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With a laid-back culture, beautiful vistas, and low cost of living, Colombia has become one of the most popular destinations for Americans living abroad. In fact, it’s estimated that 60,000 US citizens have made Colombia their new home.
But what are Colombia’s taxes like for US expats? Here’s what you need to know.
When discussing expat taxes in Colombia, it’s important to remember that Americans living overseas still have US tax obligations. That’s because all US citizens are required to file a federal tax return regardless of where they live in the world. Whether you’ve settled down in Bogotá or Boston, you still have to report your worldwide income to Uncle Sam.
But beyond this, as an American living in Colombia, you will almost certainly have to file taxes with the Colombian government. For now, let’s take a closer look at Colombia’s tax policies.
In Colombia, expat taxation is based on residency status. If you qualify as a resident, you will be taxed on your worldwide income. If you are a non-resident, you will only be taxed on your Colombia-source income.
In either case, if the entirety of your income is from traditional employment, you may not have to file an annual tax return at all. This is because your Colombian taxes will be withheld at the source by your Colombian employer.
However, if you receive other forms of income, such as self-employment income, you will typically have to file a tax return.
Anyone who spends more than 183 days in Colombia within a given 365-day period will be considered a resident of Colombia for tax purposes. This applies regardless of whether those days were continuous or split up over multiple trips.
If you spend 183 days or less in Colombia, you will be considered a non-resident.
As we discussed, Colombian residents are taxed on their worldwide income, while non-residents are only taxed on income from a Colombian source. But what are the rates for each?
Just like in the US, Colombia’s tax year is the same as the calendar year—January 1 to December 31. As for the filing deadline, that varies based on your financial details and the last digit of your tax ID number. The due date for each category also changes from year to year, making it even more difficult to keep track.
Consult an expat tax professional to learn more about your tax filing deadline and other obligations you may have as an American living in Colombia.
Note: if you owe taxes on your Colombian tax return, you may be required to pay your tax debt in two or three installments throughout the year.
If you fail to file a Colombian tax return when required, the standard penalty is 5% of any tax debt you owe per month past the deadline. This can add up to a maximum penalty of 100% of your outstanding tax debt.
If you receive a summons from the Colombian tax authority before coming into compliance, the penalty increases to 10% per month up to a maximum penalty of 200% of your tax debt.
In addition to this, interest will begin accruing on your tax debt as soon as the deadline has passed.
On top of the income tax, the Colombian government imposes several other forms of taxation. Here are some of the most common examples
Colombia levies a value-added tax (VAT) on most goods and services. The standard rate for this tax is 19%. Some goods and services are taxed at a lower rate of 5%, and others are exempt. Exemptions include:
Sales to Colombian free trade zones are also exempt from the VAT.
The standard capital gains tax in Colombia is 10%. However, gains made from lotteries, gaming, and some other activities are taxed at an increased rate of 20%.
There is no official inheritance or gift tax in Colombia. However, inheritances and gifts are generally considered capital gains and taxed as such.
Colombia also imposes a corporate income tax. In 2021, the flat rate for this tax was 31%, but this rate was raised to 35% for 2022 and the foreseeable future.
In Colombia, property taxes are managed at the municipal level rather than the national. The rate for this tax depends on how the property is used. Usually, however, it ranges between 0.4% and 1.2%.
Colombia levies a small tax on all financial transactions, including:
The standard rate for this tax is 0.4%.
Like the US, Colombia maintains a social security system funded by contributions from employees and employers. Currently, the rate for mandatory contributions is 30.5%, with employers contributing 20.5% and employees contributing the remaining 10%.
Because there is no US-Colombia totalization agreement, Americans living abroad in Columbia may be required to contribute to both systems.
No. There is currently no US-Colombia tax treaty. This leaves Americans living in Colombia at risk for double taxation on their income. Fortunately, the IRS tax credits listed above can help reduce the risk of double taxation for most US expats, such as:
Using these tax benefits, most expats are able to erase their US tax bill entirely, removing the risk of double taxation.
No. The US and Colombia have not entered into a totalization agreement. This means that Americans who live and work in Colombia may have to contribute to both nations’ social security systems.
We hope this guide has given you a better understanding of what taxes are like for US citizens living in Colombia.
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