The income tax filing season has already started for filing Colombia income taxes for 2016. The tax filing season in Colombia each year is much later in the year than in the U.S. Most notably, the tax season in Colombia starts in August for filing income taxes for the prior year.
Personal income taxes are known as renta personas naturales in Colombia. Income tax filing in Colombia is known as declaración de renta.
The agency responsible for collecting income taxes in Colombia is Dirección de Impuestos y Aduanas Nacionales (DIAN). If you are from the U.S., you can think of DIAN as the IRS of Colombia.
The following article is based on my understanding of Colombian income taxes. This is based on my actually filing income taxes in Colombia over the past several years. In addition, I researched Colombia’s income taxes and also talked to my Colombian tax accountant.
We highly recommend talking to a Colombian tax accountant if you think you need to file income taxes in Colombia or are considering moving to Colombia to understand the tax implications.
Beware that there is a lot of out-of-date and inaccurate information about Colombian income taxes in English found out on the Internet.
For example, some websites claim that expats with residency status in Colombia aren’t taxed on worldwide income until they have been a tax resident for five years. But this is completely out-of-date information, which changed in 2013. So, you now become a tax resident in Colombia and become liable for filing income taxes the first year you reside in Colombia for over 183 days.
The official exchange rate on December 31, 2016 was 3,000.71 pesos to the US dollar, which is used in this article. UVT for 2016 is 29,753 pesos.
Who Needs to File Colombian Income Taxes?
You are considered a tax resident in Colombia if you stay in the country for more than 183 total days during a year, whether this time is continuous or not.
In addition, a year for determining tax residence is any 365-day period. It’s not necessarily a calendar year. And it can even straddle two years. For example, if you were in Colombia 90 days in the last six months of 2015. And if you were in Colombia 94 days in the first six months of 2016, you would be considered a Colombian tax resident for 2016.
If you are considered a Colombian tax resident, you are NOT required to file income taxes if all of the following filing requirements are meet (for 2016).
- Gross income in 2016 is less than 1,400 UVT, which is 41,654,200 pesos ($13,881 USD at the official exchange rate at end of 2016).
- Gross equity (net worth) on the last day of 2016 does not exceed 4,500 UVT, which is 133,888,500 pesos ($44,619 USD).
- Total value of purchases and consumption in 2016 does not exceed 2,800 UVT, which is 83,308,400 pesos ($27,763 USD).
- Credit card consumption in 2016 does not exceed 2,800 UVT, which is 83,308,400 pesos ($27,763 USD).
- Total value of accumulated bank savings, deposits or financial investments held at the end of 2016 does not exceed 4,500 UVT, which is 133,888,500 pesos ($44,619 USD).
If you are a Colombian tax resident and exceed any amount in the above list, you are required to file taxes in Colombia.
What Income is Taxed?
Colombia taxes the worldwide income of tax residents. Non-residents are taxed only on Colombia-sourced income.
If you were a tax resident of Colombia in 2016. And if your worldwide income was $13,881 USD or higher in 2016, you are technically supposed to file income taxes in Colombia for 2016.
Most income is taxed in Colombian including salaries and rental income. Foreign pensions/retirements are also taxed in Colombia according to a ruling from DIAN. However Colombian pensions are exempt from Colombia income taxes (up to a limit). Also, 25 percent of labor income (up to a limit) is exempt from taxation.
Capital gains such as inheritances, gifts, gains from the sale of stock and gains from the sale of real estate are taxed in Colombia at a rate of 10 percent. However, gains from the sale of stock on the Colombian exchange are exempt. This is provided the stock don’t represent more than 10 percent of the total shares of the Colombian company.
Colombia also has a temporary wealth tax for tax years 2015 to 2018. And this wealth tax reportedly is expected to be eliminated in 2019. The wealth tax only applies to those with a net worth of over 1 billion pesos. The wealth tax for wealth over 1 billion pesos is levied at progressive rates ranging between 0.125 percent and 1.5 percent.
In addition, there is no joint filing of income taxes in Colombia. Each person must file, if required.
