Transferring funds for a house ?Help

calipro says on Mar 23, 2006, 15:53:

JM00N87 You don't pay any taxes on money that you wire to Colombia. There is a very small tax if you withdraw more than 3 and half million in one months time. Also there will be a hell of a large tax if you decide not to fill out form 4 and 11 and then try to wire the money back to the states. But simply to wire money to Colombia there is no tax at all.

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JMOON87 says on Mar 23, 2006, 16:47:

THANKS Calipro, does this apply also to transeferrring al large sum of money for the purchase of a houses like 75-125k ?..what are the forms 4 and 11 -just like a registration or recording of the transaction ..i just read on some old post that you will pay 42% when you sale and try and get the money back to the u.s. ..thanks again

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viewpoint says on Mar 23, 2006, 19:23:

JMOON The forms 4 & 11 will register the funds as a foreign investment allowing you to repatriate the funds when you sell the real estate.

Failure to file the forms subject you to a fine of up to 250% of the amount of money transfered. If for some reason you manage to transfer the funds without filing the forms you would still be subject to an assessment of at approximate 40% tax upon the sale of the property if you attempt to repatriate the funds through the central bank. Any investment of CP$80.000.000 or more other than your primary residence will subject you to patrimony tax. Non-resident foreign people or enties where not subject to this tax until November of 2005 when the law changed and now everyone is subject to the patrimony tax which imputs taxable income of 6% on your equity in Colombia other than a residence.

You need good legal advice to cross all these hurtles. If you are buying in Medellin I can direct you to a person that will oversee the filing of forms 4 & 11. The law has recently changed Nov of 2005 and you need to be aware of the impact on your investments.

Under the current laws I would not recommend investing any money in Colombia other than a residence and even then very carefully.

Learn about the patrimony tax before you commit any funds to Colombia as it makes the AMT in the USA look like a sunday school pinic.

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JMOON87 says on Mar 24, 2006, 07:09:

Thanks Viewpoint , how does the Pat tax affect residents all would be buying now is a primary residence and would not buy anything else unless it was in my wifes name or i was a resident which would be a few years from now ? ............GIB , i appreciate your advice and it is well taken but we would like to get a house or apartment there .

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viewpoint says on Mar 24, 2006, 07:14:

JMOON Yes I couldn't agree more with the GOB statements as I was once targeted years ago and the GAULA saved my ass at the last minute.

The new Colombian patrimony tax laws and DIAN are every bit as bad as the the criminal element for anyone that considers a serious investment in Colombia. Attached below is a news release detailing the increased tax collections coming from DIAN. Please note the 17% increase in domestic tax collections. Some of that money was mine. jajaja

Colombia Update (Ba2/BB): Year So Far Shows Impressive Growth in Tax Collection; No Deficit in 2006?

The DIAN (the Colombian national tax agency) announced on Wednesday that tax revenues for the first two months of the year suggested that, among other things, the economy was growing faster than expected. Specifically, total tax revenues increased by 21% year over year in the first two months of 2006, significantly overshooting the established targets (by more than Cop$280 billion, according to the DIAN). The approved 2006 Budget assumes that tax revenues inch up 9% year over year in 2006. Tax revenues increased by 16.5% year over year in 2005.

The official information available for the two first months of the year shows combined growth of 45% in external VAT receipts and import duties and an expansion of 17% in domestic tax receipts. Total tax revenues for the two months amounted to Cop$7.95 trillion (US$3.18 billion). Of increased relevance, our forecasting models (based on monthly tax revenue data dating from 1996) indicate that if the current velocity of tax revenue growth does in fact continue, total tax revenues will show nominal growth of somewhere between 18% and 22% year over year in 2006—this implies real growth of 15.2% year over year. In peso terms, total tax revenues will reach Cop$51.4 trillion by year-end 2006 (17% of expected 2006 GDP), up from 43.6 trillion (15.6% of GDP) in 2005. Of those revenues, Cop$20.6 trillion (6.8% of GDP) will be coming from income taxes, and Cop$15.3 trillion (5.1% of GDP) from value-added taxes. “Other” taxes (such as the financial transaction tax) will account for an additional Cop$3.7 trillion in revenues. Those other tax revenues are likely to show an expansion of 20% year over year this year, if one assumes that performance over the next few months matches that of the first two months of 2006.

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viewpoint says on Mar 24, 2006, 07:28:

JMOON If your wife is Colombian and the funds are yours her name can't appear on the title of the home without being subject to paying an income tax on her equity value of the home (like a gift tax or unreported income tax).

AZTEC (a regular poster) can fill you in on the details as he had the best legal advice money could buy. He was purchasing a home in Bogota for his Colombian wife but found she couldn't take title in her own name for tax purposes. You can place the title in a corporation or trust (foreign or domestic) and she can own the shares but otherwise it triggers taxation.

