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I Invested in Colombia....Now, how can I get my money out?

There have been many posts on PBH regarding the forms that must be filed when transferring funds into Colombia to purchase property. The following 3 posts resume much of what has been said:

Viewpoint said on July 27th 2005 (US to Colombia wire transfers & Taxes):

If you are transfering this money to purchase a property you need to first advise the receiving bank and after receiving their consent you will need to file a form 4 and then a form 11 so that these funds can later be repatriated without any tax consequences. The receiving bank will assist you in filing form 4 but you must file the form 11 yourself. If you fail to file these forms you could receive a penalty of 200%.

Gator says on Feb 11th 2007 (How to transfer money to Colombia to buy land):

The reason I use Declaracion (form) No. 5: is I am a resident and my wife is a Colombia so I am only interested in reporting the importation funds to the Banco de la Republica. Assuming the funds are remaining in Colombia, which they are, I have no further reporting responsibilities for the importation of dollars. However, I fully realize that if at a latter date have a need to sell the property and repatriate the $$$$, the funds will be taxed at a 46% rate. Since I will NOT be leaving Colombia Form 5 does the trick for me.

Robi said on Non 6th 2007 (Investment Visa : Summary):

About the 6 months rule, I do believe it is a problem.
When I filed my form 4, Janet Cristina called and checked it out with Banco de La Republica (without making my name of course). They say that after 6 months to have lived in the country (no matter on which VISA), you have to ask to be recognized as "Inversionista Residente" and you cannot file form 4. Which is the advantage of being a "Inversionista Residente"? They could NOT answer this simple question. It is just like a "medal"... ridiculous.

Having been through all of this recently I can add (through harsh experience) that the utmost care must be taken…..I was threatened by a 900 million COP fine for filing the WRONG documents and I had enormous problems in rectifying the error.
In short, the “foreign investment�? route (forms 4 & 11) can only be used by NON-RESIDENTS. Thus, as soon as you have been in the country for more than 6 months you are NOT ELLIGIBLE to use this procedure. Unfortunately, as I thought this was the appropriate procedure if one wished to preserve the right to eventually repatriate funds out of the country following a future sale I chose this route even though I was, by then, deemed a foreign resident.

In all of this my bank was of no assistance whatsoever and allowed me to file form 4 in the full knowledge that I was a resident. The confirmation this error (if uncorrected within 3 months) was liable to a fine of up to 200% of the amount involved by the Banco de Republica only served to panic my bank (no names mentioned) and I had to threaten them with legal proceedings to get them to join in with me to get the matter resolved.

From all of this it would appear a “foreigner�? can ONLY be assured of the right to repatriate investment funds out of Colombia IF THEY DO THIS VIA FORMS 4 & 11 AND WHILST STILL A NON-RESIDENT.

However, I have never been able, so far, to obtain any concrete information on what happens to a foreign resident’s investment if they wish to repatriate funds. From Gator’s post (above), it would appear a massive “tax�? (?) may be due on the repatriment of any net sales proceeds (I.e. already after deduction of any capital gains taxes). If confirmed, this would appear to be an incredible impediment to any foreign residents making investments in the country after they have already been there more than 6 months.

Does anybody know anything more about this?

By fecherklyn on Jun 7, 2008, 17:22 in Friendly Talkzone.

wendell13 says on Jun 8, 2008, 17:55:

The silence is deafening from the "experts".

I would find some competent real estate attorney here in Colombia and not rely on non profesional people

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robi666 says on Jun 8, 2008, 18:17:

I am glad that you finally solved your problem.

You can wire the money out from Colombia. It is your money.
What you have to justify is why you have that money here. DIAN wants to know if you paid taxes on earned money.
It is not that, if you filed form 5 and not 4, you will be automatically taxed.

Anyway, it is a matter that I wanted to invest further and I will in the next weeks. My accountant is an expert on this matter, but even a deep read to the Circular Cambiaria would do it.

"I am a citizen of the most beautiful nation on earth. A nation whose laws are harsh yet simple, a nation that never cheats, which is immense and without borders, where life is lived in the present."

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robi666 says on Jun 8, 2008, 18:40:

A brief reading to the Circular shows how you have to fill a declaration when sending out money. That declaration will be transmitted to DIAN.
DIAN, in case that amount was not legalized by a form 4 when coming into Colombia, will probably want to investigate why you have that money and if you paid taxes on it (in case you have earned it and not just transferred from your savings abroad).
The same is applicable to capital gain obtained by selling a property, even if the initial money where legalized with form 4.
But that's all pretty normal, for how I see it.

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Ctg Bound says on Jun 9, 2008, 04:19:

A good accountant should be able to advice on the taxs to be paid in sending the money out of Colombia by OFFICIAL channels.