Penalties for Not Filing Income Taxes in Colombia
I have met some expats living full-time in Colombia who don’t file income taxes in Colombia. This is even though they likely are required to file. Keep in mind there is a penalty for not filing if you are required to file, even if you don’t owe any taxes. Reportedly the penalty for not filing income taxes in Colombia is 10 UVT or 297,530 pesos.
Also, if you plan to become a dual citizen in Colombia, which is possible after having a resident visa for five years, part of this process looks to make sure you have been filing income tax returns in Colombia.
If you didn’t file and owe Colombian income taxes, the penalty for late filing can be quite stiff. The penalty is 5 percent per month of the delay with a 100 percent ceiling. And it can even become higher with a ceiling of 200 percent. In addition, interest on unpaid amounts is also included, which reportedly is an interest rate of about 30 percent per year.
When to File Colombian Income Taxes?
Your filing date for Colombian income taxes is based on the last two digits of your Colombian tax ID number. The Colombian tax ID number is known as the Número de Identificacíon de Tributaria (NIT). This is found on a DIAN form known as the Registro Único Tributario (RUT).
The filing dates in Colombia for income taxes for individuals for the 2016 tax year started in 2017 on August 9 and run until October 19. These are the same due dates for filing as last year. So, the tax season has already started in Colombia for filing 2016 returns and runs until October 19.
The entire schedule of DIAN filing dates is found here. Your individual filing date can change each year based on my experience. Some years my filing due date was in October and this year it was in August.
How to Get a RUT (and NIT Number)
To get a RUT form, you must go to a DIAN office to request this. On the RUT form is the NIT number, which is your Colombian tax ID number. The last two digits of your NIT determines your required filing date.
In Medellín, to get a RUT form you need to go to the DIAN office in the Alpujarra administrative complex in El Centro. This is located at Carrera 52 # 42-43. Furthermore, DIAN’s office in Alpujarra is located in the basement of one of the buildings. Any of the security guards will be able to direct you to which building has the DIAN office.
Before you go it is recommended to get an appointment. In my experience, DIAN most likely won’t let you in without an appointment. You can make an appointment with DIAN to receive a RUT form by calling +57 (1) 487 8200. It is possible to sometimes even make an appointment the same day.
When you go to DIAN’s office, you will need to bring your original ID (cedula or passport) as well as a copy of your ID – the front and back of your cedula or the data page of your passport.
You should arrive 15 minutes before your appointment. And when you arrive at DIAN they will ask for your appointment number. You typically will have to wait outside until your appointment time is called. You then enter the building and will be given a number at reception to wait your turn. And you should watch the monitors for your number.
You may need more than just the RUT form at DIAN. DIAN started using electronic signatures for some tax forms. For example, if you need to file a declaration of your assets outside of Colombia you will also need this electronic signature set up.
In my experience recently, the entire process at DIAN to get a RUT and electronic signature setup took 1.5 hours. This required a moderate amount of Spanish. Most Colombian tax accountants will also offer a service where they can get this RUT form and electronic signature from DIAN for you.
Colombia Income Tax Rates
Colombia has progressive income tax rates like many other countries, which maxes out in Colombia at 33 percent. The following is the income taxes bracket table for 2016 income taxes in Colombia:
Note there isn’t a separate tax table rate for being married and filing jointly in Colombia like in the U.S. However, there is a limited deduction from your income available in Colombia for dependents.
What Exchange Rate to Use?
For your end-of-year bank statements, credit card statements and account statements in another currency, you should use the official exchange rate on December 31, 2016, which was 3,000.71 pesos to the US dollar.
However, for a salary and expenses you incur over the year in another currency you have two options. You can use the official exchange rate on December 31, 2016 (3,000.71) for the annual total for each item. Or you can use the official exchange rate on the day when you receive or pay each item.
For example, to convert an annual salary in another currency to pesos to calculate Colombian taxes you could just use the December 31, 2016 exchange rate for the total.
Or you could use the official exchange rate for the date of each salary payment received during the year. So, if you were paid twice a month, you need to make 24 calculations with 24 different exchange rates. You would also need records for each salary payment received.
