Taxes in Colombia

Allankwnyc wrote:

Hi guys,
I have been living in Barranquilla for a few months now and have been reading a few posts here about tax law in Colombia. I am a US citizen that pays taxes there.  If I I reside in Colombia more than 180 days, I can be completely taxed again ? (After taking deductions of taxes paid in the states)  That seems totally crazy. Please advise.

Dear Allan,

Welcome to the Colombia forums of expat.com ....

Fortunately, federal taxes paid in the USA (regular deadline April) are deductible from any Colombia obligation (potentially collected in August or September).

However, if your worldwide tax obligation to Colombia is more than you paid Uncle Sam, there could still be some 'lucas' owed to La DIAN.

The threshold to automatically become a tax resident of Colombia is 183 days out 365.  So if you stick to the 180 days that a tourist gets with tourist-permit and extension, you may have no Colombia taxes to pay.

Does this answer your questions?  Is anything unclear?

Visit some Colombia tax professionals to seek the best-possible outcome for your tax situation.  If you see more than one accountant or tax attorney, you are almost certain to get multiple interpretations and tax opinions.

cccmedia

Lol. I am really bad at this stuff.  Let's say I make 50k and pay 15k in taxes in the US, do I still have to pay taxes on the other 35k in colombia ? (50-15)
Thanks for the help.

That will take a little math, although I suspect you're covered as far as Colombia tax obligation.

Fortunately, Brother Archer should be around here somewhere with his graduated Colombia tax schedules   .. and may be able to reassure.

cccmedia

Allankwnyc wrote:

Lol. I am really bad at this stuff.  Let's say I make 50k and pay 15k in taxes in the US, do I still have to pay taxes on the other 35k in colombia ? (50-15)
Thanks for the help.

That's not quite it.  First, if you stay more than 183 days total in any 365 day period not necessarily a calendar year, you are considered by Colombia to be a tax resident for the year in which you pass the 183 day threshold.

Then, you would be taxed based upon your income of $50K, not 50 - 15.  You would be allowed to offset any money you might owe, by the amount of taxes you already paid to the US.  Since Colombia's tax rates are higher than the US's, you might owe some money to Colombia.

But there are deductions you can take that may mean you wouldn't pay anything- consult a tax professional, or several as cccmedia suggests, and get the best answer - but they should be able to back it up by pointing to specific tax code.

Although this article may not be completely up to date it explains basically how the income tax works in Colombia and the marginal rates.  The percent rates are based on income in UVTs (Unidad de Valor Tributario) for a year instead of pesos to allow easier changes and adjustments for inflation.

https://en.wikipedia.org/wiki/Taxation_in_Colombia

You have to do the math.  For instance, the 19% rate kicks in at 1400 UVTs, and the 28% rate kicks in at 1700 UVTs (again please note this may not be up to date).  For 2018 one UVT = 33,156 COP which at today's exchange rate is $10.83 USD.

So any income over 1400 UVT*10.83 or
$15,162 USD ($1263 USD/month) is taxed at 19%. 
And then any income over 1700 UVT*10.83 or
$18,411 USD ($1534 USD/month) is taxed at a 28% rate,
and any income over 4100 UVT*10.83 or
$44,403 USD ($3700 USD/month) is taxed at a 33% rate.

The latest reforma tributaria also supposedly imposed a 10% marginal rate on anything over 600 UVTs or $6,500 USD ($542 USD/month). 

Again, consult tax professionals in Colombia to get the answer(s), realizing that even more so than in the US, their skills and knowledge can vary widely and they may not all be up to date on all the changes especially if they are not used to dealing with taxes on foreign income.

OsageArcher wrote:

consult tax professionals in Colombia to get the answer(s), realizing that even more so than in the US, their skills and knowledge can vary widely and they may not all be up to date on all the changes especially if they are not used to dealing with taxes on foreign income.

Thank you, Brother Archer, for answering the call   .. and demonstrating the various facets of the tax situation in Colombia.

