Last modified: 13/01/2025 13:43

Corporate taxation

	Rate
Corporate income tax rate	35
Branch tax rate	35
Capital gains tax rate	15

Residence: A company is resident in Colombia if it was legally incorporated within the country or if it has its effective management and control in Colombia.

Basis: Resident companies are taxed on their worldwide income. Foreign companies are taxed only on their national source income.

Taxable income: The overarching principle in determining net taxable income for Colombian tax purposes is to deduct from gross taxable income any tax credits or returns and to make allowance for any related expenses.

Significant local taxes on income: Municipal taxes such as the Industry and Commerce Tax

Alternative minimum tax: All taxpayers subject to Corporate Income Tax are required to pay a minimum corporate income tax equivalent to 15% of their adjusted financial profits, which comes into effect if the tax calculated under the regular system is lower.

Taxation of dividends: Profits Taxed at the Corporate Level: – Colombian companies: 10% – Resident individuals: 0% or 20% – Foreign companies: 20% – Non-resident individuals: 20% – Permanent Establishments (including branches): 20% Profits Untaxed at the Corporate Level: – Colombian companies: 41.5% – Resident individuals: 35% to 48% – Foreign companies: 48% – Non-resident individuals: 48% – Permanent Establishments (including branches): 48%

Capital gains: Colombian legislation classifies certain kinds of capital gain (along with other kinds of income) as irregular income (ganancias ocasionales). Such income is subject to a special tax (impuesto de ganancias ocasionales (IGO)).

Losses: Capital losses resulting from transactions taking place between a company and its shareholders, branches, subsidiaries, parent or sister companies are not recognisable for IGO purposes, unless they are subject to transfer pricing rules. Furthermore, losses arising on the disposal of a fixed asset can only be set off against other irregular gains subject to IGO, and cannot serve to reduce the standard corporate or personal income tax liability. It must also be noted that any unutilised losses resulting from IGO-liable transactions cannot be carried forward for IGO purposes.

Foreign tax relief: Foreign income taxes over non-domestic-source income are creditable against CIT, subject to certain limitations. Generally, the amount of the credit cannot exceed the sum of Colombian taxes imposed over the same income. DTTs provide for more comprehensive credit systems as well.

Holding-company regime: Directed towards those companies whose main purpose is the “holding of securities, the investment or holding of shares or participations in Colombian and/or foreign companies, and/or the administration of such investments”.

When the holding distributes the dividends to an individual or corporation that is not residing in Colombian territory, they will be understood as foreign source income, and will not be taxed in Colombia for that foreign shareholder. On the contrary, if the holding distributes dividends to Colombian residents, they will be taxed at the general income tax rate, but they could obtain a discount for taxes paid abroad on income taxed by the foreign entity.

Tax-based incentives: CIT exemptions – Income from the sale of electric power generated from wind, biomass, or agricultural waste. – Income related to social interest or priority housing is exempt.

Group relief/fiscal unity: No consolidated filing.

Small company/alternative tax regimes: The SIMPLE regime aims to encourage the formalization of small and medium-sized enterprises (SMEs). Those who choose this system would replace the Corporate Income Tax (CIT) or personal income tax, the local Turnover Tax, and the Consumption Tax with a single SIMPLE tax calculated on their total revenue. To qualify for this regime, a taxpayer’s annual gross income must be below approximately COP 4,200 million (USD 848,000). For consultancy and other liberal professions, the threshold is approximately COP 510 million (USD 114,000).

Under the SIMPLE regime, fixed rates are applied to gross income, varying between 1.2% and 8.3% depending on the sector of operation.

Additionally, those opting for the SIMPLE regime must implement electronic invoicing within two months of registering in the Tax Registry (RUT). According to the relevant legislation, individuals or entities opting in must engage in business activities. The regime specifies that an individual is deemed to conduct a business if they (i) pursue an economic activity based on business freedom and private initiative and (ii) conduct this activity with business criteria, meaning it does not resemble an employment or subordinate relationship.

Corporate taxation: compliance

Tax year: Fiscal year is from January 01 till December 31st

Consolidated returns: No

Filing and payment: Individual filing and payment

Penalties: Penalties (Fines) established for tardiness, not filing, and filing with errors.

Rulings: Yes, rulings may be obtained from the tax authorities on various Colombian tax matters.

Taxation of individuals

	Rate
	Individual Income Tax
Income tax	0% – 39%

Residence: If and individual remains in the country (continuously or not) for an aggregate period of time of 183 days within a period of 365 consecutive days they shall be considered a fiscal resident.

Also, if the individual is a Colombian national, they will be fiscal residents if one of the following criterias is met:

The spouse or dependants remain in the country for 183 days (continuously or not) within a period of 365 consecutive days.

50% or more of one’s income is sourced directly or indirectly in Colombia.

50% or more of one’s property/assets are managed in Colombia.

50% or more of one’s assets are ‘physically’ located in Colombia.

The tax authority (DIAN) requests proof of fiscal residency in another country and said proof is not provided to the DIAN.

The person has a fiscal residence in a place considered a tax haven by the Colombian government. For the above scenarios, the period actually spent by the Colombian individual in Colombia is irrelevant.

However, an individual will not be a Colombian resident for any of the scenarios above if 50% or more of one’s yearly income has been sourced where one is domiciled or 50% or more of one’s assets are located where one is domiciled.

