Ingresos brutos” (Gross incomes) within Colombia greater than COP 38.48 millions in 2014

What is "income" meant in Colombia? Income earned in Colombia? What about Out of Colombia pensions earned by foreigners? Is that considered income?

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Whilst on the subject of Colombian Tax Declarations, it should be noted that deadlines exist for their submission.

This year the deadlines run from August 11th 2014, until October 21st 2014, the specific day being determined by your cedula number.

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@bjm.

As I said, I am not an expert, but here is what I understand.

The distinction between "Global" and "Local only" is a function of how long you have been a resident for tax purposes. To my understanding, an expat becomes a "permanent resident" once he has held a resident visa for more than 5 years. Once this is "achieved", he becomes "globalised" and he has to declare his global incomes and assets. Until then, he only has to declare his assets and incomes sourced from activities within Colombia.

I really would like someone else to examine what I have just said as I could be wrong?

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@bjm.

"What about "out of Colombia retirement pensions?"

This is also my case.

During my first 5 years in Colombia, I did NOT declare in Colombia my overseas pensions.

Since then, I have included my French & UK pensions in my Colombian declaration (I.e. declare Global incomes), but they have never incurred any assessed tax liability because the amounts never exceeded the exempt threshhold.

Hope this helps.

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Thanks. I appreciate you info.

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You only need to include your US pension and/or your assets outside of Colombia if you are a Colombian resident for tax purposes. In the case of a foreigner living in Colombia I am pretty sure that the rule that applies is if you live in Colombia more than 183 calendar days in any 365 consecutive calendar days. You can find the rules if you google this or in the DIAN website. The rules are very simple an straightforward. I am attaching the rules in Spanish below:

1. Permanecer continua o discontinuamente en el país por más de ciento ochenta y tres (183) días calendario incluyendo días de entrada y salida del país, durante un período cualquiera de trescientos sesenta y cinco (365) días calendario consecutivos, en el entendido que, cuando la permanencia continua o discontinua en el país recaiga sobre más de un año o período gravable, se considerará que la persona es residente a partir del segundo año o período gravable.

2. Encontrarse, por su relación con el servicio exterior del Estado colombiano o con personas que se encuentran en el servicio exterior del Estado colombiano, y en virtud de las convenciones de Viena sobre relaciones diplomáticas y consulares, exentos de tributación en el país en el que se encuentran en misión respecto de toda o parte de sus rentas y ganancias ocasionales durante el respectivo año o período gravable.

3. Ser nacionales y que durante el respectivo año o período gravable:

a) Su cónyuge o compañero permanente no separado legalmente o los hijos dependientes menores de edad, tengan residencia fiscal en el país; o,

b) El cincuenta por ciento (50%) o más de sus ingresos sean de fuente nacional; o,

c) El cincuenta por ciento (50%) o más de sus bienes sean administrados en el país; o,

d) El cincuenta por ciento (50%) o más de sus activos se entiendan poseídos en el país; o.

e) Habiendo sido requeridos por la administración tributaria para ello, no acrediten su condición de residentes en el exterior para efectos tributarios; o,

f) Tengan residencia fiscal en una jurisdicción calificada por el Gobierno Nacional como paraíso fiscal.

PAR.—Las personas naturales nacionales que, de acuerdo con las disposiciones de este artículo acrediten su condición de residentes en el exterior para efectos tributarios, deberán hacerlo ante la Dirección de Impuestos y Aduanas Nacionales mediante certificado de residencia fiscal o documento que haga sus veces, expedido por el país o jurisdicción del cual se hayan convertido en residentes.

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@rafapark.

Thank you for your reply although, in my case, this largely serves to demonstrate my command of the Spanish language is still nothing to be proud of, and that any level of bureaucratic language gives me an immediate headache.

Does the information you have provided substantiate what I said initially, or does it correct it? Quite frankly I do not know as I had difficulty in getting beyond the 1st sentence.....and this is in English:

....."You only need to include your US pension and/or your assets outside of Colombia if you are a Colombian resident for tax purposes....."

Already, I had difficulty in fathoming this out; how should we understand a "Colombian resident" in this context? Are we talking here about a COLOMBIAN NATIONAL WHO IS RESIDENT IN COLOMBIA, or are we speaking about ANYONE, a local, or a foreign expat, who happen to be RESIDING IN COLOMBIA?

If the cavalry are out there they are very welcome to come and rescue me. If I cannot get beyond the 1st sentence, then I give up.

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In answer to the queries, since January 2013 all Foreigners, Resident in Colombia on any Visa, have to declare their income, including Foreign Pensions, albeit until October 2014 Foreign Pensions were not taxed, unfortunately an Abogado queried this, and as a result, from October 2014, Foreigners Pensions are taxed, unless your home country has a double tax treaty with Colombia, so unless you have a very good Accountant, you could have to pay tax twice, in your home country and in Colombia.
Find an Accountant, and take receipts for any vehicles bought or sold during that tax year,
your escrituras for any properties owned,
receipts for any work done on your property, including materials if you did the work yourself.
A certificate from your Colombian Bank, obtained specifically for DIAN, which shows your expenditure for the year.
Copies of your income transfers to Colombia, and if you used a Transfer Company, a certificate from them.
A Certificate from you EPS Health Provider to show how much you paid into the system, as a legal requirement.
This does not mean you will pay any tax, if you have a good Accountant, your claimable expenses will cancel out any tax obligations, but you must complete the return.
I have been reliably told, that DIAN is not after the little man, if a Return is made, as long as it appears reasonable they will accept it, they are after those who make no Returns, and those who are obviously lying, as their Certificates will bear out.

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How would Dian know you are receiving any pension or income and of what amount from out of Colombia? Many of us take out cash here and pay via debit/credit cards from our non Colombia banks...

Thanks

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And just think they don't even give you a credit card, a loan or a permanent visa. Nice trade off? Keep digging and you will find the answer that you want.

How do I block this thread?

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Ha-ha.. 10-4

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@ Felipe58

Thanks for all the information you provided. Some of it includes factors that are new to me.

In your 1st para you state “ALL” foreigners, resident in Colombia, on “ANY” visa, have to declare their income including Foreign Pensions. As you have stated it, this would be a far more draconian condition than I have understood to date. More draconian because I understood the obligation to declare foreign pensions only kicked in after being a resident for a certain period (5 years?).

Also, you mention an obligation to obtain an annual certificate from your Colombian bank showing your EXPENDITURE for the year. I have never heard of this although I do obtain certificates from my bank certifying to DIAN the incomes (rendimientos) and withholding taxes (retefuente) paid/debited to my accounts with them together with some details on my credit card activity. But nothing about EXPENDITURES!

Do you have any further info on the above aspects? It would be nice to find where they are covered in the DIAN tax rules.

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... Also I'm looking for tax code 206, section 5. I can't find it on my searches

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This is as I understand it; if you are considered a tax resident in Colombia you have to declare and pay worldwide income in Colombia by the law. Until recently, a foreigner for example who received his / her residency visa would not be liable for worldwide income for 5 years. That changed.
The second issue is tax residency. So if you for example have a cedula extranjeria opt student visa etc (ie not a resident) and stay in Colombia for more than 183 days, then you are liable / need to declare worldwide income if above the thresholds.
If you are there for less than 183 days then no you don’t (my interpretation from what I have gleamed). I also understand that for example, if you are a foreigner, and do not stay in the country over the 183 days but have significant holdings (ie property over 124 million pesos) that you do not need to declare it. I may be wrong on this – every-time I speak to an accountant I get a different interpretation.

Point 3 in Spanish refers to Colombian citizens. Basically I think that if you are a Colombian working overseas, and outside the country for more than 183 days which would qualify you as a non-resident – may not be, and would be considered liable for Colombian taxes ie if your wife or kids are living in Colombia etc.

Not tax advice - just what I think as I have been looking into this for a while.

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@bickmed.

Your clarification seems to make sense to me. In particular your info that the need to declare worldwide incomes had changed recently and now applied immediately on obtaining a residency visa rather than after 5 years as it previously was. My only comment is to ask how the government expects people to be aware of these changes as I have seen no notification of it anywhere. If you have any legal reference for this change, it would be much appreciated.

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Unfortunately, the onus is not on them it comes back to us. In the US we can't claim ignorance or misinformation on any laws. Here is probably worse. Look at when the local government decides to make a non motorcycle day of of the blue without authorization... Police line up with flatbed trucks pulling motos...

We are tax residents (not permanent residents or citizens. Just like you said. Beyond the 184 days. At this'd point is probably difficult to track us but if we use Puntos with stores to get discounts etc (obviously cedula# related) or hold local bank amounts, we are definately exposed. Who knows if the removal of permanent visas has something to do with this to hold this over our heads when it's time to renew. I know I have pessimistic mentality with this but life teachers is all kinds of lessons
.

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As above - as in most countries, the onus is on you to know the laws - not knowing about them is not accepted as an excuse. It was promulgated in the national and local news. If you search KPMG or other international tax firms they have all the information in English.

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@bickmed,

I agree the onus is always on the general public to know the law, but I feel it should be reasonable the laws were available in a relatively simple manner and expressed in understandable terminology.

I have just examined KPMG's 65 page executive summary trying to find something on the Colombian taxation of pension incomes....are they exempt, and if so, up to what threshhold, etc. I could find nothing.

Like most private people in Colombia I have to use a tax accountant to produce my tax declarations as to do so is beyond me, and most people. Surely this is wrong?

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I agree with that... Legalize is a while other language and lay people should have it in some sort out fashion is available to the citizens and public...
But.... How can that be put into place is another story... With all due apology to all attorneys and accountants. It's unreasonable to HAVE TO use a payed professional...
I know, I know, it's not gonna happen lol

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I wish people would clean up their spelling so the proper meaning could be known!

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Unfortunately some people use their phones and they have a habit of changing spelling after they are even corrected. For me l. I apologize, and would be more than happy to confirm what is not understood.

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"In some sort out fashion"?

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In fact, "in some sort out fashion is available".

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Lmao... Out = of in this context.

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Please, cell phone users, write clearer so ALL your readers don't have to work so hard to understand your meaning.

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This thread seems to have been taken over for the purpose of discussing the grammatical skills required to post comments. May I politely suggest those who wish to continue in this vein open up a new item dedicated to the subject.

So, back to the original subject, tax declarations, if there is anything else to be said.

My grammar is not very good, so I apologise for any mistakes I have not discovered.

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It's not about grammatical skills. It's about understanding. 'nuff said.

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@Andresen,

Yes, "nuff said".

But to take advantage of the fact you have been viewing this thread, do you have anything to add to the discussion?

I note you live just outside Medellin and receive a social security, but seem to draw it from local ATMs and have been living here for some time. It seems therefore you are a resdent for Colombian tax purposes? If so, do you complete annual Colombian tax declarations and do you have any difficulty doing so?

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Allow me to chime in here... Did Colombia just change the 5 year residency clause to become a tax resident last year before reaching the five year mark?
Was that tied into revoking permanent residency?