You can find a list of the official exchange rates in Colombia during the year from the Banco de la República here.
Calculating Colombia Income Taxes
To calculate Colombia income taxes, you start with your gross income and deduct a variety of deductions including:
- Expenses related to receiving your income – this could include such items as home office expenses and travel.
- Mortgage interest for the taxpayer’s dwelling – limited to 1,200 UVT, which is 35,703,600 pesos ($11,898 USD) for 2016.
- Colombia health insurance – Payments towards medical insurance in Colombia that is limited to 192 UVT, which is 5,712,576 pesos ($1,904 USD) for 2016.
- Economic support of dependents – limited to 384 UVT, which is 11,425,152 pesos ($3,807 USD) for 2016.
- Pension/retirement savings contributions – limited to 3,800 UVT, which is 113,061,400 pesos ($37,678 USD) for 2016.
- 25 percent of your labor salary (gross income minus costs and deductions) – which is exempt from taxes up to a limit of 2,880 UVT, which is 85,688,640 pesos ($28,556 USD) for 2016.
The result after subtracting deductions is your Colombian taxable income. From this you calculate Colombian income taxes due for your Colombian taxable income using the Colombia income tax table (see above).
Colombia Double Tax Treaties
Colombia has Double Tax Treaties with several countries including Bolivia, Canada, Chile, Czech Republic, Ecuador, France (in 2018), India, Mexico, Peru, Portugal, South Korea, Spain and Switzerland. It also has one with the United Kingdom that is not in force. These tax treaties include a tax credit for income taxes paid in the other country.
Colombia does not yet have a Double Tax Treaty with the U.S. and many other countries. But Colombia still permits a tax credit for some income taxes paid in other countries. This is even though there isn’t a tax treaty in place.
For example, I pay income taxes in the U.S. as a U.S. citizen even though I live in Colombia. The U.S. taxes worldwide income, as does Colombia. But I was able to get a credit for some of the income taxes I paid in the U.S. when filing income taxes in Colombia.
The end result is that in the past four years living in Colombia, I only had to pay income taxes in Colombia two years out of the past four. Two years I paid no income taxes in Colombia. The average Colombian income taxes I paid over the past four years works out to only about $90 USD per month.
Finding a Colombian Tax Accountant
If you need to file a Colombian income tax return, you should talk to a Colombian tax accountant. A tax accountant can help to navigate all of the Colombian tax regulations, determine what things you can deduct, and help you file.
I have used a bilingual accountant in Medellín to file my Colombian income tax returns over the past three years. Here’s her contact information:
Paula Cruz, Colombian Public Accountant, email: [email protected], Skype: cliping21
She normally charges clients about 450,000 pesos for filing Colombian taxes. She has an office near Parque Lleras in El Poblado. And she told me recently that about 90 percent of her clients are expats.
This year Paula filed my Colombian taxes online with DIAN and provided me a copy of my tax filing document (DIAN Form 210) as well as a separate tax form to use to pay the taxes I owed at a bank.
The Bottom Line
The bottom line is that moving to Colombia can be tax neutral for some people, but not everybody. Moving to Colombia has been tax neutral for me in two out of the past four years. You may have to pay some income taxes in Colombia, depending on your personal situation. And this can also change from year to year based on my experience.
I now include Colombian income taxes in my budget as another cost of living in Medellín. But the overall cost of living in Medellín is relatively low for expats, as there are many surprisingly cheap things found in the city.
So, the $90 USD average per month I experienced over the past four years in Colombian income taxes really isn’t that much when I factor in other low costs of living in Medellín like apartment rent, utilities and transportation.
Over the past several years, I have met many expats living in Medellín that file Colombian income taxes. Many of these expats told me they pay little or no Colombian income taxes. Most notably, it really depends on your personal situation.
So, if you are planning to move to Colombia it is important to understand the tax implications. We recommend talking to a tax professional.
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Editors note: Updated on July 19, 2018 with information that Colombia’s double tax treaty with the UK is not yet in force based on a reader comment.