What banks in colombia can I use for my SSA direct deposit?

For sure, Bancolombia but, I also think Davivienda may work.

what tax rate are these deposits subject to in Colombia and are they automatically deducted from the deposited sum?

It's a graduated scale but, you can assume it's 33% for most Americans receiving income from the USA.  No deductions. If you want to start a business ALL income is taxable, minus business expenses, plus department and local taxes, not to mention being responsible for social security payments, health insurance and, a few other taxes on employees.  I investigated starting a business here, with US based customers and it turned out I would be paying over 60% in federal, department and, local taxes in Colombia, plus whatever US taxes may be due.  Since Colombia does not have a tax treaty with the US, none of the taxes you pay in Colombia are deductable against US taxes.  If you're an American in business in Colombia, you could actually be responsible to pay more in taxes than you received from customers.

laceja wrote:

It's a graduated scale but, you can assume it's 33% for most Americans receiving income from the USA.

The 33% rate applies only for any income over about 42,668 USD per year or about 3556 USD per month at today's exchange rate.  The 33% rate is the highest marginal rate, and it doesn't kick in until your yearly income exceeds 4100 UVT (Unidad de Valor Tributario).  For 2018 1 UVT = 33156 COP.  So anything over 4100 UVT or 135,939,600 COP gets taxed at the 33% rate.   

Any income less than about 3556 USD per month is taxed at marginal rates of 19% and 28%.  You can see here where those marginal rates kick in, in UVT:

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

Great, thanks for the info.
I remember reading somewhere that you would not be double taxed for US generated income for which you pay taxes in the US, unless you bring that money into Colombia. Is that accurate, or are you supposed to declare foreign income just as it is required by the IRS for US residents? I know it's another country and laws, though similar, may have different stipulations when it comes to foreign capital.

You should consult a Colombia tax professional - consult several, because you are likely to get different answers each time.  Pick the one who can back up the answers with laws.

You are not liable to file and pay taxes in Colombia unless and until you spend more than 183 days total in-country in any 365 day period.  Then you are considered a tax resident for the year in which you reach the threshold.

You should be able to deduct any US income tax paid from what would be owed to Colombia.  But since Colombia's income taxes are higher percentages and start at lower income levels, it's possible not to pay any US taxes but to owe Colombia taxes.

There are other deductions you may take that would lower your tax bill.  Consult Colombia tax professionals for details as everyone's situation can be different and no one should trust tax advice given on an internet forum, unless you like future surprises that cost you a lot of money.

You only need to declare foreign income, if you're a Colombian citizen.  Legally, you do have to declare income earned in Colombia to both the IRS and Colombia.  The last time I checked you can bring into Colombia up to $7000 USD per month, without having to declare anything.  That's by wiring it into your Colombian bank account.  You can take out as much as you like from cajeros against your US bank account, limited by the number and amount imposed by your US bank and the local bank's policies.  Davivienda will allow you to wire into your local Davivienda account up to $10,000 USD per month, with no questions asked.  Just remember, if you have a Colombian bank account, you must file the appropriate FATCA documents with the IRS.  It doesn't matter how little you have in that account... You must declare it with the appropriate documents.  Failure to do so, will result in very heavy fines (many thousands of $'s) even if your local bank balance is miniscule.

A reminder... There is no tax treaty between the US and Colombia so, any foreign income earned in excess of something like $100K, is taxed in the US without any credit for taxes paid in Colombia.

Welcome to the New World Order!

laceja wrote:

You only need to declare foreign income, if you're a Colombian citizen.

This is not correct.  If you qualify as a tax resident (residente fiscal), being in-country more than 183 days total in any 365 day period, you must file a tax return and are subject to taxes on your world-wide income, if it's over about 44 million pesos annually.  Being a Colombian citizen or not has nothing to do with it.  See this source article, posted near the end of November 2018:

https://www.gerencie.com/residencia-par … arios.html

From the above:
"...ser residente fiscal implica que la persona deba declarar todos las propiedades y los ingresos que tenga dentro y fuera del país, de manera que si un extranjero es residente fiscal en Colombia, debe declarar los activos que tenga en Colombia y en el resto de mundo, al igual que debe declarar los ingresos que obtenga en Colombia y fuera del país."