---

One possible strategy -- based in part on the varying skills and 'conocimiento' of tax professionals in La República -- is this...

1.  Contact multiple tax professionals and ask each one to provide you a gratis general tax-opinion of your Colombia obligation for Year X.

2.  Do what you can to verify that they are in the ballpark.  For instance, what is their reputation on Expat forums?  Are they/will they be able to back up the tax-opinion with tax law?  Do they seem to know about the current status of the tax law, including the more recent updates?  Would they be willing to defend you if you were ever audited by La DIAN?

3.  Follow the guidance of and/or employ the experta who is providing the tax opinion that is most favorable to you.

4.  If tax attorney Herr Moeller tells you it will cost $900 US to investigate your taxes for Year X, I recommend that you pass on his offer.

----

I contacted Herr M. and four Colombia accountants to address my Tax Year 2017 Colombia obligation, paid a total of $83 for a few tax-opinions and guidance .. and ended up with what I consider a highly favorable tax outcome through a Spanish-language-only accountant in Ipiales, Nariño.  (Her name is Yvone C. and she works as a full-time accountant for Ipisurcable, a cable TV company in southern Colombia.)

With the exception of the Ipiales accountant, whom I met with in person, I did all the research online and by telephone without meeting in person with any of the various tax professionals.

By the way, Herr Moeller gets consistently rave reviews on Expat forums.  If you potentially have a really large tax bill and don't mind paying the legal freight, he would probably be an excellent choice to research your tax situation and satisfy every phrase and paragraph of the law.

cccmedia

Just  landed a job here in COL for two year contract. Great info....Thanks to all for the detail and input.

handymantulsa wrote:

Just  landed a job here in COL for two year contract....
Thanks to all for the detail and input.

Congratulations, Handyman.

If your employer has an accountant, on Day 1 ask him or her whether they are debiting your paycheck to send money to La DIAN .. and get guidance from the accountant about whether you need to file a personal tax return with La DIAN.

cccmedia

The Spanish for payroll/paycheck withholding is retención en la fuente de renta and you can find a PDF here that explains how the process operates in Colombia:

http://www.comunidadcontable.com/BancoC … fuente.asp

Quick question: between my SSDI and a small pension I receive $36,000 a year. That's it no bonds 401k nor properties. Is the $36,000 subject to 38% tax? 😳 do I have to pay Colombia $13680 for taxes? 😱

No way, Alicea.

Don't, however, rely on the layperson Expats

who populate this site, to give you a reliable answer.

The wise Expat queries 3-5 accountants or attorneys

in Colombia, usually via email for gratis guidance,

and follows the guidance in the most favorable

response.

Now, when I did this contacting five experts,

Christoph M. was the only one who wanted

a payment in advance (900 US), which was not

what I considered a favorable response.  He may

be a great lawyer, but in that case I didn't need

great, I just needed favorable.

cccmedia

I should also mention that historically,

Colombia has claimed tax on a graduated

scale, meaning that the first portions of

income are taxed at rates way below

30-something percent, if at all.

cccmedia

And then there are opiniones of expats who have been here 20 years..

Tommy Lee and South American Explorer

I cant comment because I am not a US citizen and live under different rules.

Butt I know what most long term IS expats do

The tax situation here in Colombia is brutal and getting worse. My accountant who isn't the best told me I really can't deduct anything from the US except whatever taxes I paid there, and given the exchange rate I'm in one of the highest tax brackets here. I like living here but this may force us to reconsider another location unfortunately.

@jmckenna71 183 days

I recommend doing some research. Colombia has marginal tax rates, meaning the more you make, the higher your tax rate. The table below measures in UVT (Unidad de Valor Tributario) which for 2023 is 42,412 COP (about $10.60 USD at an exchange rate of 1 USD = 4000 COP).

On your first 1090 UVT of income (about $11,560 USD) you pay ZERO. But then it goes up to rates of 19%, 28%, 33%, 35%, 37% and 39% as your income passes each UVT threshold as the table below indicates.

