Date de publication : 06-10-1907
The following information are for the sole purpose of providing a general overview of the local taxation of the Corporate tax aspects of the country. In any case, the information provided below cannot be considered as comprehensive or deemed to constitute specific legal advice.
Yes we tax in Colombia
New tax reform: No specific information
New tax treaties:
- Tax treaty between Colombia and Japan is under negotiation.
- Tax treaty between Colombia and Lithuania is under negotiation.
- Tax treaty between Colombia and Luxembourg is under negotiation.
Local tax advisors
No specific information on the local tax advisors.
Under the domestic tax law, the Permanent Establishment is defined as a fixed place of business through which a company conducts whole or parts of its activities.
Resident companies are taxed on their worldwide income (« worldwide principle »). However, non-resident companies are only taxed on their revenues derived from Colombia sources (« source principle »).
Entities are considered to be resident for tax purposes in Colombia if they have their domicile in Colombia; or if they are incorporated under Colombian law; or if their place of management & control is in Colombia.
Note: the definitions of permanent establishment and place of residence are subject to the relevant provisions of any applicable double tax treaty, if any.
Corporate Income Tax
The general CIT tax rate is 33% (starting FY2018).
Note: There is in addition an income tax surcharge for taxable years FY17 at a 6% rate and FY18 at a 4% rate. Such surcharge applies only on the portion of the net income which exceeds 800mCOP (around 264kUSD).
Note: there is a minimum a 3,5% presumptive income tax system which applies on the same basis as CIT.
Non-taxable income includes the following:
- Dividends received from qualifying participations (i.e. the dividend should derived from profits that have been taxed at the level of the distributing entity);
- Certain capital gains deriving from qualifying participations
Non-deductible expenses includes the following:
- Dividends benefiting from the participation exemption ;
- Interest in excess of the thin-capitalization threshold ;
- Fines and penalties;
Carry forward: Yes, but some restrictions may apply.
Carry back: No
Tax year is the calendar year.
Annual tax returns are established by the company on a self-assessment system.
Except for some exceptions, the basis of the income tax shall be determined in line with the IFRS rules.
Companies shall pay two advance payments on April and June of the current taxable yea
Whithholding Taxes (payment to foreign companies)
The local tax rates in Colombia are the following, subject to the provisions of an applicable double tax treaty, if any.
There is a 5% WHT on the profits paid from a branch to its foreign head office.
The general rate of WHT on dividends is 5% of the gross amount.
The general rate of WHT on interest is 15%.
The general rate of WHT on Royalties is 15%.
The general rate of WHT on management fees is 15%.
The general rate of WHT on technical services is 15%.
Generally, capital gains are taxed under the regular CIT as general income.
Note: capital gains deriving from qualifying participations may be taxed under a separate 10% tax rate, or may be exempt under certain conditions.
Standard VAT tax rate is 19%
Zero-rated supplies include, subject to certain conditions:
- exports of goods;
- Services provided in the country but used exclusively abroad;
Exempt supplies include, subject to certain conditions:
- Certain financial services ;
- Financial lease;
- Certain insurance services
Note: exempt transactions differ from zero-rated transactions in that the input VAT associated with exempt transactions is not deductible.
The VAT is paid on a bimonthly basis through a VAT return on which VAT paid when acquiring goods or services from third parties is credited against VAT liabilities arising from sales or provision of services. Therefore, the VAT paid to suppliers of goods and services that constitute a cost or expense is creditable towards the VAT collected by the taxpayer from its clients.
Note: However, in the case of construction services all the VAT borne should be considered as a cost and could not be offset against the Output VAT.
In case where for a tax period, Input VAT exceeds Output VAT, certain non-resident companies (which are not required to register and incur Colombia-VAT in the course of their business activities in Colombia) may apply for a refund.
The taxable base of VAT is determined as follows:
- Imports: the tax is computed on the customs value of the goods plus custom duties
- Sales of goods and services: the tax is calculated on the entire value of the transaction, including among other: direct financial expenses, transportation, insurance, commissions fees,…
- Construction of immovable goods. For this purposes, on the respective construction contract it must be stated the portion of the consideration that corresponds to the profit of the contractor. This profit cannot be lower to the profit that commercially would apply on similar contracts.
The general statute of limitation is 3 years starting at the end of the year in which the tax return had to be filed.
The statute of limitation could be extended to 6 years in certain cases (i.e. the company generates tax losses or in case where the company offsets tax losses).
There is foreign exchange control in Colombia. Income and capital could be repatriated subject to compliance with the regulations prescribed by the central bank.
There are thin capitalization rules in Colombia. The interest derived from loans between related parties may not be deductible in case where interest exceeds some ratios (3 times the taxpayer’s net equity).
Furthermore, the interest rate shall comply with the market practice.
Do not hesitate to share your experience in Colombia with us in the comments below. Any comments are welcome !