Colombia: Business Environment

Company Tax

35%
A 20% rate applies to non-commercial companies located in a free-trade zone.

Tax Rate For Foreign Companies

Resident companies are taxed on their worldwide income whereas non-resident companies are only taxed on their Colombia-source income.
Worldwide income earned by non-resident entities that is attributable to branches and permanent establishments in Colombia will be taxed at 35% for 2021 (or 10% in case of capital gains). Profit remittances taxed at the branch level are subject only to the 10% rate. Worldwide income earned by non-resident entities that is attributable to branches and PEs will be taxed at 35% or 10%, depending on whether the income is to be treated as ordinary income or capital gain.

Capital Gains Taxation

Capital gains are generally taxed at 10%.
Capital gains from the sale of assets held for two years or more, or on the liquidation of a company incorporated for two years or more, are taxed separately at a rate of 10%.

Main Allowable Deductions and Tax Credits

As a general rule, expenses that are necessary, proportional, have a cause-effect relationship with the income-producing activity, and have been realised during the relevant tax year under the accrual method of accounting are tax-deductible.
Amortisation of tangible and intangible assets can be deducted at rates ranging from 2.22% to 20% (the International Financial Reporting Standards (IFRS) apply to the amortisation of assets acquired after December 31, 2016). Depreciation rates can be increased for companies that operate on 16-hour shifts (25% per each 16 hour-shift). Goodwill cannot be amortised for tax purposes (any goodwill generated since 2017).
Start-up expenses give rise to a tax deduction. Bad debt and interest expenses are generally tax-deductible (conditions apply).
Donations to charities give rise to a tax credit instead of a deduction from the tax base. Fines are not tax-deductible. Expenses incurred abroad for the purpose of earning income in Colombia are deductible up to 15% of the taxpayer's net income.
Most taxes, except for equity and standardisation taxes, are 100% deductible. 50% of industry and trade tax can be credited against CIT liability or, at the election of the taxpayer, 100% is a deductible expense. 50% of the financial transactions tax can be deducted.
Further deductions/credits include: 100% of fixed assets acquisition; 25% of the investments made for the control and improvement of the environment (tax credit); 120% of the salary payments made to employees who are under 28 years; 100% of the investments made in certain scientific and/or technological projects or in professional training projects.
Tax losses can be carried forward up to 12 years (for those incurred since 2017, indefinitely for losses incurred before). The carryback of losses is not permitted.

Other Corporate Taxes

Until 2021, businesses were subject to an alternative minimum tax of 0.5% (calculated from the net worth of the business in the year immediately preceding the current fiscal year). Some assets, like holdings in Colombian companies, could be excluded from the calculation of net worth. This tax was abolished as of 2021.

The equity tax (CREE by its acronym in Spanish) was abolished in 2017; however, base excesses (CREE income less CREE minimum base) from previous years continue to be offset against taxable income.

Employers are subject to a payroll tax of 9% on behalf of their employees that make more than ten minimum monthly wages (with 3% allocated to the Institute for Family Welfare, 2% to the National Apprenticeship Service, and 4% to the Family Subsidy Fund). Social security contributions amount to 28.5% of the gross salary, with approximately 20.5% being borne by the employer. Employers also need to pay a contribution for professional risks, at rates ranging between 0.522% and 6.96% of the monthly salary.

Registration fees apply to documents registered with the Chamber of Commerce (at variable rates between 0.3% and 0.7%) or the Register of Public Deeds (between 0.5% and 1%). Partial exemptions are provided for documents that are subject to both registration and stamp duties or that must be registered simultaneously with both institutions.

An industry and trade tax is applied at the municipal level, with rates ranging from 0.2% to 1% of gross receipts derived from carrying out industrial, commercial, and service activities within a municipal territory in Colombia. Real estate is subject to a municipal tax at rates varying based on the value of the property (and not according to the number of owners or the personal wealth of the taxpayer), usually ranging from 0.5% to 1.2%.

A 0.4% bank transaction tax is levied on withdrawals from chequing and savings accounts and from accounts opened with the Central Bank.

Companies also may be subject to a carbon tax. Furthermore, taxes are levied on plastic bags (COP 50) and on the sale, freely or onerously, of transformed products based on psychoactive or non-psychoactive cannabis (16%).

Other Domestic Resources

Consult Doing Business Website, to obtain a summary of the taxes and mandatory contributions.

Tax Rate

Allowable Deductions and Tax Credits

Residents can deduct from compensation mortgage interest paid in Colombia (up to 1,200 UVT tax units in 2022 or COP 45,605,000).
Employees may deduct prepaid medical assistance (up to COP 7,297,000 per year in 2022) and interests paid on educational loans granted by ICETEX (up to COP 3,800,000).
Donations made to certain institutions dedicated to the development of health, education, culture, religion, sports, scientific and technological research, ecology and the protection of the environment, or to social development programmes of general interest are deductible (limits apply).
Deductions are available for dependents, capped at 10% of gross labour income until a maximum of COP 14,594,000 for 2022.

Special Expatriate Tax Regime

There is no special tax regime for expatriates. Non-residents are taxed only on their Colombian-sourced income.
An individual is resident for tax purposes if the individual is present in Colombia for more than 183 days (whether or not continuously) in a 365-day period.