Taxes in Colombia
Taxes are the State’s main source of income, which are used for the country’s public spending and to guarantee citizens’ rights.
In Colombia, the DIAN is the entity in charge of collecting national taxes (income tax, VAT and the levy on financial movements) while the mayors’ and governors’ offices collect other types of taxes for their regions. (Tax on motor vehicles, alcoholic beverages and cigarettes, property tax, among others).
Payment of taxes in Colombian pesos
Taxes are paid in Colombian pesos and taxpayers are both legal and natural persons.
Now, with respect to the national income tax, individuals, national or foreign, resident in the country, are subject to the payment of the same.
Taxation of Foreigners in Colombia
However, it is important to know whether the foreigner is considered a tax resident or not, because if he is, he must pay tax on his income from national and foreign sources, and on the contrary, if he is not considered as such, he must only declare his income from national sources, unless it has been subject to withholding at the source.
Tax Residents in Colombia
Article 10 of the tax statute establishes that individuals who meet the following conditions are considered residents in Colombia for tax purposes:
- Remain continuously or discontinuously in the country for more than 183 days (including days of entry and exit of the country) during a period of 365 consecutive calendar days.
- When the continuous or discontinuous permanence in the country falls on more than one year or taxable period, the person will be considered a resident as of the second year or taxable period.
- Being exempt from taxation in the country where they are on mission in respect of all or part of their income and occasional gains during the respective taxable year or period, due to their relationship with the foreign service of the Colombian State or with persons who are in the foreign service of the Colombian State, and by virtue of the Vienna Conventions on diplomatic and consular relations.
- Be nationals and that during the respective taxable year or period:
- a) their spouse or permanent partner not legally separated or dependent children under legal age have tax residence in the country
- b) 50% or more of the income is from domestic sources.
- c) 50% or more of the assets are administered in the country.
- d) Have 50% or more of the assets in the country.
- e) have been requested by the tax authorities to prove their status as residents abroad and fail to do so.
- f) have tax residence in a jurisdiction qualified by the National Government as a tax haven.
Tax Classification of Individuals
Now, having clear in which migratory conditions it is considered that a foreigner must pay taxes, it is important to understand the tax classification of natural persons:
- Employee: any natural person resident in the country whose income derives, in a portion equal to 80%, from the rendering of services in a personal manner or from the performance of an economic activity on behalf and at the risk of the employer or contractor by means of a labor or legal or/and regulatory relationship or of any other nature, regardless of its denomination.
- Self-employed: any natural person resident in the country whose income derives in a portion equal to or greater than 80% from the performance of one of the economic activities indicated in Chapter 11 of Title V of Book I of the Tax Statute (340)
Thus, under any condition in which the taxpayer is obliged to file a tax return and pay income tax, it is important to take into account that the taxpayer must have a RUT (taxpayer identification number), a procedure that is carried out before the DIAN.
Equality for Foreigners and Nationals
Income tax rates for foreigners residing in Colombia are the same as for Colombian nationals.
Finally, the payment of taxes is a duty, so once it arises, it does not matter if you are a national or a foreigner, in Colombia the treatment is the same.