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No, I have not!

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2013 tax laws were overhauled. if your in colombia over 183 days your a tax resident. oops.. however that alone doesnt mean you have to file.

if you have income of over 30 million pesos a year coming into your colombian bank account then maybe you do.

although if you pay taxes out of colombia for this money then you dont have to pay here in colombia. no double taxing.

email me if you need more info.

Cheers,

James@medellinattorney.com

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ColombiaGringo, Thanks for that. How about someone who has no Colombian bank account but receives more than 30 million pesos into a US account from pensions or Social Security or whatever annually?

I have been here a year but actually so far see no reason to have an account in a Col bank. Maybe when I buy something that will change, but so far the ATM route works great for what I need.

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Ditto

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@Patricio, James.

Your most recent comments are at last touching the heart of the debate I have been trying to instigate....."Can expats fly under the radar and avoid doing Colombian tax declarations simply by virtue of NOT opening a local bank account and using ATMs/foreign cards for their cash requirements? My assessment of this situation has always been to do so was at great risk of breaking Colombian tax laws.

As James has already said, the"new" 2013 Tax Reform tossed out the 5 year rule about becoming a permanent resident with its associated global incomes obligations. Thus now, if you reside in Colombia for more than 183 consecutive days, then, you are liable to Colombian tax legislation. E.g. In my opinion, you have to do a tax declaration even if you have no local bank account. What counts, is what you have to dclare in the tax declaration, and this would have to include your worldwide incomes and assets wherever they exist.

Once these worldwide incomes and assets have been declared (E.g. Whenever they exceed the declaration threshholds), they are assessed to see if they are high enough to incur taxes. If any of these worldwide incomes (E.g. US pension incomes) has already incurred US taxes, then further "double" Colombian tax will only be envisaged when the comparable Colombian tax is in excess of the US tax.

This is the way I have been imposed "double" taxation on my worldwide incomes/assets when I resided some years ago in Norway.

Will welcome your comments.

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I have been watching this tax conversation over the week. What amazes me is how U.S. expats are always trying to rip off or get away with not paying their share. Yes, I am a U. S. citizen planning to move to Colombia next year. This is why we are hated in so many foreign countries. If you don't like the rules, go back to where you came. If you don't understand the tax rules because of the language barrier, hire a translator and go to a professional. You are now living in THEIR country. Please learn to respect the laws and culture of the places you choose to travel. The world was not made to adjust to U.S. standards. I am sure the taxes can help many people within the country and won't break your pocketbook.

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My response to a ? previously was if an US expat had a Colombian visa and neither bank accounts nor investments in Colombia needed to file a Colombian return when they were filing in US. What is apparent from the blog is that this is a sketchy subject and nobody seems to actualy know. ease off criticizer.

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It would not be a sketchy subject, if you went to the proper source, a Tax professional.

At the current exchange rates, approx. your first $12,000 USD is tax exempt, afterwards, the rates range from 19%-33%.

The capital gains tax is at a flat rate of 10%.

Colombia is party to other double taxation countries like, Canada Chile, Switzerland Spain & possibly some other So. America countries, but the tax you pay on foreign sourced income is credited towards your tax liability on that income in Colombia.

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dmillonig has made some good comments I feel. To my mind, a large part of Colombia's problems stems from a lack of civic responsibility from those residing in the country....expats of all kinds included.

We must all be aware of the rampant tax evasion by the professional and artesanal classes in Colombia. How often do you get a doctor, lawyer, plumber, you name it, to issue an invoice?

Regretably to my mind, most expats take advantage of this tendency, usually by trying to become "invisible", or "under the radar", as I call it. I do not keep count, but I meet lots of expats in Colombia, but virtually none of them are in conformity with the country's tax legislation, amd most of them take conscious evasive action to avoid identification. Proof, just take a look at this site's archives and witness that the most common advice is to avoid opening bank accounts to avoid any form of "registration". This is called "cheating" everywhere else in the world.

Sorry to appear "Holier than thou", but that is how I feel.....and I am fed up with paying heavier taxes just to compensate others' greed.

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fecherklyn, you are so correct. So many move to other countries to take part of the benefits, but choose to find ways to cheat the system, so they don't have to pay their part like the residences of the country.
I wish these type of ex-pats would stay where they come from, they bring no benefit but self greed. P.S. No, I am not a religious nut! Far from it.

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Well I have to say, those last couple of posts in agreement to possible cheating is so far off base it requires my response.
Taxpayers, in whatever country they live are now being considered you " are always trying to rip off or get away with not paying their share" by your estimate? Number one you don't know or have enough data to encompass the status of taxpayers (or ExPats for that matter) and what they actually do. You are interpreting what some posts you are reading and presuming facts that are not in evidence. Maybe you are applying yourself after looking in the mirror?
Number two... are you a cheater to or rip off artist to educate ourselves with the current tax law here? I say absolutely not. For me, I don't want to be cheated either and I don't want to pay double or additional taxes on anything? It took me a long time to almost comprehend US IRS tax code and that is with the assistance of available books, interpretations of tax law, instruction sheets etc etc. Overall this is not available here in Colombia. When you speak to three different accountants in Colombia, you get three different answers. You dont realize law, all law are interpretations. For Example

Usually, to have earned income you must have received the funds in exchange for labor, like wages and self-employment income. A pension is a payment for past services performed by the employee. So, it isn't considered earned income

Many of us here are trying to determine that with pensions. The wording of DIAN is not clear on that, or at least I cannot find it. Now if I am trying to take every exemption possible here and in the US, educate myself on every aspect, that doesn't make you a cheat, it makes you smarter than the guy who just checks off "standard itemized" and pay or get a refund blindly. All tax laws are very cryptic, understanding them and applying to yourself is far from cheating

Now as far as this section of a post
"...common advice is to avoid opening bank accounts to avoid any form of "registration". This is called "cheating" everywhere else in the world." I would say that my understanding is to not open a bank account to avoid registration, it is rather than to not pay exorbitant fees and have your money is a less than secure situation. If you run into some difficulty with your funds in your account, direct deposits etc, trying to unravel it is an extremely time consuming, complicated scenario. Same thing with credit cards.... fees for not using them and of course high interest rates. This isn't cheating or avoidance, its a legal choice. There is no regulation when you get a RE visa you have to open a bank account .

Finally with this posting " I am sure the taxes can help many people within the country and won't break your pocketbook. " Nobody knows the other guys pocketbook, you should mind yours and not the next guys. EXPats bring money into Colombia and spend it on the local economy... rents, utilities, small shops, pharmacies, electronics and the list goes on and on. We tend to tip because we are accustomed to, most people I know are more than happy and generous to help the next guy, our neighbors and friends and our Colombian families. There is so much more internal corruption here on many levels that you can wave a papaya at. We are not a bunch of scum-sucking foreigners trying to milk Colombia... just the opposite.

dmillonig
If you don't like the ExPat company YOU can leave with your cat :

..and you are not a religious nut just a regular straight up
normal NUT

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bigjailerman, I see I hit a nerve. It is funny, that you cannot find the correct information on pensions. I have found documentation from two sources that states that any pensions or social security received during the year are considered income. If your social security or pensions are taxed by your home country, it will not be taxed by Colombia.

No, it may not seem right that money that you earned as a benefit, your pension, should be taxed, but that is the laws of another country. All I am saying is that if one wants to live in another country, they need to do what everyone else does..

As for corruption, don't fool yourself, that is in every country. Some just hide it better than others!

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Date Posted: 8/22/2015 3:13 PM

bigjailerman Let me clarify, when I say that you pension or social security will NOT be taxed by Colombia if taxed by the U.S. I met to say it will not be doubled taxed. You need to submit the income if you brought the income into the country, and show the appropriate amount of taxes for that amount taxed by the U.S.. The U.S. taxes paid are deducted from your Colombian taxes to be paid.

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not bigjailerman but I was ready to post that you contradicted yourself in posts.

Appreciate that you clarified, and fyi I am not attempting to cheat anyone and suspect most of the people opening up here about questions and looking for advice aren't either. Buena suerte.

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Hitting a nerve....hmmm well being labeled as a cheater or a rip off artist by some one who thinks she knows most every other expat (I dislike that word as well) and their status, choices and what they are planning is a not well thought out comment. How can you honestly know what other expats do. Lumping everyone into negative categories is juvenile.

If you have a link regarding pensions it would be a benefit to everyone on the forum, and I'm glad you find that funny.
As far as corruption, by no way, shape, or form I am not trying to insinuate other countries are not culpable, but in this thread, I am addressing Colombia.

If you would like to help Colombia, beyond filing your tax declarations, local businesses would be more than happy to accept 3 times the listed prices to level of the USD vs COP field, or send DIAN an extra 2 grand a year so they can help the poorer classes, and would help teach those who are corrupt to learn to help their own countryman... Especially from a gringo is ;-)

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Honestly Patricio, my retorts were not leveled at you at all. I took slight offense to what the other posted said. Sometimes people like to stand on high balconies and share their knowledge on the people below them and assume what they our how they conduct their lives. I generally don't respond at all, bit this time I took some umbrage.

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My post was responding to dmillong, not you!

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@ bigjailerman and anyone else who feels ofended by my comments.

BJM, you seem to be taking my comments about “cheating” personally. You should not do so. Perhaps you would care to reread what I said and reconsider if you, or any other specific person is targeted….they are not.

So, who and what am I targeting? Well quite a lot of things/persons actually. Let us start:

If you go back to the start you will see I am initially distributing some information that I think many “expats” (sorry if you do not like the word but feel free to offer a better option?) will be interested in having. In this context, I am really addressing the frightful lack of knowledge most “expats” have about Colombian taxation. If you have followed Expat Exchange long enough, you will immediately see recurrent questions about the subject. I am sorry if, in providing some “back-up”, this identifies me in your view to somebody who “likes to stand on high balconies and share their knowledge on the people below them…..” It certainly was not intended in such a manner.

In fact, one of the “situations” I am indirectly targeting is the LACK of PROFESSIONAL GUIDANCE and I do try to make a point of emphasizing in all of my posts that I am NOT an expert in the subject. In reality, I am just like most of you: trying to get the most out of the bits and pieces of info that is fed to me. As I have said elsewhere, over the 13 years of my residence in Colombia I have used four professional tax accountants, all supposedly experts in their field. Unfortunately, the reality is that as soon as your circumstances start to include international finances, tax treaties and even many day-to-day issues, their lack of command about Colombian taxation is soon revealed. In short, I feel permanently frustrated about my inability to understand many tax issues.