Basis: Resident individuals are taxed on their worldwide income, and Non-residents are taxed on their national income only.

Taxable income: Individuals that are residents in Colombia are taxed with the income and complementary tax at progressive rates . They pay taxes on their income and capital gains of worldwide sources and must declare their equity owned in Colombia and abroad.

Capital gains: Tax on Capital Gains applies to the income from certain operations expressly listed by the law, among which are the income obtained from the disposal of fixed assets owned for more than two years and the income from inheritances, legacies, donations, and similar acts, as well as the income earned from the spousal portion. This tax rate is 15%

Deductions and allowances: Charitable contributions Mortgage interest deduction Healthcare expenses Dependant deduction

Foreign tax relief: Fiscal residents subject to taxes in Colombia on a worldwide income basis have the right to include a tax credit in their Colombian income tax return.

Taxation of individuals: compliance

Tax year: Fiscal year is from January 01 till December 31st

Filing and payment: Individual filing and payment

Penalties: Penalties (Fines) established for tardiness, not filing, and filing with errors.

Rulings: Yes, rulings may be obtained from the tax authorities on various Colombian tax matters.

Withholding taxes

Type of Payment	Resident recipients		Non-residents recipients
	Company	Individual	Company	Individual
	Rate (%)	Rate (%)	Rate (%)	Rate (%)
Dividends	10%	0% – 39%	20%	20%
Interest	7%	7%	20%	20%
Royalties	3,5%	3,5%	20%	20%
Capital Gains	15%	15%	15%	15%

1. The withholding tax rate (WTH) could vary depending on whether there is a Double Taxation Treaty in force.

Branch remittance tax: No such tax

Anti-avoidance legislation

Transfer pricing: Colombian regulations regarding Transfer Prices has been prepared based on the guidelines by the Organization for Economic Co-operation and Development -OECD.

In light of that regime, income tax payers who perform operations with related parties abroad must determine their ordinary and extra-ordinary income, costs and deductions, and their assets and liabilities, considering the prices and profit margins used in operations comparable with or between independent parties.

Special consideration must be given to the related parties located abroad, in free trade zones and/or to individuals located or residents in non-cooperating jurisdictions, with a low or null taxation, and with preferential tax regimes.

Interest restriction: The thin capitalization rules apply a debt to equity ratio of 2:1 taking into account debt transactions involving related local and foreign parties. Interest expenses related to debt exceeding the ratio may not be deductible for tax purposes.

Controlled foreign companies: Colombia has a controlled foreign companies regime called ECE. An ECE is an investment means with no residence in the country, that is controlled by a Colombian tax resident. If the Colombian tax resident owns, whether directly or indirectly, an interest equal or higher than 10% of the ECE’s capital or its results, and at least 80%of the ECE’s total income is from passive income, the Colombian tax resident shall obtain passive income, according to its interest in the ECE that he/she must include in his/her income tax return.

Hybrid mismatches: N/A

Disclosure requirements: N/A

Exit taxes: N/A

General anti-avoidance rule: A general anti-avoidance rule (GAAR) was introduced in Colombia in 2012. Under the GAAR, where the National Tax and Customs Directorate (DIAN) could rearrange the transactions that are proven artifical, lack a legitimate business purpose or comply with the transfer pricing rules.

Digital services tax and Other significant anti-avoidance legislation: The significant economic presence concept has been incorporated establishing a withholding rate of 10% or a voluntary filing of 3% over gross income received from transactions completed in Colombia.

Value-added tax/Goods and services tax

Type of tax: This is national tax that mainly applies to the sale of corporate furniture and real estate that are not assets and that are not excluded, the sale or assignment of rights on intangibles related to the industrial property, the provision of services in the national territory and abroad, and the importation of corporate furniture that are not expressly not excluded.

The party required by the tax authority to collect and pay the tax is whoever performed any of the generating facts, despite whoever financially supports this tax is the final consumer. It has three differential rates of 0%, 5% and 19%. Exportation of goods and services is VAT exempt. Some specific goods and services are excluded, such as transportation services, education services, utilities, and interests, among others.

Standard rate: 19%

Reduced rates: 0% or 5%

Registration: N/A

Filing and payment: Individual filing and payment

Social security contributions

	Employer	Employee
	Rate (%)	Rate (%)
General Pensions	12%	4%
Healthcare	8,5%	4%
Professional risks	0,5%	0

Self-employed

16% for General Pensions and 12,5% for healthcare.

Other taxes

Capital duty: N/A

Immovable property taxes: It is a tax that applies to the real estate owned, in charge of the owners, keepers or users, at each municipal jurisdiction. The rate oscillates from 0.3% and 3.3%, approx., and applies to the real estate appraisal in force or to the self-appraisal.

Transfer tax: Transfer of assets could be subject to income tax or capital gains tax as described in previous sections.

Stamp duty: 0% – 3% depending if the appraisal of the property is higher than approx. USD$ 187,000

Net wealth/worth tax: Payable by: (i) individuals; (ii) non-resident individuals, and (iii) foreign companies or entities that do not file and income tax return but own assets located in Colombia different from shares, accounts receivable and/or portfolio investments. The wealth tax is generated by the possession of equity on the 1st of January of each year, whose value is equal to or greater than approx. USD$ 668,000. Rates go from 0% to 1,5%.

Inheritance/gift taxes: 15%

Tax treaties

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Mexico Canada Swiss Chile Spain Andean Community