Hi a1adiver,

I wouldn't worry about it.

Since you don't state from where you are an expat, I'll give you advice as a US citizen. The money you receive from the US is not taxable in Colombia.

From what I understand, foreign income is not taxable, (they are glad for the cash you bring to the Colombian economy), but If you earn lots of money working or investing in Colombia, then ask a Colombian tax adviser.

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The above replies are not entirely accurate.
An expat's status in Colombia is determined by 2 factors; Whether or not a double-taxation agreement exists between Colombia and his "home" nation, and his "residential" status in Colombia.

You should be under no illusions, if no double taxation agreements exist, and if you have a full, permanent residential visa (After 5 years residence), then YOU WILL BE LIABLE for Colombian tax on your pension incomes. But remember, tax liability does not necessarily mean you will have taxes to pay as your incomes need to be above a certain threshhold before this happens.

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I just returned from Cali and we are investigating this. We spoke with a Contador or account. This person is a family friend, trusted and knows the law. If retired, there are two criteria that you will be held to. The first is if you make more than 36 million you must declare taxes... If your income source is retirement then you file the paperwork stating that your income is retirement and there is no tax. If you earn income in the country then you will be taxed on the income earned. The second criteria is the rich person tax. Each person is allow declare exempt up to and including 120 million pesos. Any amount above this an then you will pay 3 percent on the total not the difference of the amount. Example is you have total assets in Colombia with a value of 130 million pesos then you will pay 3 percent of that value. or 3900 mil peso or about 1500 USD. If your in county amount is less than 120 again no taxes. If you must declare income and have an amount due and you have an rich tax due then you only pay the greater of the two not both. Finally if you pay tax in Colombia and you live in the US then any tax you pay in Colombia is deducted from your US obligation. An example. If the income tax due in the US is 4000 USD and you pay 3900 mil pesos then you will only be liable for 4000 USD - 1500 USD net 2500 USD. This is based on the Forien Tax Credit I form 1116 Find a contrador or contradora and discuss this BTW my wife has two family members who are retired and they confirm their income retirement and not earned income and hence pay no income tax.

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Dear a1diver,

I would like to add some comments to the above statements about Colombian income tax:

1) Tax residence

If you stay in Colombia for at least 183 days within a period of 365 days you become a Colombian tax resident (regardless of your visa situation or the origin of your income). As a consequence, you have to pay income tax in Colombia on your national and worldwide income.

2) If you are a Colombian tax resident and had in 2014 (i.e. the last fiscal period) gross revenues equal to or larger than COP $38.479.500, you have to file a tax return with DIAN (Colombian tax authority) until August or October 2015, depending on the last 2 digits of your cédula de extranjería.

Please note that gross revenues include your pension income (no matter if of national or foreign source).

If, as from 31 December 2013, you had gross assets which value was equal to or greater than COP $123.862.500 (for example real property in the US, Colombia or o third country or bank accounts in a third country), you are also obliged to file a tax return.

3) Basically, pension income is exempted from income tax (article 206 No. 5 of Colombian Tax Statute).

But: if your monthly pension is greater than COP $28.279.000, you have to pay income tax on the part of your pension exceeding said amount.

On the other hand, you should clarify if your pension income is taxable in your country of origin (I presume it is the US).

For example, my country (Germany) in recent years has started to withhold income tax from pension income, regardless if pensioners have their tax residence in Germany or in another country (as Colombia).

4) There is no Double Taxation Treaty between the US and Colombia.

If you live in Colombia and keep receiving, for example, rental income from the US that is subject to income tax in the US, you might have a double taxation issue (as you have to pay taxes in Colombia on your worldwide income).

In most cases such negative effects can be largely alleviated (although not completely eliminated) through filing foreign tax credit forms.

5) Your comments about "rich person tax" (which is actually a tax on presumptive income in order to avoid tax evasion, see article 188 of Colombian Tax Statute) are correct.

Write me an e-mail if you need more information about international taxation and tax issues in Colombia.

christoph.moeller@hotmail.de

Best regards,

Chris

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Excellent response as it clarifies in detail what I tried to impart. I am liable to tax in 3 tax areas, the UK, France & Colombia and there are no taxs treaties within distant sight.
Presently, although liable, I pay no taxes in Colombia because my incomes and assets fall below the tax threshhold....but they are getting nearer and nearer.
I also pay a tax accountant to prepare my local tax declarations as they are so complicated. This is VERY expensive, at COP 1 million per person in my case.
Colombian taxation may very well be the reason why I eventually have to leave Colombia. I have no problem with paying taxes once on my incomes/assets, but 2, or 3 times, is going too far

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I know that there is a double taxation treaty between Canada and Colombia. How it affect Canadians living in Colombia?

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Some people here have a very good handle on this but as yet I don't so if someone could please clarify

As Doncrisml stated " If, as from 31 December 2013, you had gross assets which value was equal to or greater than COP $123.862.500 (for example real property in the US, Colombia or o third country or bank accounts in a third country), you are also obliged to file a tax return. "

This amount is a little over U.S. $41,000.00.

My question is this :

If you buy a condo worth U.S. $125,000.00 but stay in Colombia less than the magical 183 days / year do you have to pay this wealth tax on it ?

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Sorry to be clear that is purchasing a condo in Colombia.

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Chris, when you refer to gross assets for computing any taxes, due it it calculated on the total value regardless of the amount of any liens, or only the equity?

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Because of double taxation on my retirement I am seriously considering 1/2 the year outside Colombia. I do not collect retirement income for 2 more years but looking ahead with the current structure I would have a projected/estimated additional 5K USD to pay in Colombia.

If your living in Colombia for 183 days or more a year you should be talking to an accountant.

Might check this thread below on taxes in Colombia. Especially one poster going by livinginmedellin. A lot of good information.

http://colombiaconnection.freeforums.net/thread/1671/taxing-situation

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The wealth tax is only for assets above 1 billion pesos, and as I understand it, you needed to have the assets a that value in 2015 , for which you would have paid through to 2018. If you had less than 1 billion in 2015 however reached that in 2016, it did not apply (as I understand it and that could be wrong).