Independently of me, this thread has led to complex questions concerning whether or not foreign pension incomes received by resident expats are taxable in Colombia? In my opinion, this is probably the most important question any pensioner considering residence in Colombia needs to be fully informed about. What has come out of our discussions so far is that (IMO) some (most?) posters are woefully ignorant, or have been ill-advised, about the subject. I am now, more than ever, convinced that all resident expats receiving pensions incomes in excess of specified threshold limits (In aggregate, and from wherever globally) are (i) liable to make Colombian tax declarations, and (ii) will be subject to Colombian income tax on these revenues if the marginal rate of taxation in the source nation is less than that in Colombia. Sorry if I am pushing this down your throat, but many people seem to prefer to think otherwise and I am sorry if it is not welcome to you.

Finally, who am I calling a “cheat”? Certainly not you BJM, nor any other particular poster. What I am saying is that many expats consciously prefer to remain “out of the spotlight” and often tout “Do you think the authorities are efficient enough to track you?” There, I have said it again BJM, I do think many expats consciously take the low profile (“Sorry, I had no idea I had to do a tax declaration”) with a view to avoiding taxation (and admittedly other bureaucratic regulation). You may feel most expats are more honorable than I am, but I will maintain my view based upon my 13 year experience in Colombia. I would say, one in every 10 expats I know actually prepare Colombian tax declarations and a majority of those who do not are not interested in finding out.

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Not at all fecherklyn. I was only using your single example of your post regarding banking and registration. Your posts are generally informative and I have no dispute with you or any of that. We can all disagree, we are all adults. The word ExPat really isn't a bad word but to me it means we turned down or away from our patriotism/country. It's not a big deal just a blurb by me. I didn't appreciate the other poster "better than thou" attitude.. It bothered me for a minute and just had the urge to defend the "ExPats" .. There are many reasons why people can't, or dont understand the process and of course it is intimidating. In any event I spoke to an attorney and a family member here who is a recent university graduate as a certified accountant (Contabilidad) who is still in close contact with his professors and have been assured pension and social security, if filed with the IRS properly in the US is not taxable here. Declaration stays in your second year here if your 183 days extend into two years, which makes your year of due date. For me it means next year because I have been in and out of the country more than a few times last year. By no means I am an expert. I will share what I uncover in as meeting with one of the professors next week.

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@ fecherklyn

The regulations/laws first changed in January 2013, the Permanent Resident Visa, no longer exists, all Foreigners now have to apply for Visa renewal, as fixed intervals, and the 5 years grace rule went out of the window.

The only way to do away with this is to apply for Citizenship, and take dual Nationality, if your home country permits that, this can be done once you have resident status.

Regarding the Bank Certificate, it will show on it, the gross amount you have spent from your account, and the gross amount spent on your Colombian Credit card.

I can't point you to the Taxregulations online, I take my advice from my Colombian Accountant, who normally only deals with National Company Accounts, but has a few individual ones such as mine, I can only say, that when she has asked for a certain certificate, I have gone and asked the relevant Authority for it, and been given it, so I have no reason to believe this information is incorrect.

With regard to the tax on our pensions that have already been taxed, my Accountant has challenged this, and we are still awaiting the outcome.

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In addition to my last post, to clarify the point about double taxation on pensions, in the past pensions below a certain figure were not taxed, Foreign Pensioners were treated the same as Colombian.

However apparently an Abogado challenged this last year, and therefore since Oct 2014, Foreigners who are Tax resident, and from a country that does not have a Double Tax treaty, now also have to pay tax in Colombia on their pension. Unfortunately this includes me, because the UK doesn't have a DT Treaty with Colombia.

Unless my Accountant can find a way around this I stand to pay a total of up to 55% tax on pension, for which I paid tax throughout my working life (20% in the UK and up to 35% in Colombia). For what I receive, that might mean I have to leave, but I have two properties here, my Finca and the Mother-in-laws house, if I had to sell those I would lose even more...I seem to be in a no win situation.

This doesn't seem very fair, when I pay my local taxes throughout the year, and pay into the National Health System.

I have been told that the continuing restrictions on Foreigners is as a result of what many state they do on this forum, live in Colombia, but try to stay under the radar, and live off a Home Country Bank Card at the ATM.

I just hope that the Authorities catch up with those people, and either kick them out, of ensure they pay all the dues they have so far avoided.

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This is now a mature thread, more than 50 posts old and, I think, deserving of a few conclusions about what has been written on the subject to date.

To my mind, this thread has focused on two issues:

- (1) That Colombian taxation is extremely complex and it is difficult to find real “experts” who can provide definitive replies to “expat” queries.
- (2) Whether, or not, foreign pension incomes are taxable to residents in Colombia and if “double taxation” on them is a realistic threat?

On the first issue, most posters seem to agree Colombian Taxation is extremely complex/difficult to understand, and experts on the matter are rare and hard to find. However, I feel we expats often complicate the issues ourselves by offering unsubstantiated opinions without adequate context, which is then received by its audience as substantiated fact. Here are several examples:

“Usually, to have earned income you must have received the funds in exchange for labor, like wages and self-employment income. A pension is a payment for past services performed by the employee. So, it isn't considered earned income.”

“If you are considered a tax resident in Colombia you have to declare and pay worldwide income in Colombia by the law.”

(The above are but two recent extracts taken from many. It is a generalized problem).

The problem arising from the above extracts is that putting them together as “facts” leads to the misconception that “pensions” are not deemed “earned income”, and so consequently do not need declaration for taxation purposes. Nothing could be further from the truth. Accordingly, forum readers are often confronted by inconsistent information and data that needs clarification and substantiation before it becomes of any use. In other words, what was already hard to understand has just become even worse?

Regarding the second issue, it is clear there are opposing views. Here are some examples:

“…… and as a result, from October 2014, Foreigners Pensions are taxed, unless your home country has a double tax treaty with Colombia”.

“I spoke to an attorney and a family member here who is a recent university graduate as a certified accountant (Contabilidad) who is still in close contact with his professors and have been assured pension and social security, if filed with the IRS properly in the US is not taxable here”.

“….. but the tax you pay on foreign sourced income is credited towards your tax liability on that income in Colombia.

“…although if you pay taxes out of Colombia for this money (e.g. US pensions) then you don’t have to pay here in Colombia. I.E.No double taxing.”

Each of the above statements was offered as FACTUAL. Clearly, this cannot be the case.

So, what are we to make of it?

For my part, I shall take the prudent path of declaring in Colombia my foreign (Non-Colombian) gross pension incomes despite the fact they were credited to bank accounts outside Colombia and have been subjected to social security deductions and at source withholding taxes. In addition to declaring in Colombia my “foreign incomes”, I shall also declare my foreign assets/”worldwide” (End-year offshore Bank account balances, share values, etc). This is the MY interpretation (and my current tax accountant’s interpretation) of current Colombian Tax legislation AND HOW IT IS INTENDED TO BE APPLIED BY THE DIAN. I may be wrong and shall be delighted if anybody “out there” can prove it should be otherwise.

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@Felipe58

Our latest posts crossed and mine was made without the benefit (what an inappropriate word to choose) of your update comments.

If your fears are proven true (double taxation without the benefit of source taxes as a tax credit) then I may be joining you on the same ship home.

This now becomes a HIGHLY IMPORTANT issue that all retired expats in Colombia need clearing up. Lets try to keep regular updates to this thread as, and when, they arrive.

If you do not mind, I will send you a PM so we can communicate more fully. We both live in Medellin.

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Good Post.. But please use my full quote on the post and left it open ended

In any event I spoke to an attorney and a family member here who is a recent university graduate as a certified accountant (Contabilidad) who is still in close contact with his professors and have been assured pension and social security, if filed with the IRS properly in the US is not taxable here. Declaration stays in your second year here if your 183 days extend into two years, which makes your year of due date. For me it means next year because I have been in and out of the country more than a few times last year. By no means I am an expert. I will share what I uncover in as meeting with one of the professors next week."

In any event. There might be some sort of light at the end of the tunnel and it may not be a train. I am also following up with my us tax attorney and will be told if filling/paying here in Colombia, it may offset us IRS payment or refund status... Just FYI

To be continued

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I look forward to your PM!

I have just looked up who Colombia has Double Taxation Treaties with and these include the following Countries:

Double Taxation Agreements signed by Colombia:

1) Andean Community. Multilateral treaty signed in 2004 between Bolivia, Ecuador and Peru. Decision 578. IN FORCE.

2) Spain. Treaty signed in 2005, approved by Colombian Law 1082 of 2006. IN FORCE.

3) Chile. Treaty signed in 2007, approved by Colombian Law 1261 of 2008. IN FORCE.

4) Switzerland. Treaty signed in 2007, approved by Colombian Law 1344 of 2009. IN FORCE.

5) Canada: Treaty signed in 2008, approved by Colombian Law 1459 of 2011. IN FORCE.

6) Mexico: Treaty signed in 2009, approved by Colombian Law 1568 of 2012. IN FORCE.

7) South Korea: Treaty signed in 2010, approved by Colombian Law 1667 of 2013. IN FORCE.

8) India: Treaty signed in 2011, approved by Colombian Law 1668 of 2013. IN FORCE.

9) Portugal: Treaty signed in 2010, approved by Colombian Law 1692 of 2013 and Constitutional Court C 667-2014. NOT IN FORCE.

10) Czech Republic: Treaty signed in 2012, approved by Colombia Law 1690 of 2013 and no yet approved by Constitutional Court. NOT IN FORCE.

11) France: Treaty signed in 2015, no yet approved by Colombia National Congress and no yet approved by Constitutional Court. NOT IN FORCE.

In addition to the above, is important to mention that Colombia is currently negotiating Double Taxation Agreements with several other countries, such as Germany, the Netherlands, Belgium and Japan.

There are other agreements from 1970 to avoid double taxation but only for Shipping and Airfreight :
Argentina, Germany, Brazil, Venezuela, Italy, USA and France.

Colombia has also signed several Tax Information Exchange Agreements, which have as a purpose seeking an effective control on the revenues obtained by taxpayers within another country, when they are subject to taxation on both of their national as well as foreign source income (worldwide income). As a consequence, it should be noted that Colombia has signed these types of agreements with United States, Canada, Chile, France, Belgium, Luxembourg, The Netherlands, Italy, Slovak Republic, Czech Republic, Romania, Hungary, Bosnia, Serbia, Turkey, Oman and Thailand.

Source: Linkedin.com (https://www.linkedin.com/pulse/20140925135918-39832895-colombia-double-taxation-agreements-avoid-double-taxation-on-income-and-on-equity)

These last agreements are being used to find those who are not declaring their income to DIAN, but they are only interested in the big fish!

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@ Felipe58.
Now I am more calm, I have looked again at what you reported and what concerns me most are your following words: "in the past pensions below a certain figure were not taxed, Foreign Pensioners were treated the same as Colombian".

This is important because the tax authorities assurance that foreign pensioners would be treated like Colombians was, in effect, a guaranty the ongoing tax exemptions would equally apply to expats. This meant that unless you had extremely high foreign pensions, you would not be taxed in Colombia because the exemption threshholds are so high. Thus, to remove this "comparability" with Colombian pensioners contains lots of menace.

So, where did you get these words from (Foreign pensioners WERE treated the same as Colombians).

