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. This year, during the month of January, the Dirección de Impuestos y Aduanas Nacionales – DIAN (Colombian tax authority) defined, through a tax calendar, the filing dates of the different taxes in Colombia, such as the personal income tax. If you are from the U.S., you can think of DIAN as the IRS of Colombia.
Personal income taxes are known as renta personas naturales in Colombia. Income tax filing in Colombia is known as declaración de renta.
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 specialist.
We highly recommend talking to a Colombian tax specialist 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Beware that there is a lot of out-of-date and inaccurate information about Colombian income taxes in English found out on the Internet.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 But this is completely out-of-date information, which changed in 2013.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.
*For this article, we will use as an example an exchange rate of $4,500 Colombian pesos to the US dollar. UVT for 2022 is 38.004 Colombian 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 130 days in the last six months of 2022. And if you were in Colombia 53 days in the first six months of 2023, you would be considered a Colombian tax resident for 2023.
If you are considered a Colombian tax resident, and during 2022 you met any of the following conditions, you must file income tax in Colombia in 2023:
- Earned income during the year 2022 for a value greater than 1,400 UVT, which is equivalent to $53,205,600 Colombian pesos or $11,823 USD.
- Made purchases or total consumption during the year 2022 with Colombian financial products for a value greater than 1,400 UVT, which is equivalent to $53,205,600 Colombian pesos or $11,823 USD.
- Made purchases during the year 2022 with Colombian credit cards for a value greater than 1,400 UVT, which is equivalent to $53,205,600 Colombian pesos or $11,823 USD.
- Made movements in Colombian bank accounts, deposits or financial investments in Colombia during the year 2022 for a value greater than 1,400 UVT, which is equivalent to $53,205,600 Colombian pesos or $11,823 USD.
- If as of December 31, 2022, your net worth was greater than 4,500 UTV, which is equivalent to $171,018,000 Colombian pesos or $38,004 USD.
However, if you are not a tax resident in Colombia, you will only have to file income tax in 2023 if you meet any of the following cases:
- During 2022, your income obtained in Colombia was greater than 1,400 UVT, which is equivalent to $53,205,600 Colombian pesos or 11,823 USD and the payer did not withhold at source.
- If as of December 31, 2022, your net worth in Colombia was greater than 4,500 UTV, which is equivalent to $171,018,000 Colombian pesos or $38,004 USD.
If you did not meet any of the above conditions, you do not have to file income tax in Colombia in 2023.
What is the importance of differentiating whether or not I am a Colombian tax resident?
The importance of determining if I am a Colombian tax resident is that the following conditions would change depending on it:
– Your income tax rate in Colombia.
– Income that will be subject to income tax in Colombia.
– The values that you must consider knowing if you are obliged to file other taxes in Colombia.
Consequently, it will be exposed on the previous topics.
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 2022. And if your worldwide income was $11,823 USD or higher in 2022, you are technically supposed to file income taxes in Colombia for 2022.
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) and from 2023, foreign pensions are exempt from income taxes. 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 15 percent. However, gains from the sale of stock on the Colombian exchange are exempt. This is provided the stock don’t represent more than 3 percent of the total shares of the Colombian company.
Colombia also has a wealth tax starting in 2023. This tax obliges the following people:
– Colombian tax residents who as of January 1st, 2023, have a net worth of more than $678,592 USD
– Non-Colombian tax residents who, as of January 1st, 2023, have assets in Colombia greater than $678,592 USD
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 do not file taxes in Colombia. This is even though they are likely required to file. Be aware that there are penalties, which can be quite stiff, for failing to file if you are required to, even if you don’t have to pay taxes but do file tax returns.
Reportedly, the Colombian tax law indicates the way in which the penalties for not declaring taxes, filing them out of time or with errors should be calculated, so the value of the penalty will vary depending on the case, but as indicated by law, never can be less by the year 2023 at an approximate value of $94 USD.
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.
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 and foreign asset tax for individuals for the tax year 2022 will begin on August 9, 2023, and run until October 19 of the same year.