Translated:
"...being a fiscal resident implies that the person must declare all the properties and income that he may have inside and outside the country, so that if a foreigner is a fiscal resident in Colombia, he must declare the stocks he may have in Colombia and in the rest of the world, the same as he must declare the income he may obtain in Colombia and outside of the country."

You're correct. I should have said "resident" or "citizen".  To remain in the country for more than 183 days a year, you must be a legal resident (i.e., you have a Colombian cedula extranjero, CE).  You may not remain in country for more than 183 days a year, unless you have a resident visa and CE.

However, it is true that Colombia DOES NOT have a tax treaty with the USA.  Without a tax treaty, the IRS does not recognize taxes paid to Colombia and does not allow them to be deducted from your US tax due.

laceja wrote:

However, it is true that Colombia DOES NOT have a tax treaty with the USA.  Without a tax treaty, the IRS does not recognize taxes paid to Colombia and does not allow them to be deducted from your US tax due.

Yes, that's true.  The other way around I believe you can deduct - taxes paid in the US may be deducted from your Colombia tax bill, for foreign income (but not, as far as I know, for any income from Colombian sources).

That's not worth much though, because Colombia's tax rates are higher than the US and they start at lower income levels.  So an expat who may not owe any US taxes at all, could still be liable for Colombia taxes.

OsageArcher wrote:

laceja wrote:

However, it is true that Colombia DOES NOT have a tax treaty with the USA.  Without a tax treaty, the IRS does not recognize taxes paid to Colombia and does not allow them to be deducted from your US tax due.

Yes, that's true.  The other way around I believe you can deduct - taxes paid in the US may be deducted from your Colombia tax bill, for foreign income (but not, as far as I know, for any income from Colombian sources).

That's not worth much though, because Colombia's tax rates are higher than the US and they start at lower income levels.  So an expat who may not owe any US taxes at all, could still be liable for Colombia taxes.

That was the original point I wanted to make and one of the very important reasons why it's a dangerous to have a Colombian bank account.

laceja wrote:

Just remember, if you have a Colombian bank account, you must file the appropriate FATCA documents with the IRS.  It doesn't matter how little you have in that account... You must declare it with the appropriate documents.  Failure to do so, will result in very heavy fines (many thousands of $'s) even if your local bank balance is miniscule.

The above-quoted citation from an earlier post in this thread .. is fiction.

Nobody's getting in trouble if their foreign liquid assets are a few hundred or a few thousand US dollars or some "miniscule amount" in a bank.

For the truth about FATCA reporting thresholds and requirements, Google:

about FATCA reporting irs.gov

Additional resource:  IRS form 8938.

  -- cccmedia

Just look up FATCA horror stories to know what the IRS "actually" will do to you.

I should add, get professional advice on this subject, as did I.

So are you saying most Americans will have to pay 33% on our Social Security and others funds that we have coming in from the US?

dcasanares wrote:

So are you saying most Americans will have to pay 33% on our Social Security and others funds that we have coming in from the US?

No one is saying that, and if they are, they are mistaken.

First you must be a tax resident - which Colombia defines as anyone who spends more than 183 days total in Colombia, in any 365 day period.  Then, Colombia's income tax system uses marginal rates just like in the USA - the higher your income, the higher percentage of tax you pay, but only on the amount that exceeds a limit or step - so for Colombia it is approximately, depending on the exchange rate, a 0% rate on income under about $12K USD per year (so most Colombians don't even pay any income tax, only about 6% of all people in Colombia do pay, about 3 million people), a 19% rate on income from about $12K - $17K USD per year, a 28% rate on income from about $17K USD per year to $31K USD per year, and 33% for income over about $31K per year.

See more here, under the "Income Tax" section:

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