The easiest way is to sell the asset to a person who can deposit the money outside Colombia. You will be surprised at the amount of people who can do that, I have turned several people down who wish to buy assets I have for sale as they want to pay the money outside Colombia, where as I want the money here.

You can also take up to 10,000 dollars cash out with you each trip, so depositing the money in a bank account and taking it out over time is another option.

There are other options as well.

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Frank Rizzo says on Jun 9, 2008, 15:05:

THere are plenty of people in the states that would like to have money in colombia and would do the direct exchange if you have US accounts.

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robi666 says on Jun 9, 2008, 15:37:

Frank, I cannot understand... or maybe yes.
Why would they do it if it is not dirty money?
The best way to buy a property in Colombia is wiring in the money and register the foreign investment.

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fecherklyn says on Jun 9, 2008, 16:29:

Thanks everyone for the replies so far.

Robi, I suppose my concern relates to Gator's statement :...."However, I fully realize that if at a latter date have a need to sell the property and repatriate the $$$$, the funds will be taxed at a 46% rate". So far, I do not see a source for this statement nor fully understand in what circumstances this might arise.

Lets take a theoretical situation:

Mr X (a foreigner) takes up residence in Colombia with his Colombian wife, obtains a "spousal" visa and lives the 1st year in rented accomodation.

At the end of the 1st year Mr & Mrs X decide to purchase a property costing the COP equivalent of US$ 100,000 (say COP 200 million). To pay for this purchase Mr X uses US$ 100,000 of his foreign savings which are wire transferred to his Colombian bank account and "released" by the completion of Form 5.

The purchase is completed with the use of the funds transferred.

The property is retained as the principal residence of Mr & Mrs X for 3 years during which time they include it in their annual tax declarations as part of their "Patrimonio", which itself generates a "Renta Presuntiva" and pay the appropriate taxes if the relevant threshholds have been exceeded.

At the end of 3 years they decide to leave Colombia (to return to beautiful Italy) and manage to sell the property for 250 million COP (then equivalent to US$ 150,000) AND PAY THE ADJUDGED CAPITAL GAINS TAXES.

They then try to wire transfer the net proceeds of the 250 million COP (less capital gains tax).

WILL THIS WIRE TRANSFER BE CHALLENGED IN ANY WAY BY (Gator's) 46% TAX (or whatever it is)?

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robi666 says on Jun 9, 2008, 16:48:

That's exactly what seems absurd to me.
I cannot see how DIAN can get on that money, being not earned in Colombia.

Not that the entire law about foreign investment is free from absurdity, like your real life case clearly showed...

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Gator says on Jun 9, 2008, 19:01:

Compliance with both Forms 4 and 11, entitles buyer's to take the cost of their original investment out of Colombia, tax free. Just as simple as that. If don’t want to register as a foreign investment, banks will automatically file Form No. 5 (Formulario No. 5). That is OK whenever you have no need to repatriate the money. Since we NEVER anticipate leaving Colombia our contador publico advised filing only Form 5. But he pointed out, as best as I can remember, there were be a massive Colombian tax liability if, at a later point we decided to attempt to move these funds.

It becomes more of a problem if you are a resident and lived in Colombia for more than one year.
I assume , perhaps, the funds used in the purchase as outline above were not intended to be used for resident investor purposes. If you feel you are on a slippery slope then I would certainly consult a good contador publico or Colombian attorney well versed n tax matters.

"Credidi pretio parvo emere et magno vendere tibi in animo fuisse!" .

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Titofijo says on Jun 9, 2008, 19:31:

Is there any way to move the money out of the country through Panama or some secret bank accounts in the Caribbean? How do the narcos move there $$ in and out of the US and Europe?

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Frank Rizzo says on Jun 9, 2008, 22:47:

Gator's exactly right..... there are legal ways to do these type of transactions. If (for example) someone sells a home in colombia and has whatever (say $200k usd) in cop...(430MM cop o algo).....and another investor in colombia can use those funds....they can transfer those funds to the investor in colombia and take payment in the US in USD.

The COP never leaves colombia...no forms...its' done all the time...

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fecherklyn says on Jun 10, 2008, 17:43:

Regarding your various comments:

"Consult a good contador publico or Colombian attorney well versed in tax matters".

I agree, this would be the obvious solution...but I have tried, numerous times, and never found anyone (including the banks) who knows anything worthwhile about these "foreign investment/tax related subjects. Robi knows as much as anyone I have spoken to and this is only because he has devoted much time to personal research of the relevant decrees. And, as you can see, he has no answer, as yet, to this question.