On the other hand, the filing dates of the “wealth tax” for the taxable year 2023 will be from May 9 to 23, 2023.
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 is in August.
How to Get a RUT (and NIT Number)
To get a RUT form, you must schedule a face-to-face or virtual appointment with a DIAN official here. On the RUT form is the NIT number, which is your Colombian tax identification number. The last two digits of your NIT determine your required filing date.
When you schedule your appointment, you will receive an email with the information and requirements that you must meet prior to the appointment.
When you attend the appointment, you must have your original identification (identity card or passport) with you, the number of your appointment and, also, if the appointment is in person, you must have a copy of your identification: the front and back of your identity card or the data page of your passport.
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.
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.
The entire process in the DIAN to obtain a RUT takes about 30 minutes. This requires moderate knowledge of Spanish.
In my recent experience, I decided to hire a tax advisor to obtain my RUT for which he asked me to sign a power of attorney that I signed before a notary and a copy of my identity card and he took care of everything else.
Colombia Income Tax Rates
If you are a Colombian tax resident, Colombia has progressive rates that depend on the level of your income. The following is the income tax brackets table for 2022 income taxes in Colombia:
If you are not a tax resident in Colombia and must present the income tax, your tax rate will be a single rate of 35 percent:
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, and in addition, there are other deductions by law that are possible to apply in the tax return.
For the wealth tax, Colombia also has progressive rates that depend on the value of your net worth in the world (Colombian tax residents) or solely owned in Colombia (Colombian non-tax residents):
Colombian tax residents who, as of January 1 of each year and in the case of the year 2023, have assets abroad for a value greater than $18,849 USD, have the obligation to file a “foreign asset tax” in the country abroad that has the same expiration date as the income tax.
Regarding this tax declaration, it is important to indicate that it is informative for the tax authority (DIAN), and it does not generate the obligation to make any payment unless this tax is filed extemporaneously.
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, 2022, which was 4,810.20 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, 2022 (4,810.20) 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, 2022 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. The deductions to which an individual is entitled in their income tax return are divided into three concepts:
- Income not constituting income
- Exempt income
Non-income taxable income for the 2022 income tax return (to be filed in 2023) are:
- Mandatory Pension Contributions
- Mandatory Health Contributions
- Mandatory contributions to the Pension Solidarity Fund
- Voluntary contributions to pension funds – must not exceed 25% of income limited to 2,500 UVT 95,010,000 colombian pesos per year ($21,113.33 USD).
- Payment of interest or mortgage – Maximum limit 100 UVT monthly $3.800.400 colombian pesos ($844.53 USD).
- Dependent payments Cannot exceed 32 UVT Monthly $1.216.128 colombian pesos ($270.25 USD).
- Payments for prepaid health care Not to exceed 16 UVT per month 608.064 colombian pesos ($135.12 USD).
- Contributions to voluntary pension funds – may not exceed 30% of labor or taxable income for the year and up to a maximum of 3.800 UVT per year 137.970.400 colombian pesos ($30,660.08 USD).
- Contributions to AFC accounts may not exceed 30% of labor or taxable income for the year and up to a maximum of 3800 UVT per year 144.415.200 colombian pesos ($32,092.26 USD).
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 Japan, France, Italy, Great Britain and Northern Ireland, the Czech Republic, Portugal, South Korea, Mexico, Canada, Switzerland, Spain and with the countries that are part of the Community of Andean Nations (CAN). 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 credit for some of the income taxes I paid in the U.S. when filing income taxes in Colombia.
Finding a Colombian Tax Accountant
If you need to file a Colombian income tax return, you should talk to a Colombian tax advisor. A tax advisor can help to navigate all of the Colombian tax regulations, determine what things you can deduct, and help you file.
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.
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.
*The exchange rate used in this blog was 4,500 Colombian pesos per dollar. In any case, to make the corresponding calculations in each case, it is the exchange rate corresponding to the day of each economic operation.
Sign up for the Free Medellin Guru Newsletter – You can see all of the previous Medellin Guru weekly email newsletters and sign up here.
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.
Editors note: Updated on April 24, 2023.