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https://www.hklaw.com/files/Uploads/Documents/Alerts/Business%20Tax/041715BusinessTaxAlert.pdf

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There is no 5 year residence rule for foreign tax residents in Colombia before being liable for income taxes in Colombia. This rule was eliminated in 2013 but some English language sites still claim this – this is INCORRECT.

An individual is considered a Colombian resident for tax purposes if he or she stays in Colombia for more than 183 days during a year. This is whether or not the stay was continuous during the year.

If you are considered a Colombian resident for tax purposes, you are not required to file income taxes in Colombia for your worldwide income if all of the following requirements (for 2015) are met:

1. Gross income in 2015 is less than 1,400 UVT, which is 39,591,000 pesos ($12,751 USD at official exchange rate at end of 2015)

2. Gross equity (net worth) on the last day of 2015 does not exceed 4,500 UVT, which is 127,256,000 pesos ($40,405 USD).

3. Credit card consumption in 2015 does not exceed 2,800 UVT, which is 79,181,000 pesos ($25,141 USD).

4. Total value of purchases and consumption in 2015 does not exceed 2,800 UVT, which is 79,181,000 pesos ($25,141 USD).

5. Total value of accumulated bank savings, deposits or financial investments held at the end of 2014 does not exceed 4,500 UVT, which is 127,256,000 pesos ($40,405 USD)

If you are a Colombian resident for tax purposes and exceed any one of these amounts, you are technically required to file income taxes in Colombia.

Note that Colombia taxes worldwide income, just like the United State does. If your worldwide income is $12,751 or over and you are a tax resident of Colombia you are technically required to file income taxes in Colombia.

Your Colombia income taxes filing date depends on the last two digits your Colombia tax ID number, which is known as a Número de Identificacíon de Tributaria (NIT) – the filing date is NOT based on your cedula number. You receive a NIT from DIAN (the IRS of Colombia). The filing dates in Colombia for income taxes for individuals for the 2015 tax year start in 2016 on August 9 and runs until October 19.

DIAN ruled that foreign pensions are taxable in Colombia in 2014 (this confirmed a much earlier ruling). See: http://www.gerencie.com/tratamiento-de-la-pension-extranjera-de-residentes-en-colombia.html. Only Colombian pensions up to a limit are exempt from income taxes in Colombia.

25% of your labor salary (gross income minus costs and deductions) is exempt from taxes in Colombia up to a limit of 2,880 UVT, which is 81,443,520 pesos ($25,859 USD).

There are other deductions in Colombia including pension/retirement savings, Colombia health insurance, economic support of dependents, mortgage interest for the taxpayer and expenses related to receiving your income that reduce your taxable income.

While there is no tax treaty with the US or many other countries you can subtract income taxes paid in other countries from your income taxes due in Colombia.

If you required to but don’t file taxes in Colombia and owed taxes, the normal penalty is at least 5% of what was owed but reportedly can go as high as 200%. Plus you add interest on unpaid amounts that runs about 30% per year. DIAN can reportedly audit you for up to two years.

As a tax resident in Colombia I have filed taxes three years in a row.

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The 25% of the labor salary that is exempt is for Colombian salaries only (I ask as I know a lot of people work remotely these days)?

The way that I understand the global income is that the Colombian tax due is the differential between what you've paid overseas and what is due locally.

The other side of any Colombian taxes is that the amount that you pay can be taken as a credit on your US taxes. As Colombian taxes generally file later you therefore pay US taxes, then pay The Colombian differential and then in the following year in the US claim the credit.

Some postings suggest the differential is often small. That I believe is incorrect. If you take any deductions in the US (e.g. Alimony, medical expenses, personal allowance) these aren't deductible under the Colombian system. The Colombians look at your world wide gross income, adjust for Colombian allowances in Colombia and then calculate your Colombian tax. Then you adjust that amount with the taxes paid elsewhere.

So if you have large deductions or low tax in the US the difference can be considerable. A pensioner who receives US social security probably pays little if any tax in the US. However under the Colombian system tax would be owed. As there's no offsetting US tax the full amount will be owed to Colombia.

On the other hand someone with significant US income and few deductions in the US won't pay (comparatively) a large differential in Colombia.

One last issue that is very different in Colombia is that taxes are calculated on cash flows. This removes differences that may exist elsewhere on salary, rental income etc. It is also important for foreigners as the effective exchange rate on the cash flow generates the COP value of the cash flow even if you do not convert it. So if you receive a cash flow of USD 10,000 when the rate is 3,400 that's a peso taxable amount of 34 million. If you then (months later) need to convert USD to pay your Colombian tax bill and the rate is then 2,900 you'll have an exchange cost. As many foreigners have offshore income but no local income to pay taxes managing that exchange risk is important.

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Per my Colombian accountant 25% of the labor salary that is exempt from income taxes in Colombia (up to a limit) is for a salary in Colombia or another country. I have done this with the max deduction each year and haven't been audited by DIAN.

Global income is your total gross world wide income.

Note my accountant indicates that interest income in Colombia is now tax exempt, something new this year.

I didn't have to pay any income taxes for 2013 or 2014 tax years in Colombia as I paid more income taxes in the US than due in Colombia. This changed this year for 2015 taxes and I'll have to pay a very small amount of income taxes in Colombia.

In terms of the exchange rate to use for income in another currency you can use the official exchange rate for all your transactions on the day of the transaction or the end of the year. For 2015 it is better to use the day of transaction.

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Doesn't the foreign tax credit (IRS) top out at $600 usd?

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Doesn't the foreign tax credit (IRS) top out at $600 usd?

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What if I have no government issued pension yet but I have some savings that I can invest and live on the income generated from this investment? As a Canadian I can invest it here in Canada and Canada has a treaty with Colombia on double taxation. But I can also invest my funds in Colombia in lets's say real estate and rent out x number of apartments. What would make more sense from Colombian taxation perspective?

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Many Colombian accountants are lazy and just use the exchange rate at year end for a salary in another currency to covert to pesos.

Don't let them do this for 2015! The exchange rate at the end of the year in 2015 was much higher than earlier in the year.