Colombia laws and regulations are not a friendly enviroment to navigate as compared to other countries more friendly to foreign investment. The patrimony tax shouldn't effect a residence whose value or equity doesn't exceed CP$80.000.000. The patrimony tax simply inputs the 6% income much like AMT tax does in the USA but much more brutal and lethal.

If you invest $1,000,000 in Colombia you pay Colombian income tax on $60,000 income regardless if the investment is producing any income. You are taxed at the GREATER of your actual income or the patrimony calulation of 6% return on your assets.

Structuring the investments through registered qualifing loans can help to mitigate the taxes by reducing your equity that the PAT tax is applied against. In November of 05 they changed the law to inlcude non-resident foreign people, foreign enties and I beleive even non-resident Colombians so that everyone is taxed. The exemption of foreign non-residents and foreign enties was completely deleted. If anyone sees the laws and regulation different than I do I would appreciate hearing from them. DIAN has been furthering my education the past several months and it's not good news.

Now they take no "prisioneros" as they kill everyone.

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IMorcombe says on Mar 24, 2006, 09:42:

GIB's comments GIB: What you failed to mention is how much of a hassle is to rent a house in Colombia; unless something has changed drastically since I lived there, it is the process from hell. Have to get 2 people to co-sign and most of the time they don't want to do it because they have been burned once. These two co-signers need to have real estate and proof of means, etc, so it's not a walk in the park, plus the amount of paperwork. I had to do a lot less to become an american citizen!
Just venting!

Maria Ines

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Brians says on Mar 24, 2006, 09:59:

Viewpoint You seem to know these areas very well. I am attempting to buy real estate in Colombia however have been slow to close as I have concerns. Iwill be investing about $80,000 in an apartment. I understand the forms 4 and 11 however this tax is new to me. My wife and I want a place in Medellin and have looked at a few. I do not have a bank account however my wife does. The idea was to wire the money into her account and buy it in both our namesI really need a lawyer and have been unable to find one I feel comfortable. Is it a mistake to have her name on it? Since the wire is going into her named account would we file the forms under her name? She is a US Resident and a Colombian citizen. Questions and concerns.

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JMOON87 says on Mar 24, 2006, 10:43:

Brians , we were planing to do exactly what you said looking at something in the 75-100k range we were gonna transfer it into my wifes account or builders as i do not have a bank account yet and will be going to miami soon to get my spose visa so i can get one .Part of the money will be my wifes due to florida law on homestead ...... As far as being kidnapped if we purchase something in May we probaly would not even live in it untill dec-jan i dont know if this lowers the odds of being kidnapped -also is it better to transfer to a seller or builder would they than be the ones at risk for kidnapping .....I just know firsthand many people from other countrys to invest in colombia , my wife used to work in real estate with Constructora Melendez S.A. in Cali and she said about 20% of her sales were from other countrys such as the u.s.,canada ,europe ,etc ..her last project there consisted of apartments ranging from 80-115k and out of 101 units 23 were non colombians ...We would be buying the houses with a loan against our house in the u.s. dont know if this would work to my adavantage or my bank said they would finance me for an international loan just need a large down payment 20-30 percent .also that is all i would pay is a 6% tax when i sold as long as the forms 4&11 were filled out ??/i know there are better countrys to invest in but my wife does not have family in theses countrys lol sorry to bother everybody but just trying to learn -thanks again.

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Brians says on Mar 24, 2006, 12:16:

JMoon I don't understand what you mean by going to Florida to get your Visa. I have not even explored getting a visa or cedula as it just seems impossible. Anyway I am concerned about this tax viewpont mentioned on purchases over $80,000,000 pesos. Is is a 6% annual property tax based on a assessed value? Also I am concerned about this "Windfall Tax" I have read about for large amounts being wired into my wife's account. Then is it better for me to have the property in my name or joint or her's? I assume we can register it in the name of our choice at closing. Anyway I have a lot of questions. We are just using some of our cash to buy. I don't want to have a second out on my home here. GIB I know and understand your issues however our concern is we need a foothold in the country. We plan to relocate there in 5-6 years. Since I assume I will not be able to have an income it will be a retirement for me at the ripe old age of 46:) We plan to buy a property a year for the next 6 years and then sell our house here and relocate. I have calculated it out and the income along with my US Investments will be ample. Anyway if we don't start not we risk the currency moving against us. If the currency works for us then fine we plan to buy another next year. However I am trying to establish a Income flow in Pesos that will sustain us and this is the safest thing in my eyes. I am not worried about kidnappings etc.. I feel comfortable enough with the country. Hell I could get shot here. You can't plan for these events. As for the long term prospects of Colombia I am a bull. However things can change an I could be wrong. The stock market could also crash here in the USA again. Once again you take life as it comes and things will work themselves out:)