You will have to do the math yourself, it's not hard, just a bit tedious. But it's worth noting, you don't pay the 33% tax rate except on income which exceeds 4100 UVT which is a bit over $43,400 USD at the exchange rate I use above. And the 35% rate doesn't kick in except for income which exceeds 8670 UVT or almost $92,000 USD.

Most expats with modest retirement incomes will end up paying most of their owed tax money in the 28% range which is from 1700 to 4100 UVT (about $18,000 USD to $43,400 USD).

As was pointed out, you can deduct any US taxes paid from your Colombia tax bill. And there are other deductions but you should consult a tax professional, or several, to find out what you might owe in your individual case.

Rangos en Uvt 

Desde  hasta  Tarifa marginal   Impuesto

0          1.090        0%  0

> 1.090  1.700     19%  (Base gravable en Uvt menos 1.090) x 19%

> 1.700  4.100     28%  (Base gravable en Uvt menos 1.700) x 28% + 116 Uvt

> 4.100  8.670     33%  (Base gravable en Uvt menos 4.100) x 33% + 788 Uvt

> 8.670  18.970   35%  (Base gravable en Uvt menos 8.670) x 35% + 2.296 Uvt

> 18.970  31.000  37%  (Base gravable en Uvt menos 18.970) x 37% + 5.901 Uvt

> 31.000               39%  (Base gravable en Uvt menos 31.000) x 39% + 10.352 Uvt

To read all about it go to

https://www.gerencie.com/tarifas-del-im … rales.html

If the tax situation in Colombia makes you not come to Colombia to live as a resident, well...Colombia is not for the faint of heart. Many find that the reduced cost of living and other attractions make it all worthwhile.

@OsageArcher So, do you have a sense of how Colombia looks at gross verses adjusted gross income. That is my gross income is say $100,000; but, my adjusted gross is $80,000. What do you think is likely that Colombia uses for computing their taxes.

lpd

Ha i should have a template. 80,000 subtract your home country taxes paid(if not already in the adjusted fiqure) and i am guessing 30% plus of that. It aint pretty imho

ofcourse i am no accountant

Colombia Personal Income Tax Rate

In Colombia, the Personal Income Tax Rate is a tax collected from individuals and is imposed on different sources of income like labour, pensions, interest and dividends. The benchmark we use refers to the Top Marginal Tax Rate for individuals. Revenues from the Personal Income Tax Rate are an important source of income for the government of Colombia.

    Actual    Previous    Highest    Lowest    Dates    Unit    Frequency   

    39.00     39.00         39.00             33.00                  2003 - 2023    percent    Yearly

Dont forget world wide assets above 550,000 USD not sure of the exact total but i believe im close

@lunamick How did you arrive at your dollar amount. I am under the impression that it is Five Thousand Million pesos ( Five Billion pesos). At an exchange rate of 4,000 COP per US dollar that would come out at $1,250,000 dollar US? Additionally, what assets fall under this catagory (IRS's, 401K?). All in all it is as clear as mud.

elp

I am not a tax professional in any country - so my advice may or may not be helpful!

But again, I think the best advice is to consult with several tax professionals IN COLOMBIA, who have worked with foreigners who have foreign income.

But you CAN get a rough idea by just "doing the math". And there ARE deductions you can take but you have to talk to a professional. As far as income, my guess is your USA Adjusted Gross Income (AGI) would be the tax basis - but I could be wrong.

As far as the "wealth tax" goes - the impuesto al patrimonio - for 2023 it kicks in at 72,000 UVT which using an exchange rate of 1 USD = 4000 COP, works out to a bit over $760,000 USD. See

https://www.gerencie.com/impuesto-al-patrimonio.html

Also, be aware that at least some things in the tax laws that changed with the election of the socialist Petro, are subject to change again when he finishes his 4-year-term and another Presidente is elected - and there's really no telling if taxes will get better, or worse. Wait, I take that back - when it comes to taxes, almost always, almost everywhere, they get worse, not better...

