Tax Rates and Taxes for Australian in Col.

elk says on Apr 6, 2007, 05:40:

Tax in Colombia Residents are taxed on their worldwide income. Income earned by individual residents in Colombia is taxed at progressive rates.

The tax rates vary depending on the taxable income. Income up to COP20,400,000 (US$7,662) are not taxable. The maximum tax rate is 35% on income exceeding COP96,000,000 (US$36,056).

Until 2006, residents are subject to a 10% surcharge on their income tax liability. Accordingly, the maximum tax rate would be 38.5% (35% + (10% surtax on 35%)).

Foreign residents are taxed only on their Colombian-sourced income for the first four years of their stay in Colombia. On their fifth year of residence, foreign residents are taxed on their worldwide income. The income tax is determined in accordance with a progressive table, of which the highest marginal rate is 38.5%.

Capital Gains
Capital gains earned by residents are subject to tax in Colombia. The taxable gain is computed by deducting the following from the selling price: acquisition costs (As revalued by the consumer price index), costs of transferring ownership, and improvement costs.

Capital gains earned through a resident’s fixed assets are subject to special taxation. Fixed assets are houses, apartment, vehicles, chattels, and implements. If the property was sold within two years of acquisition, the capital gains earned are subject to tax at the standard progressive income tax rates. Profits generated through sale of the property held for more than two years is subject to the capital gains tax rate of 1%, withheld at source.

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elk says on Apr 6, 2007, 05:49:

Colombian Tax and your Foreign Income Pensionado Visa and your Colombian Tax


This may be of interest to anyone holding the Colombian Pensionado Visa. Normally we are required to have an income of approximately $1,800 USD per month to qualify for the visa and pay taxes on that amount after five years of residency in Colombia. Based on the Colombian tax schedule this amounts to a tax liability of approximately $4,968 USD per year. (23% up to 96,000,000 peso’s) Most current foreign residents are not concerned about tax liability in Colombia since they are able to hide their true foreign income, however Colombian Pensionado Visa holders are required to produce financial documents when applying for the visa which makes it easy for DIAN. This is something to consider in the future if you wish to extend annually your Pensionado visa through the fifth year.


Laws change often in Colombia and this may not be an issue in the future, but something to be aware of if you plan to become a resident of Colombia using the Pensionado Visa. The below site explains the tax laws in detail.



6.2 Residency (defined)
Colombian nationals and foreign residents in Colombia must pay tax on income. A foreign resident is defined as someone who spends at least six months a year in Colombia. After five years’ residence, income earned outside Colombia also becomes subject to tax. Non-residents must pay 35% withholding tax and a 7% remittance tax when transferring earnings out of Colombia. Dividend income is exempt in Colombia.

http://www.deloittetaxguides.com/index.asp?country_id=1510000151&layout=countryGuideDtt#minorA24

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aztec says on Apr 6, 2007, 06:50:

elk, regarding foreign pensions... ...I have been advised that pension income from outside the country is exempt from the Colombian tax. Believe you used the term "earned income" and as used here in the States would not refer to pension income.

Have also been advised just the opposite and that indeed after 5 years even the outside pension would be subject to taxation.

Both of these different interpretations came from Colombian professionals.

Any information? Assume only for discussion purposes a $100,000 pension.

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mclean04 says on Apr 6, 2007, 11:00:

Interesting subject I am interested in the answer as to whether USA pension and IRA income is subject to Col. tax as a resident alien.
If you do pay the tax is it a credit on your USA tax return?

mclean

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elk says on Apr 6, 2007, 11:24:

"earned income" Aztec:

You brought up a good question regarding "earned income" vs a typical foreign pension.

I have been unable to ascertain if Colombia considers a U.S. private pension as taxable. Many public and private pensions in the U.S. are taxable by the IRS and others are not. Several disability pensions fall into the non-taxable category, however many public employee pensions are taxable by the U.S./IRS. I would suspect that if a pension were taxable in the U.S then it could and would also be taxed in Colombia once you become a resident of Colombia. (your considered resident after six months)

This brings up the question of the U.S. social security benefits/pension which many of us have used to qualify for the Colombian Pensionado Visa. Is it taxable?

It has been very easy for many of us to acquire the Colombia Pensionado Visa based on an income far less than the legal requirement of $1,800 USD per month. In my particular case “MRE” in Bogata never ask for a dollar amount when applying.

As we have all learned every case is unique and the rules change frequently depending on who you ask. I would like to “C.M.A.” now and hopefully avoid a knock on the door by DIAN.

I would appreciate any information or informed discussion relating to this subject.

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elk says on Apr 6, 2007, 11:56:

Mclean04 - IRA funds Mclean04:

It would appear your IRA funds are not taxable in Colombia?

Remember all foreign income is taxable after five years of residency in Colombia. (excluding IRS funds) We however need to define the difference between "income and a foreign pension"

"Proceeds from the sale of shares through the stock exchanges are not considered occasional earnings and are thus tax-exempt"

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Determination of taxable income

Nearly all income is subject to taxation, including “occasional earnings” (such as inheritances and gifts). For residents, this includes both domestic and foreign-sourced income; non-residents are liable only for income from Colombian sources. Proceeds from the sale of shares through the stock exchanges are not considered occasional earnings and are thus tax-exempt.

In accordance with Law 546 of 1999, interest paid to authorized financial entities on housing loans is deductible and is calculated in terms of an indexed accounting unit, UVRs (unidades de valor real), up to 1,000 units annually. There is a 60% deduction for qualifying donations and a 100% deduction for donations to entities or programs approved by the National Council for Science and Technology.

In an effort to promote construction, Decree 2005 of September 2001 allows workers to deduct initial mortgage payments and monthly mortgage quotas from their taxable earnings for up to five years following the publication of the decree. The Banking Superintendency ensures that the exemptions are used to pay mortgages.

http://www.deloittetaxguides.com/index.asp?country_id=1510000151&layout=countryGuideDtt#minorA24

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