Accounting Colombia: Overview of Taxes

When doing business in Latin America, you should consider the different types of taxes in Colombia. By knowing all the local taxes in Colombia, you will be able to adapt faster to new markets, enhance management processes, and diminish risks before they may affect your business. Essentially, there are two types of taxes in Colombia, National Taxes and Local Taxes, with the collection and enforcement of National Taxes being undertaken by the Colombian Tax Authority (DIAN). The primary National Taxes are Value-Added Tax (VAT), Financial Transactions Tax, Stamp Tax, Income Tax, and Wealth Tax. Colombia has been one of the most popular destinations for foreign direct investment (FDI) in Latin America during recent years. It increased its inflows between 2018 and 2019 by 24% reaching $14.3 billion (all figures in US-Dollars). Further its gross domestic product (GDP) has grown significantly since 2001, never dropping below 2% and reaching a total of $323.6 billion in 2019. At the same time, gross national income (GNI), hit $6,510 per capita that year. This figure places Colombia as an upper-middle-income country according to the World Bank. Colombia is bordered by Brazil, Ecuador, Peru, Panama, and Venezuela. It is only four hours away by plane from the United States and can therefore be considered a gateway to South America, as well as to Asian markets via the Pacific Ocean. The country is a founder member of the Pacific Alliance along with Chile, Mexico, and Peru. Further, it has over 60 free trade agreements (FTAs) in place and has recently become a member of the Organization for Economic Cooperation and Development (OECD). If you are thinking about expanding your business to Colombia or are already active in the market, read on to understand the different types of taxes in Colombia. Or go ahead and contact us now for a free quote. See Also: How to setup an SAS corporation in Colombia?

Accounting Colombia – Financial Transaction Taxes in Colombia

This is levied on money transacted from banks. The rates are set at 0.4% of the amount transacted. The transactions that are liable for taxation include promissory notes, ATM withdrawals, internet banking, wire transfer, bank checks, bank drafts, overdrafts, money held on term deposit, several forms of off-balance sheet coverage like commitments made on security underwriting, documents in safe custody, items kept in bank safe deposit boxes, unit trusts as well as currency exchange.

Value-Added Tax

VAT – Colombian VAT is known also as IVA, is the country’s principal indirect tax and is levied as 19% on most goods and services in Colombia, with water supply, sanitation, and public transport all exempt. There are two categories of value-added tax, common IVA and simplified IVA. The common category applies to businesses valued at US$34,000 and over while the simplified category applied to the smaller businesses. Nevertheless, regardless of the category, the amount remains the same, however, from an accounting perspective simplified IVA is easier to manage and does not need to be treated separately.

Income Taxes in Colombia

Colombian Income Tax is levied either as corporate or individual. All local or foreign corporations are subject to this tax pay at a rate of 35% of their annual revenue. Whereas Colombian citizens, foreign nationals working in Colombia, or foreign nationals that have resided in Colombia for more than five years are liable to pay the individual income tax, with the tax rate being dependent on the individuals’ annual income.

Wealth Taxes in Colombia

This tax is levied on Colombians who have properties worth an equivalent of US$1.5 Million or more and is set at 0.3% of the value of the property and it is paid annually.

Enter the Colombian market with the help of Biz Latin Hub

At Biz Latin Hub, our team of multilingual legal services specialists has the expertise in Colombia’s tax system and broad knowledge in advising companies and executives doing business in the country. With our extensive portfolio of back-office services, accounting, and commercial representation, we are prepared to deliver premium service as your single point of entry in Colombia or in any other of the 15 countries in Latin America and the Caribbean where we are present. Reach out to us now for a free quote and learn more about our team and expert authors.