"It becomes more of a problem if you are a resident and lived in Colombia for more than one year. I assume , perhaps, the funds used in the purchase as outline above were not intended to be used for resident investor purposes"

This comment reflects why I think this is a PRIORITY concern for foreigners coming to live in Colombia. I do not think my circumstances are so different to many other foreigners wishing to live in Colombia.

I, a pensioner, have chosen to live in Colombia and I must have housing. After a trial period (of more than 6 months) I decided to buy a property to live in. By this time I was already deemed a RESIDENT. As a RESIDENT I have NO CHOICE, I must bring my funds into Colombia via the Form 5 route (The alternative of the Foreign Investment route, Forms 4 & 11 is denied because I am NOT a non-resident). In these circumstances Gator, why would you wonder "if the funds used in the purchase as outlined above were not intended to be used for resident investor purposes"? I am a RESIDENT and the funds brought into the country were used to purchase a property, an investment as far as I am concerned.

Elsewhere, several persons have suggested there are ways "around this", Frank even suggesting these are "legal". Well, my propblem with all this is I do not know what is legal and, from what I have seen, very few others know either. By choice, I believe in abiding by the law but it seems difficult to know what is the law in Colombia.

Of course, "arrangements" can be found....but wouldn't it be nice to know what the law stipulates and then, and only then, decide what course of action to take?

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Gator says on Jun 10, 2008, 19:17:

"After a trial period (of more than 6 months) I decided to buy a property to live in. By this time I was already deemed a RESIDENT."

So you have been in Colombia more than five years or have been married to a Colombian national for three years?? What visa do you have now, Pensionado?

"Credidi pretio parvo emere et magno vendere tibi in animo fuisse!" .

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robi666 says on Jun 10, 2008, 19:38:

Gator,
maybe it was not that clear but for Banco de la Republica, as stated in the Circular Cambiaria, you are resident after 6 months that you live here.
Being resident for Banco de la Republica and have a resident Visa are two very different thing.

Absurd? Yeah.
Think of it: someone may want to invest to get a resident Visa.
If he was living here for less than 6 months, it is all ok. He'll get his Visa and be a resident.
If he was living here for more than 6 months, he cannot get it (he cannot file form 4 and 11). He'll have to wait 3 or 5 years for being a resident.

fecherklyn, I have to meet my contadora, the one I talked to you about and I am quite sure that she can sort things out about this matter. She works for one of well known Colombian company and on the investment that company makes abroad.
She has to handle formularios with BdlR and DIAN on daily basis.

If you'd like, we can meet together for a coffee together with her and then, I hope, we can post something here.

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huskie says on Jun 11, 2008, 05:05:

Hey Robbi can you share her name ? I am going to Colombia in August and need all the contacts possible. I am investing in property. Please e-mail me thru PBH if you want to give me the information. I will be in MDE. Thanks
Cheers

"Great spirits have always encountered violent opposition from mediocre minds-"

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robi666 says on Jun 11, 2008, 05:18:

Done.

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fecherklyn says on Jun 11, 2008, 06:04:

Gator,

I think Robi has already cleared up our misunderstanding about the "5 year/6 months rule". This probably now explains why I think the matter of "foreign investment" is so riduculous. Under the current BdlR regulations a foreigner only gets a brief 6 months "window" in which to register under Form 4 and protect an "exit passage" for his investments if he ever wants to leave Colombia.

You have mentionned this does not matter much to you as you have no intention of leaving Colombia and thus no need to repatriate any funds. Fine, I also have no present intention of leaving Colombia...but I would prefer to keep my options open against any eventuality. Incidentally, I previously lived in Venezuela and initially thought I would never leave there. But Chavez changed all of that and I was only able to get a fraction of my monies out of there at great loss. I do not want to experience something like this again.

Robi, yes lets meet up with your contadora. Can you email me please.

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huskie says on Jun 11, 2008, 06:23:

Thanks Robi!
Cheers

"Great spirits have always encountered violent opposition from mediocre minds-"

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tressel says on Aug 10, 2008, 23:51:

Can anyone please refer an honest educated accountant with experience with foreign investors in real estate. I have been looking for one for two years! I became a resident of colombia over 2 years ago and spend 6-8 months per year in colombia. I have purchased 5 apartments all with forms 4 and 11. I'm really confused if my purchases were done correctly and I need to do tax returns, I think? I really need some help if anyone can give me some advice. I got a business visa at first but that expired 3 years ago. I purchased my first apartment in the name of a business name LLC. After purchasing my 2nd apartment I got my resident visa, then I purchased 3 more apartments since last year and I am starting to rent them out. All are in business names LLCs. I need some serious tax and investment advice. Thanks, Mark

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webmanco says on Aug 11, 2008, 03:26:

This thread has been very interesting.

...A yo, déjenme queto y no me jodan má! ...

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