Looking on the bright side, the absence of a Double Taxation agreement does not necessarily mean Colombia would resist applying a foreign withholding tax as a tax credit. They could decide to allow the tax credit even though it is not required by a Double Taxation agreement.

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@fecherklyn

My Accountant received the information from DIAN in Medellin.

She has now challenged the interpretation of this, saying that it meant to apply to voluntary purchased pensions, and not to works pensions.

It is this we are waiting an outcome of, however as it stands DIAN are talking about all pensions.

Until this change which was made as I stated in Oct 2014, all pensioners, whether Foreign or Colombian were dealt with in exactly the same way.

I agree with you regards the threat to us as Pensioners, my wife who is Colombian has seen the text, and states that it is open to interpretation by the individual Tax Inspector, because it is ambiguous, hopefully this challenge may resolve that, but knowing the Colombian system, maybe not. She found the text here:
http://www.cancilleria.gov.co/sites/default/files/Normograma/docs/oficio_dian_58213_2014.htm which apparently is a copy of the reply to the Abogado.

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Thank you Felipe.

To those of you who have claimed all the information we need is easily available from the DIAN websites, I am happy to say you have my utmost respect and esteem. The text referred to by Felipe is the article Diario Oficial No 49.342 de 21 de noviembre de 2014 within the attached link. I could not understand half of it.

If there is anybody out there who would like to translate the DIAN text into something understandable, then I am sure we would all appreciate it.

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Last evening I emailed the person, Oscar Jiminez who was the author of one of the links Felipe posted... He broke it down to simple layman's language and provided his article.. See below

Dear Dave,



There is no material in English. I did an article couple years ago in relation to this matter and the conclusion was that unless you have a double taxation treaty in application the pension is taxable income in Colombia but you can apply for the tax credit.



Regards, Oscar



Aplicabilidad del numeral 5° del artículo 206 del Estatuto Tributario a los expatriados

Otro tema tributario relacionado con el tema de pensiones, se refiere al tratamiento fiscal aplicable en Colombia, a ingresos pensionales recibidos por un residente fiscal, de un sistema pensional del exterior. El tema particularmente aplica para nacionales o extranjeros que después de su trabajo en el exterior deciden trasladarse a Colombia, para establecer su residencia en nuestro país, una vez pensionados en el exterior.

El estatuto tributario indica que no están gravadas las pensiones de jubilación, invalidez, vejez y de sobrevivientes en la parte del pago mensual que no sea superior a cincuenta (50) salarios mínimos mensuales, siempre y cuando de conformidad con el parágrafo tres, adicionado por el artículo 96 de la ley 223 de 1995, se cumplan los requisitos necesarios de conformidad con el Sistema de Seguridad Social (Ley 100 de 1993).

Es decir, las rentas exentas de pensiones se rigen de conformidad con las normas del sistema de seguridad social colombiano y, en consecuencia, la pensión recibida desde el exterior, por un extranjero o por un nacional, no tendría la calidad de renta exenta.

Esta interpretación ha sido avalada por la Corte Constitucional que consideró en sentencia C-1261 de 2005, que el trato diferencial mencionado no vulnera el principio de igualdad tributaria.

Por lo tanto un expatriado que opte por permanecer en Colombia, estará sujeto a imposición sobre el ingreso recibido en razón de la pensión que no fue obtenida de acuerdo al sistema de seguridad social colombiano. En tal sentido pueden acaecer varias situaciones.

(i) Que en el país de otorgamiento las pensiones tengan el carácter de exentas. Al no reconocerse en Colombia tal situación el expatriado deberá soportar una carga impositiva en Colombia.

(ii) Que en el país de otorgamiento las pensiones se encuentren gravadas a una menor tarifa que la del impuesto de renta colombiano, situación en la cual al darse aplicación al respectivo crédito fiscal no se generará una doble imposición, pero el ingreso quedará gravado a la tarifa del impuesto colombiano.

(iii) Que en el país de otorgamiento las pensiones se encuentren gravadas a un impuesto de renta con una tarifa mayor que la del impuesto de renta colombiano, situación en la cual al darse aplicación al respectivo crédito fiscal, se tendrá como resultado que el ingreso quedará gravado a la tarifa del impuesto de renta del país de otorgamiento.

(iv) Que exista un convenio de doble imposición, en cuyo caso deberá seguirse el criterio definido por el texto del convenio. Normalmente se determina que serán gravados en el Estado de la fuente. El concepto de pensión incluye además del pago pensional, todos los pagos similares en relación con una relación de trabajo que fue desarrollada en el otro Estado.

En relación con los nacionales colombianos que habiendo trabajado en el exterior, obtienen una pensión bajo un sistema extranjero y regresan al país una vez pensionados, debe considerarse que, ante la inexistencia de un convenio de doble imposición, sus ingresos pensionales serán gravados en Colombia sin que tengan el tratamiento de renta exenta.

Si dichas rentas fueran gravadas en el exterior deberían aplicarse los correspondientes créditos fiscales

Translation below
Dear Dave,

 


 

Applicability of paragraph 5 of Article 206 of the Tax Code to expatriates

Another tax issue related to the topic of pension concerns the tax treatment applicable in Colombia, a pension income received by a tax resident of a pension system from outside. The issue particularly applies to foreign nationals or after their work abroad decide to move to Colombia, to take up residence in our country, once pensioners abroad.

The tax statute states that are not taxed pensions, invalidity, old age and survivors in that part of the payment that is not more than fifty (50) minimum monthly wage, provided in accordance with paragraph three added by Article 96 of Law 223 of 1995, the necessary requirements are met in accordance with the Social Security System (Law 100 of 1993).

That is, the exempted income pension governed in accordance with the rules of the Colombian social security system and, consequently, the pension received from abroad by a foreigner or a national, not have the quality of income exempt.

This interpretation has been endorsed by the Constitutional Court considered in its judgment C-1261, 2005, I mentioned that the differential treatment does not infringe the principle of tax equality.

Therefore an expatriate who chooses to remain in Colombia, will be subject to tax on income received by reason of the pension that was not obtained according to Colombian social security system. In this sense they can occur several situations.

(I) in the country of granting pensions can be characterized as exempt. Not recognized in Colombia this situation, the expatriate must bear a tax burden in Colombia.

(Ii) in the country of granting pensions are taxed at a lower rate than the Colombian income tax, a situation in which the application given to the respective tax credit no double taxation will be generated, but the income will be taxed at Colombian tax rate.

(Iii) In the country of granting pensions are taxed at income tax with a higher rate than the Colombian income tax, a situation in which the application given to the respective tax credit, it will result in income It shall be taxed at the rate of income tax in the country of grant.

(Iv) The existence of a double taxation agreement, in which case the criteria defined by the text of the convention should be followed. Usually it determined to be taxed in the source State. The concept also includes the pension pension payment, all similar payment in connection with a working relationship that was developed in the other State.

In connection with the Colombian national who, having worked abroad, obtained a pension under a foreign system and returning home once retired, it should be considered, in the absence of a double taxation agreement, their pension income will be taxed in Colombia without having tax-free treatment.

If such income were taxed abroad corresponding tax credits should be applied.

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@bjm,

Well done Bjm, although my Shakespearian appreciation of the English language is still recovering from the translation.

I am not quite sure where this is taking us; I have a bad gut feeling this is not going to be good news for expat pensioners.

What this text SEEMS to say is that foreign residents will no longer be treated in the same way as Colombian nationals when it comes to the taxation in Colombia of offshore pensions. If so, this is bad news and IT NEEDS TO BE COMMUNICATED TO OUR VARIOUS CONSULAR OFFICES (To alert prospective expats and to give advice and guidance to existing expat).

Anybody got any bright ideas?

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Yes, I too have the, "oh, fantastic" eye rolling maneuver and shaking of my head reaction..

I apologize for the formatting of my past.. It didn't look anything like that when I prepared it. I sometimes lose the original file when I use phone.

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I suggest we all Tweet Santos, asking him why he doesn't want Foreign Pensioners living here, and add the link...I have just done that!

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That isn't a bad thing, can you provide his tweet address

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I will try to answer your posts when I have finished packing my bags.

I have told my tax accountant about all this and he has just replied telling me not to worry. I am sure he must be right, he is very expensive.

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@bigjailerman the Tweet address for President Santos is:
@JuanManSantos

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@fecherklyn

My Accountant has said the same, and she isn't...(very expensive!)

I am a natural worrier, but she has said that the Accountants know where any money goes that is collected by DIAN, and it isn't to good causes, so they have become very good at creative Accounting, and will, quote, 'help you pay as little tax as possible íf any'.

I have been told that DIAN are after those who a avoiding paying bill tax bills, and those trying to avoid declaring at all, and you would have to be very very unlucky to be the target of a personal tax investigation.

I gives me hope, but doesn't make me feel much safer...I don't win many competitions! :)

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Sorry that should read...'I have been told that DIAN are after those who a avoiding paying big tax bills...'

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@ Felipe58

It sounds reassuring to hear the DIAN are only after "those avoiding paying big tax bills", but I would not like to rely on it too much. Someone in the DIAN with a few neurons in his head might reason hundreds of thousands of small tax bills maybe worth more than a few big ones?

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@fecherklyn

I agree with you, and knowing my Luck...!! However unless they change the rules again, I think we can only hope. The thinking behind my Accountant, is that if you pay a little, or at least declare, then you are way ahead of many who try to dodge it altogether.
I will update once I have a definitive answer, or at least my return has been accepted by DIAN.

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A quick “back of the envelope” calculation on how a Colombian pensioner is now privileged for tax purposes in comparison with an Expat pensioner.

Based on 2014 taxable values.

The Colombian tax computations are based on the following values:

Tax declarations are required once “Ingresos brutos” (Gross incomes) exceed COP 38.48 Mn in 2014.

“Impuesto sobre la renta liquida” (Income tax) starts once “Renta liquida gravable” (Net taxable incomes) exceeds 1,090 UVT (2014). The starting rate is at 19% for Renta liquida gravable in the range of 1,090 UVT to 1,700 UVT, and the rate increasing thereafter.

Accordingly, as UVT (2014) = COP 27,485, “Renta liquida gravable” threshold commences at COP 29.958,650, or COP 2,496,554 per month, say approx US$ 800 per month at today’s rates.

The “Renta liquida gravable” includes the value of all GLOBAL incomes including overseas pensions and netted off for a whole range of exemptions.

The “exemption” allowance for pension incomes is the equivalent of 50 monthly minimum salaries, so approx COP 27Mn per month in 2014.

CONCLUSION FOR COLOMBIAN PENSIONERS

The Colombian pensioner is entitled to the full exemption on pension incomes, so he is only concerned if his monthly pensions exceed COP 27Mn + 1,090 UVT /12 = COP 29.5 Mn/month.

It should be quite clear that very few Colombian citizens who rely solely on their pension incomes would ever pay Colombian income taxes.