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WOW...here we go again! Every time this topic rears its ugly head it creates a frenzy of posts. Not a bad thing because this affects us all and the input is informative and very helpful. In fact, I hit the print button and dropped it into my retirement folder.

I’m still trying to figure out how screwed I’ll be if I retire in Colombia? My combined U.S pension, Soc Sec and 401K monthly payment will be approximately 7-8K (U.S.) a month. My assets/investments exceed 1million (U.S) and it appears the Colombian government will want a chunk of that every year!

Can any of you knowledgeable bean counters give me an idea on strategy?

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I thought the $600 limit on foreign credit only applied if you weren't filing the irs 1116 document

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There many ways to get deductions. check with www.colombiaaccountant.com , Colombia Legal & Accounting to get more info and quotes on expat declarations in Colombia.

57-4-444-66334 or 301 337 1881

Tax planning in Colombia is a different animal. In December Colombia will be making a major overhaul to their tax laws.

James Lindzey
James@medellinattorney.com
www.medellinlawyer.com

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Retire to Mexico instead.

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If your a tax resident in colombia then you pay taxes on money earned overseas. Your not liable to pay taxes in the states unless the rate you paid is lower than the colombian rate.

check out www.medellinlawyer.com for more info.

cheers,

james

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Agreed that as if you qualify as Colombian tax resident then you are taxed on your world wide income.

But 'you are not liable to pay taxes in the states unless the rate is lower than the Colombian rate?'

Firstly, 'you Only pay taxes if the rate in the US is lower?' In that case are you suggesting that if the us rate is lower then you pay us tax and Colombian tax but only Colombian tax if the US rate is higher?

And I'm not sure about this concept that the US which also taxes you on your global income is about to accept no taxes from you if you pay Colombian taxes given there's no tax treaty between the two countries.

If the concept that's being described here is that if you get a US tax credit for your Colombian taxes then net-net you might end up with no US tax bill yes, but it's usually not as clean as that.

Generally the tax system in Colombia is more draconian than the US. Deductions do exist in Colombia but are different to the US and some may be difficult for ex pats and in particular retired ex pats to take advantage of. The levels at which taxes start and the banding of tax rates is such that (at least as I've been told) in the majority of cases US expats end up with Colombian taxes in addition to their US returns.

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Like everyone else, I'm still trying to gain an understanding of Colombian taxes. But one piece applicable to expat real estate owners infrequently mentioned is this:

If you are a tax resident, then all normal tax rules apply.

But even if you aren't a tax resident, the value of the real estate likely requires you to file a Colombian return. There isn't any worldwide tax, just those on income and assets in Colombia. However, if you rent your real estate when you aren't there, the net income is taxed at a flat 33%, with no deductions allowed.

If someone has different information, please post it.

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This site has been helpful to me in clarifying Colombian taxes:

http://www.gerencie.com/

You may also send them an email although I have never contacted them:

gerencie@gmail.com

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All these post are extremely helpful and I read each one carefully. In my case, I'll have to wait for "nut cutting time" and confront the reality of the day. Hopefully, there will be positive changes in near future.

I have researched the treaties the U.S. has with other countries and to my surprise, the U.S. has a double tax treaty with VENEZUELA!

This treaty was established before the Chavez disease, but for God's sake! Colombia has been the #1 U.S ally in South America for decades! Our Embassy in Bogota is the second largest in the world and Colombia is one of the top beneficiaries of U.S. assistance.

Below is article 24 of the double tax treaty with Venezuela.

ARTICLE 24
Relief from Double Taxation
1. It is understood that double taxation will be avoided in accordance with the following
paragraphs of this Article.
2. When a resident of Venezuela derives income that, in accordance with the provisions of
this Convention, may be taxed in the United States, Venezuela shall allow a relief to such
resident. Such relief shall be allowed in accordance with the provisions and subject to the
limitations of the law of Venezuela, as they may be amended from time to time without changing
the principle hereof. The relief may consist alternatively of:
a) an exemption of such income from Venezuelan tax, or
b) a credit against the Venezuelan tax on income.

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Though nobody would answer my query directly the jist that I'm getting is that my suspicions may be correct.

Even if you stay less than the 183 days/year if you buy a nice condo you may still be caught up in a luxury tax every year.

If true demand is going to drop and expats will begin having fire sales to cut losses and get out from under.

Not trying to be negative just sorting through the facts to determine my own personal strategy.

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Why do you think if you stay less than 183 days and you buy a nice condo you may have to pay the tax? The limit is over a 1,000,000,000 pesos and that is from 2015. That amount discounts your primary residence and does not include overseas assets as you are a non tax resident.

I may be wrong, but that is my understanding - you are fine for that particular tax.

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And for property over 127 million pesos, as a non tax resident you may have to file a return, but not pay anything in taxes.

I have still not figured this bit out - one reputable tax agency said as a non tax resident you don't have to file; another said regardless you need to file (but will not have to pay) - this is assuming you are not renting the apartments earned income ie rent is taxable regardless in country.

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Forget about renting.

If a luxury tax starts at over 127,000,000 COP / 3,000 COP = $42,333.33 U.S.D..

I do not believe they are going to exempt anybody with a $150,000.00 USD condo from this luxury tax.

I may very well be wrong but I am not chancing it even though prior to this that was primary part of my strategy.

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@8901

I think you are getting a bit mixed up with all the different taxes.

The COP 127 million threshhold does NOT concern the "Luxury"tax (Impuesto a la Riqueza) which starts at COP 1,000 Million per person )Excluding primary residence and a number of other asset deductions). The COP 127 million threshhold is but one of the threshholds above which you are obliged to make a Tax Declaration in Colombia IF YOU ARE A TAX RESIDENT IN COLOMBIA (More than 183 continuous days).

If you purchase a property in Colombia and do not spend more than 183 continuous days there, then you are not a TAX RESIDENT, you are a FOREIGN INVESTOR. Different rules apply to the FOREIGN INVESTOR, but I am not sure what they are.

