New Law Slashes Taxes for Green Investment in Colombia

A new law providing major tax breaks for hydrogen energy usage promises to spark more green investment in Colombia, with the country seeking to emerge as a regional leader in sustainability.

The Energy Transition Law received approval from President Ivan Duque on July 10, less than three weeks after being passed by Colombia’s congress. The legislation provides for businesses that use blue or green hydrogen to enjoy tax breaks, including zero VAT, elimination of tariffs, and accelerated depreciation.

The incentives extend to smart metering and large-scale energy storage equipment and investments, as well as to energy efficiency projects, with an official statement released at the time of the law passing congress making clear the desire to encourage more foreign green investment.

SEE ALSO: Requirements to Register a Company in Colombia

“With the new Energy Transition Law… Colombia will continue to position itself as a regional leader in this area and as an attractive country for investment in non-conventional renewable energies,” read the statement.

The new law will be accompanied by efforts to help potential beneficiaries to access funding for green investment plans. 

It also comes as Colombia inaugurates a new 9.8 MW solar farm in western Colombia’s Cauca Valley —  enough to meet the consumption demands of almost 13,000 families, with the project promising to reduce carbon emissions by 640 tons per MW generated.

In a mark of the country’s push for sustainability and green investment, during the inauguration on July 10, Duque announced that Colombia has been accepted as a new member of the International Energy Agency (IEA), in recognition of the country being a “leader of the energy transition in Latin America and the Caribbean.” 

Colombia among several LatAm countries promoting green investment

Colombia’s efforts in promoting green investment place the country at the vanguard of the sustainability movement in Latin America, with a number of other countries similarly identifying the bright future for environmentally friendly approaches.

In Argentina, so-called “green bonuses” to promote sustainable commercial practices have been promoted over recent years, with bonuses valued at over $100 million issued in 2020 alone (all figures in USD). Meanwhile, the potential value of the hydrogen economy to the country is attracting increasing attention.

A similar trend can also be noted in Chile, where green investment is seen as a potentially highly lucrative area of opportunity, with a recent report suggesting that the rise of the electric car market could see the hydrogen-related economy worth $14 billion by 2026.

In Uruguay, similar efforts are being made to promote sustainability, with the government having declared an aim of being fully carbon neutral by 2030, and the country recently celebrating the launch of “carbon neutral meat” — an initiative that promises to have a significantly positive environmental effect given the scale of the country’s meat industry.

Biz Latin Hub can assist you doing business in Colombia

At Biz Latin Hub, our multilingual teams of professionals have the expertise and experience to help you do business in Colombia, or any of the other 17 jurisdictions around Latin America and the Caribbean where we have teams in place. Whether you are focused on green investment or any other type of business, our complete portfolio of back-office solutions, including legal, accounting, recruitment, company formation, and visa processing services, means that we can be your single point of contact to oversee market entry and ongoing operations throughout the region. We also operate in the South Pacific and throughout North America.

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