CONCLUSION FOR FOREIGN PENSIONERS LIABLE TO COLOMBIAN TAXATION

Until 2014, the foreign pensioner was treated in an identical manner to his Colombian “cousin”. This latest legislation seems to change this situation radically.

As the expat pensioner now risks having no exemptions to his pension incomes, the totality of his foreign pensions will enter into his Renta liquida gravable “pot”. The 19% income tax thereafter starts after the threshold is breached at 1,090 UVT/12 = COP 2,496,554 per month. If this is correct, I find it to be an enormous disincentive to being an expat pensioner in Colombia.

There you go men. With these new regulations, if they are confirmed, and if my calculations are correct, it will mean any foreign pensioner residing in Colombia for more than 183 days in a year, will be liable to Colombian tax at a marginal rate of 19% once his pension incomes exceed COP 2.5Mn per month, say US$ 800 pm. Of course, you may get some of this back if you have already paid tax in your home country, but beware; nobody will refund anything until the supporting tax certifications have been produced in support, which will mean, at the very least, an agonizing administrative nightmare and lengthy repayment delays.

These computations were done late at night and after a few drinks, so they need careful review. Please let me know if you see any errors, or have any queries.

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@fecherklyn

Thanks for the update, I just hope that our home tax certificates do make a difference, fortunately I receive mine before the Return is due, and they are included with all the other forms I have previously mentioned, when I submit my return.

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No more on my Tweet to Pres. Santos, I think he is too busy entertaining Tom Cruise, from the complaints I have read from the Venezuelan Border.

I have sent the details to Colombia Reports, in the hope that maybe they can get more information.

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Hopefully someone can attend this and maybe ask questions.
U.S. Embassy Bogota
Town Hall in Cali with U.S. Citizens




All U.S. citizens are invited to


Town Hall Meeting with Consul General
Julie Ruterbories


Friday, August 28, 2015
Time: 1:45pm -2:45pm
at the Colombo Americano Center in Cali (Auditorium)
Calle 13N #8N-45 Barrio Granada


Please bring a valid government – issued ID for admittance.



La Embajada de los Estados Unidos
Asamblea Informativa en Cali con Ciudadanos


Los ciudadanos estadounidenses están invitados a una

Asamblea Informativa
con la Cónsul General
Julie Ruterbories

Viernes, Agosto 28, 2015
Hora: 1:45pm -2:45pm
Lugar: CentroColombo Americano de Cali (Auditorio)
Calle 13N #8N-45 Barrio Granada


Por favor, lleve con usted un documento de identificación expedido por el gobierno, este le será solicitado en el ingreso.

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OK, I have heard back from my Accountant this afternoon, I can only talk for UK Pensioners, and the situation is this:
We are liable for tax, but it at a lower rate than in the UK, and even though there is no Double Tax Treaty between Colombia and the UK there is an agreement between DIAN and HMRC, what form this takes, I have no idea.

However, as long as you have your P60 proving that you have paid tax on your pension in the UK, it will be credited against any Colombian liability, therefore for this Tax Return (2014) you will need your P60 from 2013 to cover Jan until April, and the P60 from 2014 to cover April to December.

In my case this leaves me with a big fat tax bill of $0 COP, what a relief.

I hope you all get yours sorted out in a similar fashion.

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That sounds exactly what Jane's stated... Payed in the US makes us not liable here. Great follow-up. I will continue on US side as well. Would you share your accountant contact info for use by US citizens?

Ha-ha I hope nobody on her calls you a cheat...!

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@bigjailerman

Certainly good news for me!

My wife asked my Accountant if she would be prepared to take on more Clients, unfortunately at this time, she says she can't, she primarily deals with National and International Company accounts, so I guess that I and a few others are her Pin money!

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@bjm

"Ha-ha I hope nobody on here calls you a cheat...!"

Don't overdo it BJM, it gets tiresome in the end.

The reference to "cheats" was targetted to persons who intentionally evade taxation by giving false information, or withholding information they are legally obliged to declare.

Felipe58 is far removed this type of person.

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Yes, I realise that, it was just a tiny nudge to that other party... Every thread needs a bit of jostling. Felipe, you get that I'm sure.
BTW the P60 you called that earlier, is that a UK thing or is that Colombian local form.

Good on you!

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@bjm

The P60 is the UK tax certificate showing what we have paid.

As for the comments, I just ignore them! :)

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@ Felipe58

Felipe, just to make double sure; You told us your tax accountant had written to the DIAN asking for clarification on the application of exemptions to foreign pensioners pensions (Whether they were exempt, or not). Did she get a reply from the DIAN confiming there were to be NO EXEMPTIONS regarding foreign pensions?

@BJM

BJM, you said ".....thus, payed in the USA makes us not liable here". I do not think this is right, nor what Felipe was suggesting.
On the contrary, the reasoning seems to be that all foreign pensioners residing in Colombia ARE LIABLE to Colombian tax on the overseas pension incomes. Felipe says HE IS LIABLE IN COLOMBIA, but that after taking into account how much tax he paid in the uk, the net amount due in Colombia was ZERO. It could have been that his British tax was inferior to the Colombian equivalent, in which case he would have had a balance to pay in Colombia. I hope Felipe can confirm that what I have just said is correct.

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Hello to all. I have not chimed in on this one as I do not have a lot to add.

All this uncertainty about tax liability really seems not to mater. There are several steps necessary for any democracy to institute a law or rule.

First the law or rule must be specific. If the law is ambiguous, then it will never pass muster when challenged.

Second, there must be a clear and direct effort to enforce. There is no desire or enforcement of foreigners out of country income to pay national taxes.

As with so many laws and rules here in Colombia, they were never created to actually be observed, let alone enforced.

They were created to satisfy some person, entity or group and not really thought through. They are justa little window dressing.

Of course I abide by and pay all taxes I am legally obligated to pay.

Just my thoughts,

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@ fecherklyn

My Axccountant went into DIAN for a meeting to resolve this.

There are no exemptions to paying tax, however if they havean agreement or there is a Double Tax Treaty, then the tax you paid in your home country is offset against the Colombian tax bill.

As a result if you pay more tax in your home country, than they want here, you pay no tax.

If you pay less in your home country, you pay the difference.

If there is no agreement between the countries, then you pay the full Colombian Tax Bill.

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@thelocogringo

Unfortunately it is exactly Expats with that mentality that have caused the problems for the rest of us.

They believe it will not catch up with them, the time will come that Expats are vetted before Visa renewal to ensure they are compliant with local laws. Those that believe they are above the law, need to realise what problems they are causing, not only for themselves but all Foreigners.

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Locogringo does not shy away from being a taxpayer. You need to calm down. I would rather see you focusing on rights for foreigners such as getting a permanent visa, mortgages and credit.

Here's a classic example of what Loco is saying: Where I live there is a natural reserve. It is rather an overgrown plot of weeds, no trees and such. Builders or business people are not allowed to put anything on the land. Well, here comes a mom and pop arepa stand and they build a makeshift store there and along with a concrete floor. Do you really think a governing agency is coming to look for them and slap the arepa out of their hands? I don't think so and they have been making me tasty arepas for the past six months on land that is supposed be guarded. Makes one think about who really cares about small amounts of issues. Do you really think that I would say all arepa makers should go get a business license and that they are bad people because of they are putting food on the table for themselves and their extended family?

However, if this is your coup de gras I wish you best in your endeavors. Trust me we will pay Caesar on what belongs to him.

You can't win over people with a bad vibe.

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@soystar1

I don't see the connection with what you have written and the problem with Expats in Colombia.

What Colombians get away within their own country is a different matter altogether.

locogringo was the one who put forward an idea that people not complying with the laws of the land would get away with it, whether he does or not, it is not an avenue that should even be explored when you are a guest in another country, bad enough in your own.

As for the other points you raise, since the permanent visa has been abolished, I don't think that will change any time soon, I don't know anything about mortgages, I didn't need one, and I had no trouble obtaining credit.

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Filipe 58,

That is a terribly heavy chip you are carrying on your shoulder. Brother, let me lighten your load.

Please do not worry about me and my future. I will worry enough for the both of us.

You will fine in time, that doing the right thing, if you can figure out what the right thing is, ebbs and flows. Todays killer, kidnaping, extorting paramilitary is tomorrow's Mayor of Bogota.

Todays dead beat tax evader is tomorrows secretary of the treasury.

Perhaps even you will be forgiven of your sins.

Be good and lighten up.

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I do not know if others are aware of this but I had no idea. There are more things in place that I knew about

United States and Colombia Sign FATCA Intergovernmental Agreement

http://bogota.usembassy.gov/embassy-news/press-releases-2019/united-states-and-colombia-sign-facta-intergovernmental-agreement.html

and this as well

Colombia court approves tax agreement with United States

http://colombiareports.com/colombia-court-approves-tax-agreement-united-states/

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FYI . . . . The US has no tax treaties with any country in Central or South America. I cannot speak for any other countries in the world. The best any American can do is to offset US tax with a credit based on foreign earned income. Pensions, like dividend, interest, or capital gains, are not earned income.

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Has this thread been of any use? Hard to tell; some people seem to have appreciated it, whilst others have only been derogatory. For me, the thread’s initiator, I have decided to cease my contributions to Expat Exchange. Here are my final comments.

This thread started only 22 days ago, with the sole intent of providing a little information about the obligations for making tax declarations in Colombia. Since then it has served as a springboard to discussion of a number of Colombian tax “mysteries”. Our joint efforts have allowed headway into some of these issues, but “the jury” is still out on others, regrettably including some of the most fundamental (Notably, double taxation and discriminatory practices regarding the Colombian taxation of “overseas” pension incomes).

Allow me to sound a couple of warnings before going.

I was astounded that so many posts advocate “making do”, or even “taking advantage” of Colombia’s weaknesses. I will not go into details, but read back and you will see what I mean. “If everyone around you is a rascal, then join the pack” seems to motto of some of you, whilst I verge to the other extreme in my defense that “laws are there to be followed. Of course, the subject is ripe for discussion, but need it be so “forceful”?

The Colombian tax legislation changes that came into effect in 2014 are, in my opinion, anti-foreign pensioners. In my case, my Colombian tax liabilities will increase from zero in 2013 to in the region of COP 50 million in 2014. It is the reason for my decision to leave Colombia as soon as possible. I feel that despite this thread, many foreign pensioner residents in Colombia have not taken on board the consequences of these new measures. Remember:

- Pension incomes of foreign residents in Colombia start being taxed in 2014 from about COP 2.5 Mn per month (say: a little over US$ 800 per month). This means nearly ALL pensioners; do not assume you will be the exception.
- “Yes”, you can fail to declare your global incomes and pensions, but do not imagine Colombian tax control is non-existent. The penalties for not observing the laws in Colombia are very high, generally up to 200% of the amount involved.

My disappointment: I had hoped this thread might unite enough of us to mount a challenge to the discriminatory tax changes in 2014. Regrettably, for the most part you were passive and disinterested.