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There isn't a 'luxury' tax. There's a wealth tax based on net assets but most non residents just have to file and won't pay taxes. The tax percentage isn't high anyway. It's not as if you're paying 30% on your wealth and a good tax accountant will work out how to minimize any exposure, if any. Many residents won't have to pay either. As I understand it the tax was set up with a expiry date that was extended, but you can't be included in the program if you weren't covered by the original program.

Rental income falls under income taxes and as others have said is a flat percentage on non residents and allows deductions for expenses.

So the concept of fire sales is an unlikely prognosis.

What is more the issue is the number of ex pats here who qualify as residents but aren't paying tax. At some point the system will likely catch up with them (it's not exactly a secret in Colombia that many foreign residents aren't paying tax at the present time or that it isn't on the authorities radar)

I for example have had to submit my 'wealth' return but it's just for record purposes. There are benefits to having assets recorded on your wealth return as it in many cases precludes any income taxes on those amounts (if you own a house you can't be liable for income tax on that asset).

Mixing up income tax and wealth tax will only confuse things and it's not a luxury tax.

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As above - the wealth tax starts at 1,000,000,000 pesos or 341.000 USD and does not include your primary residence. If you are NOT a tax resident it only includes COLOMBIAN assets.

The declaration for tax, which does NOT mean you will actually pay tax, is for assets over 127,000,000 pesos or 43,000 usd.

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As stated, wealth and personal income tax are not the same tax. Most investment apartments would fall below the wealth threshold (unless you owned several?).

But let's say you are a non-resident expecting to make 10% ROI on an investment rental condo/apartment. If you forget the government tax of 33%, your return falls to 6.6%. None of the expat agencies I know seem to recognize this tax.

I do think the tax system is going to get revised for next year. But they make BIG revisions in Colombia....who knows what next year will bring?

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On the ROI on rental property the target number I'd been given was 8% so the math doesn't fall out exactly but that may be nearer to a tax adjusted number. Does your ROI also presume some capital gain on the property over time rather than just net rental income?

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I just used 10% as an example. If it's 8% net, then 1/3 of that will go to Colombia, which then you could write off on your US tax return the following year.

We figure we will donate the condo to local charity eventually, subject to change. But have not focused on appreciation. But I would speculate under current law that you would owe 33% of appreciation to Colombia.

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On the sale of the property as I understand the taxes it's around 10% of the appreciation.

However many Colombian sales go through at the historical (last sale price) for tax purposes and therefore avoid tax. It's one of the reasons you will be asked for two payments; one that reflects the historical price and a second that makes the value up to the agreed price. In terms of non-residents I'm not sure what the tax implications are on trying to repatriate the money (whether form 4 or not)

33% sounds heavy though.

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As regards RoI, we always use the following figures, (for rental income) :

Residential property 0.5% of capital cost per month.

Locales, 1% of capital cost per month.

Offices, up to 2% of capital cost per month, but the market in offices is so erratic, and fashionable districts change rapidly, so can easily fall to below 1% if your location falls out of favour.

For this reason, we prefer locales, and have found the above figures very very accurate.

Hope this helps.

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Thank you to all for the clarifications,

So it seems to me if one owns a condo in Colombia for personal use only (non rental) and to avoid the residency tax is in country less than 183 days he or she would still be required to report this asset annually with DIAN and thus the extra expense and hassle of hiring a Colombian accountant.

Does that now seem right ?

I just want to make my life as simple as possible once retired and though I would of liked to own these new laws are steering me to be a renter for 5 months a year instead.

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@lp the return on residential rentals is similar to what I've heard for renting to locals (around 5%) with the higher numbers being quoted (8%) for renting to foreigners. Renting to foreigners usually has a much lower occupancy rate - locals are closer to 100% - which adds more volatility to returns,

@8901 a Colombian accountant won't be expensive to do this task. If your wealth tax is for a single item other than the first year (once you knew the process) you could probably do it yourself if you wanted to save the fee. I would have thought that the issue would be smaller than others you would have if you owned but we're only in the country half of the year. For example paying say utility bills if you aren't there is an issue. If there's a problem with a property (say a leak) is going to be difficult unless you have someone locally to fix the problem. Being a part time resident also makes getting something like a bank account (to pay local bills) difficult.

Rentals remove these issues. However even there some uncertainty exists in the future. As in many countries the 'Airbnb' model is under attack. People who live in residential apartment buildings often don't like short term residents. In Colombia beyond any local governmental rules prohibiting short term rentals increasingly buildings are voting to increase what minimum rental periods can be. What that is going to do to availability for for rentals for foreigners isn't clear.

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LP -- what is a Locales? A storefront?

The best residential returns are probably in apartments that allow furnished daily rentals. These have so many investors that they are unlikely to vote in restrictions. Think some have a "hotel" license, making it difficult even for a new law to have an impact on the ability to rent.

AirBnb isn't going anywhere, so properly positioned restrictions might improve your returns.

That said, I would stay in one first, good examples are Blux and Nueva Alejandria. We just didn't find the environment to be what we would want for 4-6 months a year.

You must decide what's more important to you...a second home or investment.

In our case, we were more interested in a second home. Most Floridians have them in them in the mountains of the Carolinas or Georgia. Ours is in the Andes.

About the best reasonable expectation, if you use it 1/2 the time is the rental income will cover most of the carrying cost.

But if you are looking for pure real estate investment returns, and you live in the US (perhaps wherever you are from), there are better opportunities at home.

Doesn't mean you couldn't make good money in Colombia on real estate, I bet you could over time, but that's going to be a business not an investment.

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Blue Seas, Yes, a local is a shop. I recommend buying in a small local mall in a better class residential area, not a massive mall, as the biggest malls are often unaffordable to the small business, both in terms of rent and also admin charges. Bigger businesses like chain-stores will drive such a hard deal on rents that you will get a much lower return.

Interesting points you raise on residential for living there yourself part time, and renting whilst you're out of the country.