Colombia is not what one would call, a stable country where you can count on the rule of law. So this brings many pitfalls but also opportunities in financial areas. The populace of Colombia as a whole have fallen for many get-rich-quick scams and pyramid schemes over the years, and that's not likely to change. And there will always be those willing to take great risks, legal or not, to reap great rewards. There's a good proverb for that:

A río revuelto, ganancia de pescadores...

@OsageArcher Thanks for your opinion on the AGI. I have "shopped" several Medellin "accountants" and my problem is that I can eventually find one who will tell me what I want to hear...lol! I may just remain an one hundred eighty three day wonder.

elp

And there will always be those willing to take great risks, legal or not, to reap great rewards. There's a good proverb for that:

A río revuelto, ganancia de pescadores.

-@OsageArcher

.

.

.

At the river of chaos, profits for the anglers...  ??

I have "shopped" several Medellin "accountants" and my problem is that I can eventually find one who will tell me what I want to hear..
@Lpdiver

The director of the DIAN has a message for those seeking an accountant.

https://www.semana.com/economia/macroec … or/202308/

@cccmedia I think that's a good translation!

I like this explanation in Spanish:

"A río revuelto, ganancia de pescadores” es un refrán popular que se refiere a aquellas personas que suelen sacar provecho de las situaciones de caos o desorden. Como tal, es un dicho de origen español, muy extendido en España y América.

@Mr. Barley that is pretty obvious.

Search around  , find an accountant who has family or buddy at DIAN and tells you what you wants to hear..

Until they do a purge of DIAN like they did at DAS 12 or so years ago and you will find yourself even more jodido (screwed) than if you kept your mouth shut and  never did a declaración de renta in the first place. 

So, If I am reading things correctly, Colombia does not look at Social Security/Retirement/Pension Income differently from Regular Income? It is all taxed as 'World Wide" Income if you become a tax resident?

Is there any difficulty getting a tourist Visa currently, and does that last for 180 days? This looks like it will cost US 82.00 plus us 52.00 to obtain?

If the above is generally true then it would seem to me to be best for many to just stay in country for 180 days out of 365 (not a calendar year but 365 consecutive days)

If I was to buy property in Columbia, lets say a Condo, that in itself may make me a Tax Resident? If I was to stay in Colombia for 180 days out of 365, I would prefer to own a condo, and lease it out when not there.  Maybe own another one in lets Ecuador (it is close), since it seems tax friendly, for the other 185 days a year.

Then if I have additional assets, like Investment Accounts, no matter where located, they may be taxed if I was a Tax Resident @ 1.5% annually to start?

This has made things so much more complex than they need to be IMO. Maybe this is the case due to some bad actors gaming the system? Sad since I will be retired, I want to make things as simple as possible and not have to deal with a bunch of bureaucratic non-sense.

@Kwendal Your profile states you are single and from the USA. So there is no charge for a tourist visa. If I was in your shoes I would not set my mind on Colombia in particular. Some here will call me out as I am investigating strongly moving to the Medellin area; however, I have a wife from there and she has family there.

I would travel around and visit several cities in Colombia as well as the other countries you have mentioned and then investigate further when you find a place you like. I would stay far away from buying property at this phase of your journey.

lpd

@Lpdiver I am single and from the USA.

TY for the reply. Yes, I plan to visit and see several areas, and not purchase till later.

What are your thoughts of Bucaramanga, Armenia?

"Is there any difficulty getting a tourist Visa currently, and does that last for 180 days? This looks like it will cost US 82.00 plus us 52.00 to obtain?"

As noted by lpdiver, the tourist visa is free, and allows a stay of 90 days, which can be extended for another 90 days.

"If I was to buy property in Columbia, lets say a Condo, that in itself may make me a Tax Resident?"

No.

After spending more than 183 days in Colombia within a period of 365 days, then you are considered fiscally resident. Owning property does not by itself require that you pay income tax in Colombia (though you will have to pay property taxes).

Start with the tourist visa, take your time, travel to different places, and make a decision when you are ready.

@Mr. Jones 1994 TY for the reply