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JMOON87 says on Mar 24, 2006, 12:40:

Brians , we are planning the same thing basically as you as far as buying smaller apartments to rent out on a gradually basis ....what i meant by going to miami for the visa is that we are married in the u.s. but not in colombia so i want to be able to get a cedula so i can have a bank account in colombia and the embassy in miami told me i needed to get a fiance visa to live in colombia with my wife .....brian , i agree about the market here in the u.s. i did the numbers and i would get more rental return in colombia from what i have seen- than here in florida now -houses in my neighborhood with a 20% down payment will give you PITI payment of $1800 a month with perfect credit plus you will be responsible for any repairs maintence etc or you can rent the exact same house for $1200 a month .I have heard that Pennsacola is suppose to be a great place to invest now but i have yet to look into it ...I also dont worry about the kidnappings i feel more safe in colombia than my mom's old neighborhood in New york and the couple months i spent in Brazil , i see guys in unicentro walking around with rolexes on and getting into sport cars - i dont know maybe they only kidnap gringos but there are alot of colombians doing way way better than me .

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Brians says on Mar 24, 2006, 12:44:

Still confused The way I understand the Visa is if you get a spousal Visa you still need to reside in the country for 6 months to get the cedula. I can't pull that off until I retire. Am I correct?

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JMOON87 says on Mar 24, 2006, 13:45:

You get a temporary cedula The embassy told us i would get a temporary cedula for 6 months and than if i stayed for 6 moths would get the regular cedula - so you are correct but i can at least get a temporary cedula and get a bank account when we do make our move .

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IMorcombe says on Mar 24, 2006, 14:12:

Thanks Gib I didn't know the CD thing could be done, great!
Thanks again,
Ines

Maria Ines

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caulfield2 says on Mar 24, 2006, 14:14:

I had a 3 month CD for 5.4% down here through BanColombia.

The problem is that inflation is almost double what it is in the US, so it's not such a great deal. I think you could get 6 or maybe even 7 percent if you deposited $10,000USD or more. My amount was closer to $3,000.

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viewpoint says on Mar 25, 2006, 09:03:

Brian & Moon I will ask AZTEC to post a response here regarding the issue of taking title in the name of your Colombian wife(s). He can explain this issue as artfully as any attorney could and he researched well with one of the best corporate attorneys in Colombia that I know well personally. My recollection is that the only way his wife could be on the title was ownership of a foreign corporation or trust that would hold title directly. There was a way to skirt around the problem. AZTEC made posts on this subject on PBH. I will try and pull them up.

http://www.poorbuthappy.com/colombia/node/7992
http://www.poorbuthappy.com/colombia/node/16453 pay attention to ZUANs post and the links included in his post. AZTECs advice came from one of the major lawfirms in Colombia listed on page 11 of the first link.

You need to get advice on this issue and I think that AZTEC is the man that can provide the information. There is a bilingual real estate woman in Medellin that I use to handle things for me but she is only experienced in the forms 4 & 11 filings. She is very good and dependable.

Regarding the 6% issue that's not a tax but rather imputed income from which you pay about 38% tax. There's a sliding scale with the maximum bracket being 38%. What little I have learned has been by trial and error the hard way.

Activities from your accounts at banks, fiduciaras, security broker/dealers, registered vehicles and recorded interests in real property all come to the attention of DIAN. If you are more than an ant they want to tax you. Stay low profile or DIAN will be visiting you and it's DIAN not DIANA.jajajaja

As I have posted before the best enviroment for investing beyond your residential needs is outside of Colombia. Take a look at Panama City where about 150,000 Colombians have migrated to.

I am not down on Colombia as i have lived part time in Medellin for the past seven years (and continue to) but I have given up trying to make sense out of the nonsense there regarding their laws and regulations that discourage foreign investment.

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dagui says on Jul 16, 2006, 06:58:

Same boat Hi Brians, my Colombian wife(i am usa) and I bought in cali 1 year ago. Now family concern is paying property taxes. When and where in cali ( if due). Prop in her name ,bank acct in her name , we are renting.is there national taxes and local taxes for popertry own. we wired directly to melendez constuction and they did all for us.my wife signed papers,now we have imobiliaria to manage and deposit rent.it is one year later now.thought o advise to share thanks.

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Brians says on Jul 16, 2006, 16:34:

Apparently yu do need to pay taxes.. however I am not that familiar yet with the rates. It appears that there is an assumption of a 6% income on all property not held as a residence. Anyway there is a sliding scale that I am going to become more familiar with when I speak with the lawyer in the next few weeks. I will advise.

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