You might like to consider some of the things that swayed me in favour of shops. With residential property, there are many things to go wrong, like electrical systems, water systems, plumbing, bathrooms and kitchens, heating systems, gas and its associated safety checks and maintenance, and any fixtures and fittings can be a horrible drain on your investment if things go wrong, And of course the tenant has so many rights nowadays that you can be forced to pay for stuff that might be unreasonable, and if you have a bad tenant, it could cost a lot in repairs/ refurbishment after they've gone. Also, in Colombia, the rent increases are fixed by the government, so if you are not making anything at the end of the day, you can't increase the rents beyond the government decree at the end of each year. I had enough bad experiences with residential tenants in the UK, and the courts always take the side of the tenant. And the average tenant will complain about anything and everything, especially if they are trying to make money out of you. Insurance will also be quite expensive, and whilst you are not there, you may need an agent to run things whilst you're away. They will also take a hefty cut, which undoubtedly comes out of your rental income. It doesn't leave you with much net profit.

If you go down the route of short term Air-bnb, then you also have to hire cleaners after every tenant, and anyone you hire will want to make as much as they can for themselves, cleaners, agents, contractors, repairers, etc. The tenant may well make stains in the beds, furniture or carpets, or their kids wet the bed, and you can't expect the next tenant to sleep in a stinky bed. The furniture is also at risk of being trashed, and often its impossible to get recompense from the tenant, or you have one hell of a battle on your hands. And of course, you won't always have a tenant. There may well be times that the property is empty for long periods. Or you may be lucky and get many, but its not something you can rely on.

Yes, it sounds horrible, but I've been down that road, and learned most of the pitfalls from experience.

On the other hand, a shop will require very little in terms of maintenance, repairs, or any kind of liability, which will drain your finances. I choose shops with just 4 walls, and a glass front. very often, the only thing there is in the whole place is a toilet, and some don't even have that. Very little to go wrong at all. The tenant of the shop will be responsible for all expenses, admin charges, and if they want a counter, they put one in. If they want shelving, they put it in. In fact there has never been an occasion when I have had to fork out for repairs at all in very many years. If the roof leaks, its the responsibility of the shopping mall to put it right, but every shop I have is on the ground floor anyway, so nothing to worry about there either.

I tell you, its worth considering. Its your choice, and every one of us is different, and we all look for different things in our investments. But the ultimate aim for most of us, is to actually make money from our investments, with as little risk as possible.

Just some thoughts to give a slightly different perspective on rentals. :) But whatever you choose, good luck, and I hope it goes well.

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00abuse

feckerkyln - reference your statement below, are you sure of this and do you have a reference for it? I am currently trying to work this out, and I have one tax agent saying if you are not a tax resident that one does not have to file for eg a property worth over 127 k; another one states that regardless I have to file. Neither has given me a direct link.


The COP 127 million threshhold is but one of the threshholds above which you are obliged to make a Tax Declaration in Colombia IF YOU ARE A TAX RESIDENT IN COLOMBIA (More than 183 continuous days).

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00abuse

@blueseas yes there have been some apartment buildings going up with that 'hotel' license to avoid the oncoming issue about constraints on short term rentals. However it's a limited number of buildings. Those properties are proving popular with investors (I know several that have sold out). Having said that reselling those properties, if you ever want to, is probably going to limit your prospective pool of buyers. Locals are less likely to want to live in a building where the majority of apartments are on short term leases. If for no other reason see my point below.

The other point anyone needs to consider is sex tourism which like it or not is responsible for a good proportion of the short term rents of up to six months in Medellin. There are signs (thankfully) that the authorities are starting to push back on that business. If they succeed and Medellin begins to lose it's attraction to sex tourists as a destination then it'll be interesting to see what that does to short term rental demand.

Avoiding letting to sex tourists is a pretty big problem for apartment owners and in particular if the lets are located in buildings with families in, It's a really good way to alienate your neighbors if you find out that you've inadvertently let to someone who's brining a stream of girls into the building.

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00abuse

@Bickmed

The following text will not suit everybody but it represents the "final word" in Colombian taxes as far as I am concerned. This analysis (only a few days old) cost me a bundle and comes from one of the most esteemed tax experts in Colombia. This is only a part of his analysis and there is more if anyone is interested. In particular, have a look at item 019 which sets out the parameters for being obliged to submit a Colombian tax declaration. Good luck!

TRATAMIENTO FISCAL EN COLOMBIA

1 Normas de interpretación en el derecho tributario
008. Sea lo primero indicar que en el sistema de control e interpretación tributaria colombiana, ha sido regla general, tanto en los pronunciamientos de la doctrina oficial como por parte de los distintos tribunales contenciosos, que la ley relativa a impuestos, y en especial aquella que establece exenciones, beneficios o tratamientos preferenciales, es de carácter restrictivo, lo que implica que debe atenerse la interpretación al texto mismo de las normas que definen los tratamientos especiales, no dando lugar, en éstos casos, a la interpretación analógica o amplia de las disposiciones tributarias.

2 Naturaleza de la Suma según el ordenamiento fiscal colombiano

2.1 La Suma es una renta o ganancia ocasional
009. El artículo 206 del Estatuto Tributario Nacional1, que regula las rentas de trabajo exentas, establece que para los contribuyentes residentes en Colombia, son exentas las rentas obtenidas por concepto de pensiones de jubilación, invalidez, vejez, de sobrevivientes y sobre riesgos profesionales, siempre que los valores mensuales no excedan las 1.000 UVT mensuales, es decir que el excedente deberá gravarse con el mecanismo que legalmente corresponda. (1.000 UVT equivalen a $29.753.000).

1 Artículo 206. Rentas de trabajo exentas. Están gravados con el impuesto sobre la renta y complementarios la totalidad de los pagos o abonos en cuenta provenientes de la relación laboral o legal y reglamentaria, con excepción de los siguientes: (…)

5. Las pensiones de jubilación, invalidez, vejez, de sobrevivientes y sobre Riesgos Profesionales, hasta el año gravable de 1997. A partir del 1 de Enero de 1998 estarán gravadas sólo en la parte del pago mensual que exceda de cincuenta (50) salarios mínimos mensuales (1.000 UVT).

El mismo tratamiento tendrán las Indemnizaciones Sustitutivas de las Pensiones o las devoluciones de saldos de ahorro pensional. Para el efecto, el valor exonerado del impuesto será el que resulte de multiplicar la suma equivalente a cincuenta (50) salarios mínimos mensuales (1.000 UVT), calculados al momento de recibir la indemnización, por el número de meses a los cuales ésta corresponda.