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Don Fecherklyn,

Needles to say, some of us will be despondent to see you go.

I felt the same way last year when the Colombian Goverment canceled my permanent residendcy. I too wondered why no one was up in arms, protesting and just a little lethargic about the whole thing.

In the end, I just let it go and decided to not worry about it. It will all work out.

So far, so good.

If you like it here and you are having fun, than stay. They are not going to his you up for any income taxes any time soon.

If you do not like it here, then leave. Go some where else.

See you later.....

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Like fecherklyn, I am walking away from this Forum, there seems to be a strong anti-establishment leaning, and I want no part of it.

If Members were prepared to get off their backsides and do something more than think of ways of beating the system, changes might be made for the better. The hard truth is that you can't beat the system, it will catch up with those who try to circumvent it, and I have no sympathy once they are identified and dealt with.

I have been accused of having a chip on my shoulder, what about, I have no idea, I have only stated the obvious. If you have a Visa, then DIAN has enough details to follow up with your home country, they can and will in time, establish those who have been guilty of tax evasion, and then we will see who has the last laugh.

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If you want some to feel sympathy for you, I think you're at a loss. You guys really need grow up and get into reality. One of life's lessons is that not everyone will like you. Moreover, agree with your rhetoric. Life is too short move on and enjoy your life. Wishing you best in your search for Camelot.

Ideas and concepts are appreciated you just have to keep going for what you enjoy in life. Don't give up on your personal endeavors.

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I am a US expat retired in Medellin. All of my income is from Soc. Sec. and pensions. This year I filed my 2014 US income tax return and my tax due was $0. Filing Taxes in Colombia was an article in the August 4, 2015 issue of Medellin Living News. In the next week or so I plan to go to the DIAN office in an attempt to find out if I owe Colombian taxes. I'll share what I learn but my Spanish is minimal.

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Do you need to register with the RUT form. Does anyone know about that form use in practical terms,? I read it but someone better fluent can explain it..
www.dian.gov.co/contenidos/otros/conozca_rut.html

Thanks

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Hey Screw, great question.

The N.I.T. is Colombias version of a tax payers ID number. If you are in business, you need to have a N.I.T. in order to file your returns.

The RUT, that is the name of the form that the DIANN, Colombia's version of our IRS, issues that shows your Legal name, address for service,catagory of business and your NIT.

This form is then shown to your local "Chamber of Comerce" and from the RUT, they will issue a business license. There are some additionall agencys that will also issue various licences, depending on your business activity.

The NIT is your business Tax Id Number.

The RUT is the form or certificate that shows your NIT.

Any questions, feel free to ask.

Martin

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If you aren't in business, you still need an NIT. Right?

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Anderson, if you are not in Business then you do not need a NIT.

There could be some exceptions for some unusally high earners however I have never encountered that.


Martin

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---If this posts twice, my apology---lost power JUST as I hit post to the thread tab...

OK, now that I'm an expert for spending most of the morning and part of the afternoon at DIAN, Here's what I learned regarding a foreigner with a foreign pension (Social Security)
Since we're talking about 2014, remember your pension is valued at 2372COP to the dollar...pretty hard nor to reach that threshhold spoken about in other comments here.
You must file with Dian, listing your foreign earned pension BUT, and this is important, I was told it will NOT BE TAXED.. The two Customer Service people I spoke with assured me of this. You, as a foreigner, will be taxed if you reach the threshhold on any of the other categories, again spoken of in other comments here.
You also must "register" with DIAN (RUT). Just bring a copy of your cellular with you. They verify it to the actual card you possess and ask you the usual, address, e mail, phone..think that was all.
The NIT is also given to you when you register (RUT). Its a new number given to you as a foreigner, which will be your identity at DIAN. No more cellular for them. Colombians apparantly do not det a NIT as they can use their "citizen" cellular.
Lastly I asked if I could do the return on my own or if I needed an accountant. Got a wry smile and a comment of yes, you can try, but most everybody uses an expert...Still going to try. Bit stingy, but if I can save 250.000 pesos, you bet I will. (always did my own in US)
Both people I talked to (with my wife) were knowledgable, polite, and friendly. Even the lady at the front giving out numbers stopped to ask how i liked her country. All much better than I imagined.

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saiid20, thank you for the good information. If you don't mind sharing, do you hold a Colombian bank account, if so do you have a preference?

You may post to my personal mail if you like. Thanks.

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What do you mean by 2372COP?
Are you referring to Uvt or another amount?
It's funny I was there today as well, I am re hashing the conversation with my wife and mother in law who came with me

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What do you mean by 2372COP?
Are you referring to Uvt or another amount?
It's funny I was there today as well, I am re hashing the conversation with my wife and mother in law who came with me

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What do you mean by 2372COP?
Are you referring to Uvt or another amount?
It's funny I was there today as well, I am re hashing the conversation with my wife and mother in law who came with me

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Apologies... Many posts, frozen app

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Re the 2372, its the rate of exchange on the last day of 2014. So basically if your pension is 15000 per year, DIAN will want to know it's really 35'580.000 pesos.
You've got to do this backwards (COP to Dollars) when you file that FBAR report to the US if you've a foreign account worth more than 10, 000 dollars. Somewhere on that website, they give you all the values you need...for just about every currency

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I misunderstood and I just pm you with an apology as well. So is bottom line your take is we need to file declaration that or over that amount BUT Colombia is considering that exempt because of its source? Pension and Ss? That is what I am gathering and was also followed up with James, the Medellin attorney said if we filed in us and off course maintain our copies, it will not be taxed here.
If the exemption is true, like we all hope, I would love to have a hard copy of anything resembling that. I would have to say the DIAN the agent in Monteria said I didn't pay ha-ha.. Thanks for your info and please correct me if I'm wrong.

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Hate to ressurect this, but I'm afraid I was given some wrong info.
Per my previous post, was told the US pension needed to be filed but would not be taxed. Got nowhere trying to file myself, even with the wifes help, so went to an accountant.She too said I just needed to file but I gave her all the necessary info; half interest in our appartment, my bancolombia 2014 hisrory, my US tax return from 2014, copy of my w2 from social security, and my blessing.
Got a call the next day from her saying she found out my pension was taxable, what I heard from DIAN was wrong...probably because I didnt understand...pensions generated in Colombia are not taxed, those generated elsewhere are...
So....I paid....not much at all as the accountant used some of my provable expenses to offset the pension BUT, I dont like to be wrong or to give bad info, and apparantly I did both here. Sorry, we must file and pay

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It might be illuminating to hear reactions to this tax business from any readers currently residing in Colombian penal institutions. I suspect that's the place to find experts on what the law requires. Also, to anyone involved in the lucrative business of training Boston Terriers in Colombia to herd and destroy rats while patrolling the perimeter: Are their mandatory uniform requirements deductible?

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HOW A TOURIST CAN END UP OWING COLOMBIA $10,000 TO $15,000 IN INCOME TAXES

think you are wrong about deducting US taxes from your Colombian income because Colombia has no double tax treaty with the United States. However, US tax law does provide some relief because foreign income taxes can be used to reduce US Taxes either as a credit (subtracted from your tax obligation) or a deduction (reducing your taxable income). Note that Colombia has no Standard or Itemized Deduction and no Exemptions like the US Income Tax. US Social Security benefits are taxable income in Colombia and Qualifying Dividends, now taxed at up to 15% in the US, are taxed as ordinary income in Colombia. It is possible to have worldwide income that is too low to result in taxable income in the US but could still result in a substantial tax in Colombia. Someone with Social Security benefits and $15,000 in Dividend income would experience that result and have a Colombian income tax obligation of about $5,000 while owing nothing in the US.

You are required to file a Colombian income tax return if you spend more than 183 days in Colombia during any 365 consecutive day period. I came to Colombia in March 2015 on a tourist visa for 85 days studying Spanish (note that arriving today at 10 PM and leaving tomorrow at 1 PM counts as 2 days since midnight is the daily cutoff). I am in Colombia again on a 90 day tourist visa Studying Spanish. If I return in January 2016, again on a 90 day tourist visa to complete my Spanish studies, I would trigger the 183 rule by spending more than 183 days during a 365 day period, albeit on a tourist visa with no Colombian bank account, and have to file and pay Colombian income taxes for 2016. I would still have to file and pay US income taxes as a US Citizen, but would be able to take a tax credit (or optionally, a deduction which reduces my taxes much less than a credit does) with limitations for income tax paid to Colombia. By returning in April instead of January, I will not be liable for over $10,000 to $15,000 in Colombian income taxes which do not provide with with much of a US tax credit since I am retired and much of my income is Social Security and qualifying dividends.

Note that if you have a net worth over about $500,000, you are subject to Colombia's wealth tax, also.

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It is more than 183 days during a 365 day period even if it spreads over 2 years. Residing in Colombia from Sept 1, 2015 until April 30, 2016 will result in an income tax obligation for 2016.

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Doesn't the offset for IRS isLIMITED to 600.00 usd on foreign income tax?

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You are not limited to $300 (single) and $600 (joint) if you file form 1116 which calculates your limit. See: http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Tax-Credit---How-to-Figure-the-Credit

Normally, you are limited to the amount of US tax you would have paid on foreign income. But, Colombia taxes worldwide income, and I am guessing (based on the intention of the US foreign income tax credit) that you would be limited to Colombia's income tax on Colombia sourced income, but only to the extent it does not exceed what the US tax would have been. I do not think IRS will permit you to deduct Colombia's income tax on your US Social Security benefits, for example.

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Thank you

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So I am not a 'tax' resident, but I have a bank account in Colombia for which I receive income and pay a withholding tax. Can I file a tax return to get some of that back or would I have to report all worldwide income etc even though I am not a tax resident?

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My opinion..
Withholding on Income in Colombia? Of course.
Buy If the account is holding money from elsewhere, you can't get withheld $ refunded from Colombia...

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Still don't get it, I brought funds to Colombia, used a bunch to buy a property and now have some left, I get interest in my savings account from the leftover funds and there are tax withholdings from every interest payment the bank makes. My question is: Could I get a refund of those withholdings by filing a tax return or would I end up having to report other worldwide income. I have no other income in Colombia

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@ canpandave,

I am NOT a tax expert, but the following thoughts come to mind:

-You say you are NOT a "tax resident" in Colombia but have a bank account there which earns remuneration that is subject to local withholding tax.

- From this, I would understand you are a Non-Resident from the point of view of Colombian Tax legislation and brought the money into Colombia to buy your property as a Foreign Investor using the exchange control formulaires No 4 and No 11.

- Under this basis (as a Non Resident, foreign investor), your Colombian bank interest remuneration will be subject to a 33% withholding tax.....end of story, unless you change your tax status.

However, are you sure you are a non-resident for tax purposes? Do you stay less than 183 days per year in Colombia? What has happened to the property you have bought....is it rented out?

