.   Could you please introduce your accountant's contact details, ASAP?

Thanks in advance,


Richard J.

matt552 wrote:

There is no treaty with USA/Colombia, and it's ugly if there for more than half a year over any consecutive 365 day period. It's not an option for me with Colombian tax rates, and curious what most do? Everything I read says all foreign income is taxed as a resident, and the rates get high in a hurry.

Great question, Matt:  you asked what most do about taxes?

The fact is... nobody knows.  This is true because (a) many Expats who are in Colombia more than 183 days in 12 months avoid the tax system and don't write about their tax situations on Internet forums .. and (b) everybody's situation is different, so applying a what-most-do standard is not practical.

While foreign income is taxable according to conventional wisdom, there can be massive deductions as explained on this thread and other threads in the forum.  One of the biggest is available to USA Expats who work in Colombia and can deduct over $100,000 US in so-called earned income from their tax basis each year.  Paid foreign taxes can be deducted from the tax basis.

Also, see my ensuing post below.

cccmedia

sailcompania wrote:

Watch the video that CCC posted about Paula Cruz and consult a tax person here in Colombia.

This concept about consulting a tax expert in Colombia is a must!

In fact, some of us have consulted multiple experts such as accountants and tax attorneys in a single year.  In many cases, one can get a reading on how an expert interprets his/her tax obligation via a no-cost email exchange.

The tax laws of Colombia are so opaque, there are so many expert interpretations and La DIAN's enforcement of the tax laws is so unpredictable .. that the opinion of no single expert should be relied upon.

If you scour the posts on this subject Internet-wide going back years, you may find occasional post(s) by an Expat stating they were pursued by La DIAN.  However, any anecdote will not be a reliable predictor of how an individual Expat's tax situation will be resolved going forward.

If you're in a gray area, the best ways to avoid paying taxes you don't believe you owe or should pay may include...

  -- Don't buy property in Colombia.

  -- Don't do anything to provoke La DIAN.

  -- Follow the rule to timely obtain a cédula ID if you have obtained a visa that requires you to do so.

  -- Don't mess with any governmental agency or its personnel, and especially don't do so in a public and/or confrontational way.

  -- Keep to yourself any ideas that Colombia tax laws are dumb/onerous/unfair/unenforceable .. unless you are posting anonymously on a forum.

  -- Stay out of government data bases to the extent that is practical.  Nobody seems to reliably know when Colombia's agencies will start getting good at cross-referencing data on Expats to their tax-exposure detriment.

  -- Do not overstay your legal time in Colombia!

cccmedia