010. De igual manera se encuentran exentos los valores que correspondan a Indemnizaciones Sustitutivas de las Pensiones o las devoluciones de saldos de ahorro pensional, caso en el cual debe calcularse el límite exento, como un valor resultante de multiplicar la suma equivalente a 1.000 UVT, calculados al momento de recibir la indemnización, por el número de meses a los cuales esta corresponda.

011. No obstante la anterior afirmación, el parágrafo del artículo mencionado determinó que para tener derecho a la exención, el contribuyente debe cumplir los requisitos necesarios para acceder a la pensión, de acuerdo con la Ley 100 de 1993, condición que ha sido interpretada por la administración, como una limitante para acceder al beneficio por personas que, no obstante estar residenciadas fiscalmente en el país, reciben pensiones o indemnizaciones sustitutivas, al entender que no se trata de pensionados a la luz de la Ley 100 de 1993, sino mediante otros sistemas que no hacen parte del sistema integral de pensiones.

012. La Corte Constitucional se pronunció al respecto, y en Sentencia C-261 de 2005, dijo:
“Ahora bien, a la luz de la igualdad cabe preguntarse si los pensionados por fuera del sistema integral, también pueden aspirar al beneficio tributario de los que están dentro de dicho sistema. La conclusión es negativa. La norma acusada no vulnera el principio de igualdad tributaria entre tales pensionados externos al sistema integral, y aquellos pensionados que han adquirido su calidad de acuerdo al sistema de seguridad social integral, sin que ello signifique que a la luz de ciertas reglas tributarias, tales pensionados ajenos al sistema de seguridad social integral, es decir, el segundo universo de pensionados al que se ha hecho alusión, no estén cobijados por normas tributarias específicas sobre las que la Corte no se pronuncia en esta oportunidad porque no han sido demandadas.”

013. El pronunciamiento de la DIAN, respecto de la aplicación de la exención contenida en el numeral 5 del artículo 206 del E.T., en desarrollo del pronunciamiento jurisdiccional, considera que las pensiones obtenidas en el exterior no se encuentran exentas, y la única forma de obtener dicho beneficio, es integrando los valores al sistema integral de pensiones regulado por la ley 100 de 1993, o las condiciones de jubilación en fondos privados de pensiones, según la regulación del artículo 126-1 del E.T.

014. En relación a la calificación del ingreso, y su calidad de renta ordinaria o ganancia ocasional, es importante establecer que se trata efectivamente de un ingreso extraordinario, que no hace parte del giro normal de los negocios y actividades del contribuyente, por lo que tiene las características generales para ser considerada una ganancia ocasional.

015. No obstante, y por la limitación existente en la interpretación normativa en materia fiscal, se debe considerar que las ganancias ocasionales en Colombia son aquellos ingresos obtenidos como consecuencia de la liquidación de sociedades, las herencias, donaciones y legados, las rifas, apuestas y similares y las obtenidas como consecuencia de la enajenación de activos fijos.

016. Así lo determina el artículo 299 del E.T.2, que define como tales los indicados en los artículos 300 y siguientes, cuyos conceptos se enunciaron.

2.2 La Suma es una renta pensional
017. En efecto, la suma es una renta pensional o una indemnización sustitutiva de la pensión, si se transfiere por parte del pagador, pero no goza, en términos tributarios, y al tenor de la posición de la doctrina oficial, de beneficios especiales por tratarse de una indemnización sustitutiva obtenida por fuera del régimen general de pensiones regulado por la ley 100 de 1993.
3 Deber legal de declarar
018. Conforme lo establece el artículo 5913 del Estatuto Tributario, todos los contribuyentes del impuesto sobre la renta y complementarios se encuentran obligados a presentar declaración, con excepción de aquellos que la ley, de manera expresa exonera de hacerlo.
Artículo 299. Ingresos constitutivos de ganancia ocasional. Se consideran ingresos constitutivos de ganancia ocasional los contemplados en los siguientes artículos, salvo cuando hayan sido taxativamente señalados como no constitutivos de renta ni ganancia ocasional en el Título I de este Libro.

3 Artículo 591. Quiénes deben presentar declaración de renta y complementarios. Están obligados a presentar declaración del impuesto sobre la renta y complementarios por el año gravable de 1987 y siguientes, todos los contribuyentes sometidos a dicho impuesto, con excepción de los enumerados en el artículo siguiente

019. En términos generales no estarían obligados a declarar, las personas naturales que cumplan con la totalidad de los siguientes requisitos aunque depende, en buena parte, la clasificación como contribuyente empleado, trabajador por cuenta propia u otro tipo de contribuyente persona natural, considerando los valores base para el año gravable 2016:

a. Que el patrimonio bruto en el último día del año gravable 2016 no exceda de cuatro mil quinientas
(4.500) UVT ($ 133.889.000)

b. Que los ingresos brutos sean inferiores a mil cuatrocientas (1.400) UVT (41.654.000)

c. Que los consumos mediante tarjeta de crédito no excedan de dos mil ochocientas (2.800) UVT) ($83.308.000) incluidos los realizados tanto en Colombia como en el exterior.

d. Que el valor total de compras y consumos no supere las dos mil ochocientas (2.800) UVT ($83.308.000) incluidos los realizados tanto en Colombia como en el exterior

e. Que el valor total acumulado de consignaciones bancarias, depósitos o inversiones financieras, no exceda de cuatro mil quinientas (4.500) UVT ( $133.889.000), incluidas las realizadas tanto en Colombia como en el exterior

f. Que no sean responsables del impuesto sobre las ventas del régimen común

4 Tratamiento fiscal en Colombia aplicable al pago de la Suma

4.1 En cuanto a la declaración de renta

020. Son gravados en Colombia la totalidad de los ingresos obtenidos por personas naturales residentes en el país, tanto de fuente nacional como de fuente extranjera4, a las tarifas establecidas para cada rango de contribuyentes, así:

4 Artículo 9. Impuesto de las personas naturales, residentes y no residentes. Las personas naturales, nacionales o extranjeras, residentes en el país y las sucesiones ilíquidas de causantes con residencia en el país en el momento de su muerte, están sujetas al impuesto sobre la renta y complementarios en lo concerniente a sus rentas y ganancias ocasionales, tanto de fuente nacional como de fuente extranjera, y a su patrimonio poseído dentro y fuera del país.