Otherwise, I can see little point in trying to make a Colombian tax declaration which you are not obligated to do as a non-resident. As there is no double taxation agreement between Colombia and the USA (to my knowledge), it seems unlikely you will be able to offset the Colombian taxes you are paying against your USA taxes (But I know next to nothing about USA taxes).

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Correct I am a non resident, invested in an apartment and filed formulario 4, I stay less than 183 days and my apartment (so far) will be for personal use.

So from what I understand, there are not 'personal exemptions' for which I am entitled and could have the tax withholding refunded? I am a Canadian resident for tax purposes

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Canada Dave, telle what witholding taxes are you paying? I have never heard of this, never paid this.

Martin

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Each time the bank pays my savings account interest, they withhold taxes

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Thats very odd. I get interest on my account and they do not withold anything. What is the name of this tax?

I it a special tax on Canadians? I know they have taxes that only apply to our friends to the north.

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Loco,

ALL interest remuneration paid out by financial institutions in Colombia is obligated to deduct a withholding tax at source (called "retefuente") UNLESS the RATE OF INTEREST being paid is lower than the threshhold limit.

I am not sure exactly what this threshhold limit is, but I know when my cuenta de ahorros pays interest at 2.0% p.a., then the retefuente tax is deducted. However, when the interest rate goes down to 1.0% p.a., then NO retefuente is charged.

Conclusion, your interest is paid at a rate of interest under the threshhold level.

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Fukerchin,

That makes sense to me. I have a ahorros acount and it pays every day or two but the amount is never more than a few hundred pesos. Nothing that I would even ask them about.

Seems to me a guy who is paying a nominal amount of tax on his savings would leave sleeping dogs alone.

Not stir the pot so to speak.

I am really dumbfounded at how inane some of the posters are about this tax deal.

But, to each his own.

Martin

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I guess if you have little money in the bank, it does not matter, but when the interest payments are in excess of 20k peso's every day or two, the tax adds up. I am not against paying taxes that are due but if they are not entitled to it, I fail to see why one would give their money away. Still have not found the answer to my original question...

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Hey Martin,
Don't want to be "nosey", but if you are earning a few hundred pesos a day in a "cuenta de ahorros", that indicates that you have a reasonable sum in there that could be working much harder for you.

I keep a little to one side, but still readily available for emergencies, about 30 million cop, which I keep in a 'cartera colectiva' , or fiducuenta. It earns a considerable amount more than in a cuenta de ahorros.

If you have an account with Bancolombia, ask them about it. You can transfer online from your cuenta de ahorros to the fiducuenta, or back again without charge, immediately (in banking hours), without having to give notice.

That 30m earns roughly about 2,500 cop a day, sometimes 3,000 a day, depending on the rates. I think at the moment, they are paying about 3.25%pa. Ok, not a lot, but every little helps. 80,000 or 90,000 a month is enough to buy a few bottles of wine a month.

In my cuenta de ahorros, its not even worth signing on to check.

Next time you are in your bank, just ask.

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they are not deducting any interest from my escrow acct to buy a new apt. The interest fluctuates around 3%. The account is at Alianza.

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they are not deducting any interest from my escrow acct to buy a new apt. The interest fluctuates around 3%. The account is at Alianza.

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I'm learning more every day.. Great info here.

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id say those comisionistas de bolsas will be good to ride into the next year. the regular banks are a little more secure. the low interest funds are less risky but the major banks are probably a little safer than fiduciary alianza who is a comisionista de bolsa aka colombian stock broker agency.

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@canpandave.

To answer your question, I can see no way you can offest this Colombian tax (or constitute deductible allowances) against your Canadian taxes The only way I can see It would be possible was if there was a double taxation agreement in place between Colombia and Canada, in which case you would have to declare in your Canadian Tax declaration the Colombian interest income (on the basis of having to declare your global incomes in Canada as a tax resident there) and then claiming the Colombian withholding tax as an offset allowance.

How did the world ever become such a mess?

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Somehow its getting waay more complex that I intended. I am not looking to offset anything against my tax return in Canada.

I was just trying to determine if there is a way for me to file a Colombian tax return, report only the interest earned on my savings in Colombia and report the tax the bank withheld, take whatever deductions I might be entitled to in Colombia and see if I would get anything back.

From what I am reading, it sounds like it will be too complicated and I should just let them take their pound (ounce?) of flesh and forget about it.

/d

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Piranah,

That is a great idea, I did not know about that. Generally there is not a lot in my savings however it can be more at times. If I made a couple of hundred mill per year, that is significant for me.

New tires for my moto, tips for the girls, penicillin for me.

I will talk to my bank and let you know.
Thanks

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@ColombianGringo,

Agreed, the rate of interest you get depend on the "risk" you are prepared to take.

Local banks' cuentas de ahorros and government treasury bonds and CDT's offer the least risk but the interest rates are not very "exciting".

For a handful of millions (pesos) in a cuenta de ahorros, you will only earn 1% (say balances of COP 500,000 to COP 50 million) and up to 3% for balances of over COP 200 million. (so turn out your pockets).

Commisionistas' carteras have various offerings but greater risk. I currently have a "Factoring" cartera where balances of a minimum of COP 5 million are earning 8.5% pa.

You get what you pay for and then hold your breath.

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Loco, are you having fun manipulating my username?

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Yes

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I am a wordsmith at heart.

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@LaPirana,

"Earning about 3.25% pa....on about COP 30 million."

Sounds about right on a readily available cartera collectiva.

But, at the end of the day, you are throwing away about COP 1,500 every day when the local cost of living is increasing at 5% p.a.

If you can plan ahead for likely contingencies for at least 30 days, then you could do better with a one month CDT.

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Fecherklyn. Thanks for the input. Its good to toss around stuff like this. I hadn't heard of the 'factoring cartera' giving 8%. Yeah, I realise the risk/reward level means that its not so safe, but I spread my risks over quite a wide range of investments. Do you get it through your bank? Or is the factoring cartera via a broker?

I tried CDTs in the past when there was a long slow decline in interest rates, which was a good move. As the rate is pre-determined at the start, I have always used the basis of:
If you think interest rates will fall, the CDT is the better option, as the rate will be fixed for the period you stipulate..
If you think interest rates will rise, then the cartera colectiva is better, as your rate will increase.
I bet on the rates rising, and so at this moment the CC is better for me. This was borne out by the interest rate rise last week. But who can predict the future with any certainty? Ha Ha.

When I get to a certain level, usually 150 to 200 million, I then buy another local. Then if the whole world goes belly-up, like it did in 2008(?), then at least I still have the property.

Hey, maybe we should open a different thread, for financial stuff like this. I feel guilty hijacking the tax thread.

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@LaPiranha,

I agree, we should start another spread specifically for the exchange of local financial investment advice as this thread is already creaking around the edges. Why don't you have a go on opening it up as I have already had my fill recently.

I have been in two carteras recently involving "factoring" on which I have had no problems. I prefer not to give specifics on this open forum, but PM me if you would like further info. One was a Fiduciera and the other a broker.

Where are interest rates going? Up of course, wherever else, and it cannot be too soon in my opinion.

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Hi CanpanDave

If you are stay in Colombia less than 183 days then you are not obligated to file the income tax to DIAN.

If the witholding tax or "retencion en la fuente" on your earned savings interest is small then, this could be entirely ignored. ( it think is 10% of your interest, but need to check on this at DIAN website)

I guess if the size of the interest is considerable then you may feel the need to file and find some deductions to offset the balance.

My second point is about the tax on your colombian assets. "patrimonio" over 123.68 Mil COP is subject to tax.
Is your property in colombia valued as per your impuesto predial over the 123 threshold?

I think 2 o 3 room apartments area already beyond this limit ( correct me if I am wrong), so I wonder how expats are doing on this matter.
I am very interested in learning this stuff as I am considering Colombia to be a place to escape the Canadian winters in my future golden years...

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Reviving this thread from last year....

I have read through the posts on this thread and have not seen any comments about a tax exception on inheritances.

In the case of Expat X -- a USA citizen living in Ecuador -- his income is derived primarily from steady, ongoing monthly wires into his USA bank account. The source of the wires is his portion of a family inheritance managed by a major USA-based trust company that invests the inheritance principal.

Neither Ecuador nor the USA currently taxes Expat X's income.

Expat X was interested in spending more than 183 days per year in Colombia. However, he calculated that COL's tax bite on his USA income would be about 30 percent, apparently making that much time in Colombia not feasible.

Recently, though, Expat X read on two website pages that Colombia does not tax inheritances. Thus, spending more time in Colombia now seems feasible.

From a PwC Worldwide Tax Summaries web page (taxsummaries,pwc.com):

“There is no inheritance or gift-specific tax, as such, in Colombia.”

Both this PwC web page and a page at a differently-sponsored site assert that capital gains tax may apply to inheritances.

However, Expat X’s inheritance income is cash, not real estate, so capital gains are not a factor.

Is there any doubt that the above-quoted citation is valid under the current taxation rules of Colombia?

cccmedia

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I think X has such an unusual (and lucky) situation he needs a good tax lawyer. However let me offer this.

The first problem X is going to have is the money that's being transferred in each month. Depending on the amount paperwork needs to be completed with the Central Bank. The bank that the money that is being received to is probably going to want proof of the source of the money (and something like a W-2 showing source and tax paid works wonders here). Because of the risk of drug money laundering the free flow of any reasonably sized amounts of money, either in individual amounts or as a total amount over a period of time are controlled. Having non taxed money will make them cautious. So even before dealing with taxes getting the bank to release the transfers will be your first challenge. Not impossible, but it could be frustrating.

On the tax on inheritance that for me is a one off event which happens on the transfer of assets to a heir at one point in time. I can't see Colombia taking the view that the money is never taxable.

Whereas Colombia may not have specific inheritance taxes I do know of situations where people have inherited property but then have had to sell it to meet the resulting taxes. What you need to be careful with reports like PWC is that they will cheerily tell you there's no inheritance tax (using US terminology) but then fail to tell you is that there is a tax on the general transfer of assets which then impacts assets transferred following a death. That is an example, not a fact but you will see the point that needs to be checked. Colombia may not have any inheritance tax, but is there something else that might impact this?

Trusts are not uncommon here. It is not uncommon here, for tax purposes, for families to transfer assets in the form of trusts prior to their deaths. Those trusts then appear as part of the assets of the people who receive them and therefore go into the calculation for income tax based on patrimony. That would result in annual tax presently of around 1 per cent of the value of the trusts. The cash flows from the trusts would then not be taxable (you either tax something through the patrimony method or the income method but not both).

My guess is that all of the US scheming about blind trusts etc. wouldn't matter a jot to the Colombians. Who's wealth ultimately is it is the key fact.

X might then be looking for some way that he could argue that the trusts weren't his. The problem then is that he has a series of cash flows that he can't explain the source of. A Colombian tax accountant in reviewing someones global tax liability is going to look at their bank accounts and want to be able to determine the source of all cash flows.

