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Understanding Colombia’s Tax Incentives for Businesses

Understanding Colombia’s Tax Incentives for Businesses

Learn more about Colombia's tax incentives for businesses and how you can take advantage of them to optimize revenue and deliver better results by year's end. In recent years, Colombia has undergone a process to increase its competitiveness and attractiveness, becoming an investment hub in Latin America. As part of this process, the country is constantly increasing its offer of tax benefits to reduce the overall tax burden that is often considered as one of the most expensive in the region. What are tax benefits in Colombia? Tax benefits in Colombia refer to any differential treatment that legal entities and individuals can apply to reduce their overall tax burden. All tax benefits must be established by the Colombian Congress if it is of national relevance or by the local councils if it is a municipal tax. To understand the tax benefits in Colombia, you should be aware that the tax benefits are not subject to interpretation and must be applied exactly as required by law. Similarly, you cannot make interpretations to be able to acquire a tax benefit. Which kind of tax benefits exist in Colombia? Colombia is constantly increasing its offer of tax benefits. In Colombia, there are 3 categories of tax benefits. They differ according to the way they impact the tax determination process. The 3 categories are: 1. Tax benefits to lower the taxable base. 2. Tax benefits that discount from the value to be paid. 3. Tax Benefits that return to the taxpayer the value already paid as taxes. Some sector-specific tax benefits may be applicable to some specific commercial operations....

Why Seek Tax Advisory Services in Colombia?

Why Seek Tax Advisory Services in Colombia?

Colombia is considered one of the most attractive countries in South America to invest and to do business in. However, with an ever-changing tax landscape, it is essential for companies and business owners to engage with a trusted tax advisory services provider. We outline the most important reasons why you must seek tax advisory services in Colombia when doing business in the country. Colombian tax system is complex In Colombia, registration processes at the national level are different from those at the municipal level. As we explored in our article “How to file taxes as a corporation in Colombia”, companies operating in the country are expected to comply with tax regulations on a national, regional, and municipal level. This multilayer of corporate compliance requirements might be challenging for those who are not expert in the field. For example, businesses operating in Colombia should be aware that registration processes at the national level are different from those at the municipal level. Most companies are assigned a National Tax ID number or RUT (Registro Único Tributario) during the national incorporation process. However, they must register before the municipal tax authorities that supervised the territory where they operate. This is to request a municipal Tax ID or RIT (Registro de Información Tributaria). This requirement is commonly overlooked and may cause fines and penalties. To avoid this, you must count on a local tax advisory services provider. Constantly changing tax regulations Colombia is now famous in Latin America for its constant fiscal reforms. A...

Explaining Corporate Dividend Tax in Colombia For Businesses

Explaining Corporate Dividend Tax in Colombia For Businesses

Find out everything you need to know about corporate dividend tax for businesses in Colombia. Understanding corporate dividend tax might be a challenging experience for companies recently operating or looking to operate in Colombia. We outline the key concepts every foreign executive should consider when complying with local regulations and interacting with Colombian tax authorities. What are dividends for tax purposes in Colombia? In Colombia, dividends can be taxed by the company who distributes them. As we explored in our article 'Understanding dividend withholding tax in Colombia for US residents in 2020', the definition of dividends for tax purposes can be found in section 30 of the Colombian Tax Code, which states the following: “Any distribution of benefits, in money or kind, charged to the equity that is made to partners, shareholders, community members, associates, subscribers or similar. The transfer of profits that correspond to income and occasional gains of national source obtained through permanent establishments or branches in Colombia, by non-resident natural persons or foreign companies and entities, in favour of related companies abroad.” Furthermore, according to the 48 and 49 section of the National Tax Code, dividends are taxed considering income tax. Likewise, dividends can be received by a third party without being taxed. Understand the difference between taxed and non-taxed dividends As previously explained, dividends in Colombia may be taxed by the company in charge of distributing them or by the individual or entity receiving said dividends. This...

Key Tax Considerations for Foreign Companies in Colombia

Key Tax Considerations for Foreign Companies in Colombia

Colombia has become one of the most attractive Latin American destinations to invest in, with many businesses choosing to expand through the incorporation of a Colombian company. When it comes to the constitution of companies in Colombia, the most used type of corporation is the Simplified Share Company. known as the 'SAS'. The process to incorporate a SAS is straightforward and a SAS can be incorporated in as little as 2 weeks and allows for (2) shareholders, who can be natural or legal persons (i.e the company can be owned by an individual or another company - local or foreign).  Nevertheless, if you want to establish a branch of a foreign company, the requirements are slightly different. Even though the process to establish a branch office is different from that of a SAS, it is important to highlight that the taxation liabilities are not that dissimilar.  Colombian Tax Considerations - National Tax and Customs Authority (DIAN) DIAN is the national authority in charge of financial regulation and tax collection in Colombia. Its functions include the following:  Manage taxes and customs in Colombia - tax collection, tax inspection, tax settlement, tax refund etc.  Control and surveillance the exchange rate regime.  Support international trade operations. Tax Requirements in Colombia Income Tax When a company has been formed under Colombia´s laws or when a foreign company receives revenues from activities in Colombia, the company must pay income tax.  REMEMBER:  If you live in Colombia for more than 183 days per year, you will have to pay this tax as an individual....

Tax Accountant: When Do You Have to Pay Taxes in Colombia in 2018?

Tax Accountant: When Do You Have to Pay Taxes in Colombia in 2018?

The tax-payment period for the year 2017 in Colombia has begun. During this period, Colombian companies are obligated to present their financial declaration to the Colombian Tax Authority, DIAN. Also, residents must pay taxes if they received a certain amount of income during the year 2017. In one of our previous articles, we gave an overview of the taxes in Colombia. This article will tell you if and when you need to pay your taxes as a company or a resident.  Colombian Accountant - When Does a Company Need to Pay Taxes in Colombia in 2018? In the months of March, April or June 2018, Colombian companies pay their taxes for the year 2017. The payments are made in two installments: The 1st tax-payment is in March or April 2018. Also, companies need to present their financial declaration in one of these months.  The 2nd tax-payment is in June. The exact dates of both payments depend on the companies Tax Identification Number (Numeró de Identification Tributaria: NIT) and imply that each company has his own specific date and month when it needs to pay its taxes. The exact dates are determined as follows: The 1st tax-payment is based on the last two digits of the NIT of the company. The 2nd tax-payment is based on the last digit of the NIT of the company. When Does a Resident Need to Pay Taxes in Colombia in 2018? Conversely to Colombian companies, Colombian residents need to pay their taxes for the year 2017 in the months of August, September or October of 2018. You are considered to be a resident if you meet one or more of the following requirements: You stayed in Colombia...

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