Rangos en UVT Tarifa Marginal Instrucción para calcular impuesto en $ Desde Hasta
>0 1090 0% No tiene
>1090 1700 19% (Renta gravable o ganancia ocasional gravable expresada en UVT menos 1090 UVT) *19%
>1700 4100 28% (Renta gravable o ganancia ocasional gravable expresada en UVT menos 1700 UVT) *28% más 116 UVT
>4100 En adelante 33% (Renta gravable o ganancia ocasional gravable expresada en UVT menos 4100 UVT) *33% más 788 UVT
021. El pago del impuesto, previa determinación y aplicación del crédito fiscal explicado adelante, se hace en anualidades, que para el caso presente será en el año calendario 2017, en los meses de agosto a octubre según los últimos 2 dígitos del Nit, y se depura la renta, deduciendo los gastos y costos que cumplan los requisitos de causalidad, proporcionalidad y necesidad exigidos por la ley tributaria.5
5 Artículo 107. Las expensas necesarias son deducibles. Son deducibles las expensas realizadas durante el año o período gravable en el desarrollo de cualquier actividad productora de renta, siempre que tengan relación de causalidad con las actividades productoras de renta y que sean necesarias y proporcionadas de acuerdo con cada actividad.

La necesidad y proporcionalidad de las expensas debe determinarse con criterio comercial, teniendo en cuenta las normalmente acostumbradas en cada actividad y las limitaciones establecidas en los artículos siguientes.

6 Ley 1739 de 2014. ARTICULO 295-2.

—Base gravable. La base gravable del impuesto a la riqueza es el valor del patrimonio bruto de las personas jurídicas y sociedades de hecho poseído a 1º de enero de 2015, 2016 y 2017 menos las deudas a cargo de las mismas vigentes en esas mismas fechas, y en el caso de personas naturales y sucesiones ilíquidas, el patrimonio bruto poseído por ellas a 1º de enero de 2015, 2016, 2017 y 2018 menos las deudas a cargo de las mismas vigentes en esas mismas fechas, determinados en ambos casos conforme a lo previsto en el Título II del Libro I de este Estatuto, excluyendo el valor patrimonial que tengan al 1º de enero de 2015, 2016 y 2017 para los contribuyentes personas jurídicas y sociedades de hecho, y el que tengan a 1º de enero de 2015, 2016, 2017 y 2018 las personas naturales y las sucesiones ilíquidas, los siguientes bienes:
(…)

PAR. 4º—En caso de que la base gravable del impuesto a la riqueza determinada en cualquiera de los años 2016, 2017 y 2018, sea superior a aquella determinada en el año 2015, la base gravable para cualquiera de dichos años será la menor entre la base gravable determinada en el año 2015 incrementada en el veinticinco por ciento (25%) de la inflación certificada por el Departamento Nacional de Estadística para el año inmediatamente anterior al declarado y la base gravable determinada en el año en que se declara. Si la base gravable del impuesto a la riqueza determinada en cualquiera de los años 2016, 2017 y 2018, es inferior a aquella determinada en el año 2015, la base gravable para cada uno de los años será la mayor entre la base
022. No obstante, la determinación de las tarifas corresponden a aquellos contribuyentes que se encuentran obligados a declarar y liquidar sus impuestos por el sistema ordinario, es decir si se trata de personas naturales cuyos ingresos no provienen en una proporción igual o superior en un 80% a la prestación de servicios técnicos o profesionales, caso en el cual será necesario aplicar el Sistema del Impuesto Mínimo Alternativo Nacional IMAN, que por la información con que contamos no será procedente.

4.2 En cuanto al Impuesto a la Riqueza
023. Tratándose del impuesto a la riqueza decretado por la Ley 1739 de 2014, los elementos sustanciales del impuesto fueron establecidos conforme a la situación fiscal de los contribuyentes a 1 de enero de 2015, es decir que las bases gravables, obligación de pago, cálculo de la tarifa etc., fueron definidos a esa fecha, y si no se encontraban obligados a declarar y pagar dicho impuesto por el año gravable 2015, no lo estarán por los años 2016 a 2018.

024. Si por el contrario, en 2015 fueron contribuyentes del impuesto a la riqueza, lo serán por los años 2016 a 2018, sin importar que las bases gravables se modifiquen, pues la nueva base gravable, por los años 2016 y siguientes, solo se modificará en un porcentaje equivalente a un 25% del incremento del IPC del año anterior.

025. Así las cosas, independientemente que la suma se haya recibido en calidad de renta o de ganancia ocasional y haga parte del patrimonio fiscal en Colombia al final del año gravable 2016, no se modifica la condición de contribuyente del impuesto a la riqueza, y la base gravable, en caso de haber adquirido tal condición, no se modificará más allá del 25% del IPC determinado en 2016, y que se calcula por analistas entre el 5,4% y el 7,12%.

026. Así las cosas, la base se modificará, si las proyecciones resultan acertadas, entre el 1.35% y el 1.78% para el año gravable 2016, que será base del impuesto a la riqueza de 2017, pues el año presente ya se causó el pasado 1 de enero.6

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10abuse

fecherklyn - thank you very much for posting; much appreciated. It is late now, however I will check this out in depth tomorrow. Thanks again.

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00abuse

You might look at this site to further help/confuse you:

https://www.ssa.gov/international/

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00abuse

Thanks fecherklyn for posting that.

I am still leery - in section 5. Las pensiones de jubilación it says that pensions will be taxed only if they are 50 minimum salaries/month or above - that's over $10K/month USD - but it does not say if foreign pensions like Social Security from the USA are included in this. In the absence of any specifics addressing foreigners, I'd have to assume that section is applicable only to Colombian pensions...