So, I think that under Colombian tax if they are X's assets how they were sourced doesn't matter. They go into the patrimony calculation.

Depending on the size of the trusts you may find that it would be better to find some way to have the distributions taxed instead and some clever tax lawyer might find a way to do that but that takes you back you your 30 per cent scenario as there's no US tax.

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What taxpayers pay COL’s so-called wealth tax?

What is the minimum assets value for assessing the wealth tax?

What is the temporary (additional) tax on wealth?

Are all assets held outside COL included in calculating an individual’s wealth-tax obligation?

What is the so-called “alternative tax”?

cccmedia

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What 'wealth tax'?

Income tax is assessed two ways. Firstly on your income and secondly on your patrimony (net assets). Whichever produces the higher tax in any one year is what you are taxed on. I think people misunderstand the net assets approach as a wealth tax.

There is an additional tax on the wealthy to fund the war but a) it is small b) it was extended so if you weren't already included you can't be added c) it's likely to be eliminated.

If you are a resident all of your global income and all of your global assets are included.

There is an exclusion from wealth for your residence up to a certain amount.

Roughly how the patrimony system works is like this. Say you had net assets of $500,000. 3 percent of that ($15,000) is the equivalent income that you pay tax on. Then like tax on earned income it's a sliding scale. So, again roughly that might produce a taxable amount of say $3,000.

If you have income and can't deduct tax from somewhere else Colombian rates are high and there are few deductions. But if you don't have income and only assets you need pretty large asset levels to generate punishing numbers. However expats tend to get a little emotional about their assets being taxed, mainly because that isn't the practice in the US.

However there is tax reform coming. I've heard that for 2017 that 3 percent equivalent might become 4 percent.

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Interesting post regarding X, though more questions than answers so far. 3 specific questions to add to the mix:

1. If you are the recipient of inheritance (us $500,000 for example) during a year when you've been more than 183 days in Colombia, will the Colombian government claim you owe 30% of it?

2. If you receive tax-free monthly retirement benefits from the US (say $5,000 for example), will Colombia tax it as income?

3. If you receive monthly inheritance benefits from a US trust (basically the same question asked by X) will Colombia tax it as income?

I'll throw in a fourth question for kicks: With so many differing opinions floating around, just how reliable would a legal consultation be on this subject and would it be worth the money at all?

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00abuse

Deloitte and other established tax-information websites clearly state that inheritance cash income is untaxed in Colombia. However, they state that real estate that is inherited is subject to capital gains tax if the property is sold.

Ipso facto, the answer to questions 1 and 3 is that an inheritance is tax-free provided it is in cash or liquid cash-equivalent.

For question 2... the retirement income you mentioned is taxable in Colombia even if it is not taxed in the U.S.

The final questioned you asked...

If I had half a million dollars coming to me in an inheritance, I would definitely seek out a qualified tax expert in Colombia... not only for his or her opinion, but to make sure all the t’s were crossed and i’s dotted in my upcoming COL tax return.

Given the different interpretations such as you mentioned, I would pre-verify that my tax expert agrees that inheritance cash is not subject to taxation in Colombia.

cccmedia

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00abuse

But is that correct?

Inheritance income may not be taxed at THE TIME that it passes as inheritance but does it mean that it is an ongoing situation?

Try this for a situation.

X inherits money on their 21st birthday with the money to be paid over (say) 20 years. I think the argument is that once the criteria of age is met (being 21) the overall account transfers even if the agreement is that it will be paid in future distributions.

My read is that the actual event on the 21st birthday is not taxable in terms of paying tax - that is 'wealth (the account) has passed from one party to the other'. However I'm not sure that it's ongoing case that the money isn't taxable thereafter as part of someone's wealth.

If the trust 'belongs' to X then it's part of his wealth and would be included as part of the calculations for tax via the patrimony process. So the transfer of the assets on the 21st birthday has no tax impact, but each year after the value of the account would have tax assessed on it (say 1% of the notional).

Real estate may only be taxable for capital gains purposes but what is 'cash income'. Equities? Bonds? Alternative investments? What about the changes in values on those, any dividends or interest payments? Is the suggestion that because money was inherited all of the value changes (other than from real estate) will never attract taxation in Colombia? How would you separate those value changes from the distributions made?

Trusts are probably more common in Colombia than in the US. It's a very common way to pass wealth before death and to minimize issues and taxes. However those trusts do appear on an individuals wealth and are subject to the patrimony tax. So, part of the issue would be trying to prove that the trust was in some way different to vehicles that exist already in Colombia. If it isn't a Trust as defined in Colombia what is it? Colombian tax will always look at basic criteria to try to label an asset under the local system.

In terms of using the 'established' tax information websites I studied them all but it wasn't until I went to a tax preparer/attorney that I began to understand the system (and it seemed to me nothing like what I'd read on line). Finding a good tax attorney has saved me a lot of money (and pain) not just for this year but also going forward.

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10abuse

Since you already have a good tax attorney, I will not attempt to outdo him or her re most of your questions since I am not living in Colombia, have never paid tax to Colombia and am not an attorney.

As far as I know, receiving inheritance payouts over time does not subject the income to taxation. I did not see anything on the websites specifically addressing this, so I don’t see it as a problem.

Clarification... The trust does not ‘belong' to Expat X. He receives a monthly income from it, as do other family members. Years from now, where these beneficiaries have all departed the earthly plane, the trust company will forward the balance of the trust as gifts to previously-designated charities in accordance with the benefactor’s will.

cccmedia

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00abuse

My understanding is that the distributions (I'd avoid the word "income") would not be taxed provided the value of the trust, or at least the persons share of the trust was included in the patrimony and tax assessed that way. Realized Income ( or at least the shared amount) on the trust would also be assessed.

The fact that when the beneficiaries all die the proceeds go to charity is interesting. I think X needs to be careful on this. Pushing this element as a reason not to include the asset as wealth might end up with the decision that this is not inheritance (there has not been an effective transfer of the asset) but instead the amounts being received are some sort of income.

Expats often go to some lengths to try to argue that for some reason they do not 'own' assets to avoid them being included in their patrimony. The issue then becomes that any distributions have no where to go in Colombian taxation other than as 'income'. I've even seen instances of tax advisors 'helping' expats achieve this to happily reduce current taxation while failing to produce the scenario of 'what happens later'

As we've said the issue needs a tax advisor. The tax advisor will then see the cash flows from the inheritance (cash flows being a basic tenant of Colombian tax) and then the discussion will begin - is this a cash flow from an existing asset (wealth) or something new (income - an increase to existing wealth)?

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00abuse

One other thought on the websites on taxation, and in particular ones by companies like Deloitte. These are not charitable companies, they are in the business of providing consulting and selling services. What they give away for 'free' is merely to give people an overview of the situation, to demonstrate their credibility in the field and to act as an enticement to use their services.

If they don't mention something it should not be considered that this suggests that there isn't some rule around it but rather that it may be an area of higher 'value' that they want paying for.

The websites are generally intended for foreign companies looking to set up business in a country. Their general expectation is NOT that your average ex pat is going to use their services.

If you look at any of the sites on issues around personal taxation they at best muddy the waters around the two methods (the either or) of calculating tax in Colombia. It is certainly not clear advice on a subject, when you actually look at it, isn't that complex. Again it is 'teaser' information.

In contrast if you look at local or even regional firms working in the area their websites tell you nothing other than they specialize in the area.

Using a website to decide whether you need to file Taxes (or declare some source of income) in Colombia is unlikely to be a useful defense if the DIAN come calling.

Good tax advice on offshore tax issues might not be cheap, but if the questions are phrased correctly potentially have many years of use.

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00abuse

ParadiseLost said: "These are not charitable companies..."

Having worked for many years as a principal of the evil empire (not Deloitte but another one you surely know) I have to report that you are more correct than you can possibly know. ;)

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00abuse

Oh I know. I used to pay many of the consulting bills for the company I worked with in the US. The whole concept of pay us $10 so that I can show you how to save $5 is well known to me.

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00abuse

5 got 10? That's actually a pretty good value proposition. ;)

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00abuse

All I know is that I will keep an eye on expats that actually pull up stakes and go back to the U.S. If this happens? I know to stick to the 183 days rule.

I'm not a thief, crook or cheat. Looking to LEGALLY minimize my tax exposure is not a crime.

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00abuse

All I know is that I will keep an eye on expats that actually pull up stakes and go back to the U.S. If this happens? I know to stick to the 183 days rule.

I'm not a thief, crook or cheat. Looking to LEGALLY minimize my tax exposure is not a crime.

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00abuse

Everybody makes their own decisions and being non-resident is an entirely legal way to avoid the Colombian taxation on global income.

I filed as a resident for the first time this year - previously I'd filed as non-resident on Colombian income only.

The tax I paid to Colombia, over and above my US return was tiny. I've heard others who have filed in the past say that with a good tax accountant it is no big deal. I've never seen a posting on here where anyone - who has filed - has suggested it has been financially unusually painful.

Do people who choose the non-resident option actually know what their Colombian tax liability would be if they stayed or do they just presume that it is going to be 'bad' news?

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00abuse

Fully agree with above post. paid two years now. Not that big a deal.

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10abuse

@saiid20

Encouraging; I hope it applies to pension & 401k disbursements > than 20 million pesos a month.

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00abuse

Agree with @ParadiseLost and @saiid20. I have now filed income taxes 3 years in Colombia and only had to pay some income taxes in Colombia 1 of the 3 years.

And that year ended up being only about 6% of the income taxes I paid in the US, so no big deal. There are many deductions in Colombia that none of the retirement publications talk about. And the biggie is you can subtract income taxes paid in the US from income taxes due in Colombia.

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00abuse

Don't pay attention to hand wringing Nellies. (No reflection on WhoaN.) Anyone worried about taxation in Colombia is just a typical Republican sh*t.

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00abuse

Like others here, I have now declared taxes here in Colombia for three years, and to date the only payment I have had to make was paying my Accountant, and she doesn't cost much (Please don't ask, she isn't taking on new Clients!).
The only income I have other than from my Colombian Bank Acc. is my UK Police Pension, which whether I like it or not is taxed at source.
Fortunately up until now, although there has not been a Double Taxation Treaty, DIAN has had it's own agreement with the UK's HMRC, so I have not been double taxed. During Santos recent visit to the UK, he signed a Double Taxation Treaty, so that should ensure there are no misunderstandings in the future.
The one thing I have learned from my Accountant, is to get a receipt for absolutely everything you spend your money on (except your usual day to day expenses), and it can mostly be claimed against tax.
Having said that, I have been warned that with the likely introduction of the new Tax regime, I may well have to pay something next year, but not enough to get worried about...she said!! However she said that last year, and I had a $0 bill, so fingers crossed, and if she ever retires, I'll strangle her. Nice to know DIAN appreciate it when you declare, I received a text last month, thanking me for my declaration :-)

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00abuse

@Felipe58, Again, Very encouraging! Thanks!

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00abuse