Taxability on a foreign Pension

Esteban R. aka: lawyer co
was kind enough to research this important subject.
I'm posting it again for the new comers to Colombia.
Medical insurance has also been researched by Esteban.

Many thanks Esteban for your time spent on the above subjects.

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Pensionado Income tax and general tax information.

By

Esteban R.
Colombian lawyer
Email: lawyerscolombia at yahoo.com

This is a short response to the questions regarding tax of foreign pensions and other income while residing in Colombia. I contacted DIAN which is equivalent to the U.S. Internal Revenue Service for answers to these questions. The following information is current as of 7 April 2007

Definitions:

Residency: For tax purpose, an individual is considered a resident of Colombia when has been living in Colombia for at least six months, which can be continuous or discontinuous.

Income Tax: Foreign citizens are obligated to pay income tax on income derived from a national source. Example: They work for a company here in Colombia and receive a salary.

Question 1: When is a foreign citizen required to pay taxes?

According to Colombian law foreign residents are required to pay tax on worldwide income after five years of residency in Colombia be it continuous or discontinuous residency. Certain types of income whose source is in Colombia, are however excluded and they must be pay since the first day the foreign citizen has the residence ( see tax definition).

Exclusions:

A Social security benefit from a foreign government would be exempt from Colombian tax.

All non-national pensions of less than $10,000 dollars per month are exempt.

In conclusion, you must pay income tax on all foreign income after five years of residency in Colombia, but not all that income will be taxable. You should consult your accountant for specific information.

Again, foreign pensions are not considered taxable income in Colombia unless they exceed $10,000 per month. I have asked DIAN to provide written documentation to cover the above questions and DIAN’s legal opinion in the matter.

By elk on Nov 16, 2007, 13:31 in Friendly Talkzone.

arthur brode says on Nov 16, 2007, 13:43:

Thanks for the info.Elk and Esteban

http://www.calirentals.net/

lampltr says on Nov 16, 2007, 18:15:

I second Arthur...always great info to keep in mind, appreciate the dilligence!!

aztec says on Nov 17, 2007, 09:06:

"All non-national pensions of less than $10,000 dollars per month are exempt." elk

What does the statement mean?

If all your pension is in an IRA account in the States are withdrawals exempt from Colombian taxes or not? Are US State pensions exempt from Colombian taxes

elk says on Nov 17, 2007, 13:07:

The laws can change daily in Colombia depending on who you ask.

I have a State Pension from California and social security income. Both are non-taxable according to Esteban's conversation with DIAN.

I would think benefits from an IRA plan would also be exempt, but it's probably best to
speak with an account. As I read it, a PENSION is a PENSION, but best to get professional help with this specific question.

elk says on Nov 17, 2007, 13:13:

It appears Colombia wants to copy the Costa Rican pensionado plan to attract investment and retirees to Colombia. It's a real money maker for Costa Rica and Panama jumped on the band wagon a few years after Costa Rica. I was in Costa Rica in 1973 when they first introduced pensionado program and attended one of their meetings.

In my opinion Colombia has a lot more to offer when compared to Costa Rica or Panama.

Just my opinion