So then if you are a tax resident (spending 183 days total or more in Colombia in any 365 day period you will be taxed for the "impuesto de renta" as follows according to your UVT:

>0 1090 0% No tiene
>1090 1700 19% (Renta gravable o ganancia ocasional gravable expresada en UVT menos 1090 UVT) *19%
>1700 4100 28% (Renta gravable o ganancia ocasional gravable expresada en UVT menos 1700 UVT) *28% más 116 UVT
>4100 En adelante 33% (Renta gravable o ganancia ocasional gravable expresada en UVT menos 4100 UVT) *33% más 788 UVT

Does anyone know for sure and can post an official link, that clarifies the tax treatment of foreign pensions? Are they treated the same as Colombian pensions or are they subject to the impuesto de renta as if they were ordinary income? Everything I have seen applies only to Colombian pensions.

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00abuse

Section 13 seems to say that foreign pensions are not exempt 'considers that pensions earned abroad are not exempt'

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00abuse

That is right ParadiseLost.

Legally, all the "t's" have been crossed and all the "i's" dotted, for Colombian tax purposes, a "foreign" pension will NOT be taxed on the same basis as a Colombian pension. HOWEVER, what is still not clear is FROM WHEN THIS RULING WILL BE APPLIED. The texts shown above are dated 2014 which SUGGESTS the law should apply from 2015. I asked this specific question in a letter to the DIAN and although they gave me 15 pages of other rulings, they ignored the date of application.

Is the DIAN doing this on purpose? My tax accountant and tax lawyer are unsure and believe the DIAN are so involved in setting up the imminent tax reform, they have no time or inclination to wade in on this matter.

Accordingly, my 2015 Colombian tax declaration includes 100% of my overseas pensions in Linea Pensiones de Jubilicion, Obtenidos en la Exterior, which are then 100% offset by an identical negative value in Linea Rentas Exentas, Por Pagos Laborales y Pensiones. In other words, my tax counsel have said "let us treat it in 2015 as if it was the same as a Colombian pension and let them come back and query it if they want". That is what I have done, in the full knowledge there is a risk my pension may end up being taxed an ordinary income.

If you read the news about the forthcoming tax reform, it is being strongly mooted that Colombian taxes will lose all, or part, of their exempt status. If this happens, it will remove all doubt about our foreign pensions; they will be taxed, probably from 2016.

Don't throw me in jail if anything I have said above is wrong. Even the best experts in Colombia are unsure in this area.

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00abuse

This exemplifies how ineffective, inefficient and bureaucratic the Colombian system is. Not even the taxing authority, who writes the rules, can accurately interpret their own guidelines. The perplexing thing is that even though they recognize the fault, they don’t do anything to fix it and leave it to the taxpayer to interpret. I’ll think twice the next time I complain about the IRS.

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00abuse

I made a small error in my last post.

I said "If you read the news about the forthcoming tax reform, it is being strongly mooted that Colombian taxes will lose all, or part, of their exempt status. If this happens, it will remove all doubt about our foreign pensions; they will be taxed, probably from 2016."

This was wrongof course. If the tax reform goes through before the end of 2016 (already unlikely), then the new tax laws would be applicable in 2017 (To be declared in 2018).

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00abuse

@fecherlyn
While I don't have an pension I do have a cash flow which might be considered a pension. In discussions with two different tax attorneys and one tax accountant about the most advantageous way to show that cash flow all three immediately dismissed showing it as a pension as 'foreign pensions are taxed'.
Still I guess by showing it the way they are doing it they're playing the game to see if the DIAN can tell if the income is foreign sourced. If you do get audited - either now or in the future is your tax advisor going to represent you for free with the DIAN or will the fact that you've been audited a nice earner for them?

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00abuse

@ ParadiseLost

Exactly, there you have the whole problem.

To some extent, I have already "been there and done it". A few years ago I used Formulario 4 to bring in some money to buy a property. The choice of Formulario 4 was made by my Colombian bank, but they got it wrong because I was already a tax resident by then and should have used Formulario 5. To cut a long story short, the DIAN threatened to fine me 200% of the amount of money I had brought in ïrregularly". My bank initially refused any liability and "reminded" me EVERYBODY WAS OBLIGED TO KNOW THE LAW. We sorted it out eventually, but that is why I now insist on trying to understand the relevent Colombian legislation.

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00abuse

@fecherlyn

Lot's of examples of that sort of issue. After the Panama papers came out there was this great surprise that Colombians had been putting money into Colombia. Quite how anyone missed that the Banks had been selling the program to locals as a totally legal tax management device for years is interesting. The taxes for anyone caught up in that are onerous now and get progressively worse if you don't declare until later. The banks just stepped away - in fact one was telling me that it was still a good investment opportunity as the money was outside of the country and if anything ever happened you could just 'wire' the money to JPM in New York. I begged to differ suggesting that JPM - or any US Bank - wouldn't happily just take money from an offshore account of a Colombian citizen.
In the US any investor who had been sold one of those offshore accounts would have asked for the original marketing material (which I am sure suggested that this was not taxable in Colombia) and suggested that the bank should either pay the tax (11% on the notional this year if declared) or otherwise face a class action suit.

On taxes a lot of advisors here, rather than giving you one answer (as you might get in the US) will give you a set of answers. You have to carefully ask them how aggressive they are being. I've spoken to some ex pats who say they've always been happy to be aggressive on taxes. There's some difference in what you say charge as a business expense in the US and representing whether your income is or isn't taxable.
It sounds as if you've been around the block here and can deal with issues as and when they arise. In that case the route you're going down is understandable but I do wonder if expats with less experience and contacts in country should go the 'aggressive' route? If nothing else I think that you have to employ professional advice. As we've seen the law states that Foreign Pensions are taxable - if you ask a tax advisor that's what they will quote to you. If there is any query about whether that is actually in place I'd rather a Colombian tax expert argue that with the DIAN that try to do it personally if I was audited.

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00abuse

Correction 'putting money into Panama'

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00abuse

Anyone know where one can find a summary of the "major taxation revision" that was supposed to happen at the end of 2016 and is referenced multiple times in this post? What, if anything, changed that is relevant to expats living in Colombia and/or owning real estate in Colombia?

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00abuse