Colombia Forum

zootenval
Joined 2010
Posts: 148

4 years ago

Colombia Income Tax - filing vs owing tax

4 years ago

We are planning to retire to Colombia in the next 12 months or so. As part of our due duligence, we naturally have researched potential income tax liability in our future home. I have read a lot of information, and have concluded the following:

1. Colombia wants residents to file tax returns every year, which is why the thresholds for the 4 requirements that each must be met to avoid filing are so low. That being said, these should not be confused with having a tax liability in a given year. We we move, we will have 3 sources of income: social security benefits, interest income and rental income from our stateside house we will keep.

The rental income net of expenses and interest income alone will be below the current threshold for tax liability. The key question is whether social security benefits are indeed taxable in Colombia as part of "world wide income". After much research, I contacted a Colombian Tax Accountant who is highly regarded by many in this forum, and who also works with a US trained Accountant helping ex-pats file their US return from Colombia. They replied to my e-mail yesterday, as follows:

"foreign pensions are exempt of taxes, if the amount is lower than $360 million COP. However, if you fill the requirements to file taxes (report information), even if you don't have to pay taxes, you would have to file the tax form."

That is about $114,000 US annual, at current exchange rates. This jives with a June 2019 Colombia Tax Bulletin published by Deloitte & Touche:

https://www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-colombiahighlights-2019.pdf

On page 5, it notes that monthly pensions are exempt from taxes up to 1,000 UVT, or about $10,800 US at current tax rates. This is consistent with the Colombian accountant's view.

We plan to file taxes each year, because we will definitely not meet the 4 requirements for being exempt from filing. That being said, we expect our annual Colombian tax liability to be $0 under the current structure...

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