Is Colombia on the List of Countries Collecting the Most Income Tax?

After my first year in Colombia -- tax year 2017 -- I consulted or contacted five tax professionals.  Only one charged me anything.

1.  A Colombian accountant in Medellín charged me $85 US for an online consultation.  He emailed me an estimate a few days later -- I supposedly owed $8,000 US in Colombia taxes.  He offered to do my tax filing for the year.  I passed.

2.  A well-known German tax attorney in Medellín told me about the nine hours of research he would need to do.  I passed.

3.  Another Medellín tax professional agreed to a phone or email consultation at 9 a.m. on a certain day.  She was a no-show .. and didn't answer my ensuing email message.

4.  Before the relevant tax year started, I accepted an offer from the Medellín attorney who ended up doing my visa work.  He said he would get me a gratis tax opinion from an accountant.  The accountant said my tax obligation could be zero if I was liable for no USA taxes during the year.  However, after 2017, he was no longer made available to me by the attorney's office.

5.  A mutual acquaintance introduced me to the 'contadora' for a local cable TV company here in Nariño, at her company's billing office.  She pulled up the current tax statute on her computer, took some information from me, perused the online tax document .. and told me what I owed.  The amount is so low I'm not planning to share it online.  She declined to accept any fee for her service to me.

cccmedia in Depto. de Nariño

"Road House" is a classic!  Now I've got to go dig it up and watch just the really good parts, and Jeff Healey rocking the joint!

I don't have anything to back this up except a feeling, from experience - I'd guess maybe only half of US expats in Colombia even file a declaración de renta and pay taxes, if any are owed.  The rest just blow it off.

In the past I'd guess most got away with it with no problema - but the winds of change are blowing, with Colombian citizens who make a little under 3 million COP per month now being liable to file and perhaps even pay taxes under the latest and greatest reforma tributaria. 

And don't forget that although there is no tax treaty between the USA and Colombia, you most likely can deduct USA taxes paid from your Colombian tax bill - and also, that although there is no tax treaty, they do have the capability to share information about each other's citizens income - which means DIAN may be getting more interested in everyone's world-wide income.  DIAN has the power to be aware of what its citizens make in the USA, and also what the USA income of expats is.

Seems like the thing to do is stay less than 183 days a year. I already pay 25 percent taxes on my retirements. Your information is very good. I appreciate.

loaferln wrote:

Seems like the thing to do is stay less than 183 days a year. I already pay 25 percent taxes on my retirements. Your information is very good.

For USA taxpayers, Colombia typically allows deductions of USA-based income tax already paid to the IRS.  IRS returns are typically due about six months before Colombia's.

I agree with the fewer-than-183-days scenario .. and that is my plan too.  The fact that I am paying so little for 2017 doesn't forecast an absence of tax trouble ahead in the next "Reforma Tributaria."

cccmedia

Ccc what in the world does  "Reforma Tributario" mean? Are they thinking of reforming where gringos pay more in taxes? I was thinking the whole idea behindthe pensionado visa was to get gringos down here and spend their retirement income. We've already got to be adding to the economy by millions especially since we're not allowed to work.

I was looking and I think I would owe another 8 percent to Colombia on top of my 25 percent in the US.

I don't mind paying my taxes but I still need a little to take care of my woman and eat.

The "Reforma Tributaria" of 2016 is still in the news and its full import is yet to be realized.  This article lists some of the changes including a 20% fine for those evading taxes in amounts less than 100 million COP, raising the IVA (Impuesto de Valor Añadido, same as a VAT) from 16% to 19%, and the requirement to file a declaración de renta  for those earning as little as 2.75 million COP per month:

https://www.dinero.com/economia/articul … eto/235166

Just search for
colombia reforma tributaria 2016
...and you'll get almost 2 million hits.  The first few are at least somewhat informative.

Remember that the push for the future in Colombia is not to cut taxes, but to raise them, and not to cut government spending, but to increase it.  The Reforma Tributaria of 2016 supports those ends by raising taxes on both individuals and businesses.  Many argue that this is not the road to success but quite another destination.

loaferln wrote:

I was looking and I think I would owe another 8 percent to Colombia on top of my 25 percent in the US.

Dear Loaferin,

It is probably nowhere near as bad as you think, in your case.

If you pay 25 percent to the IRS in the USA, that's likely deductible from your subsequent Colombia return for the same tax year.

I don't know where you came up with an additional eight percent owed to Colombia --
maybe a bad dream.    

cccmedia

IM gonna go with Osages guess that the majority of expats just blow it off......Thats what Id do.......its a no brainer......with governments, just dont volunteer anything and you´ll be better off.......just keep a low profile and try hard to avoid the rush hour..........

dumluk wrote:

guess that the majority of expats just blow it off...... Thats what Id do....... its a no brainer......with governments, just dont volunteer anything and you´ll be better off....... just keep a low profile.....

Hide enough money from La DiAN .. and your penalty ranges from 20 percent to a jail term of four to nine years.

Ipso facto, it doesn't appear that a tax avoider would be "better off" if the "low profile" strategy doesn't pan out.

cccmedia

As Brother Archer mentioned, the full import of the tax Reforma of 2016 is yet to be known.

That's because it will affect taxpayers of the tax year 2017 .. and their tax returns are not due until August or September of this year (2018).  So the full import will probably be known no sooner than 2019 when tax avoiders would theoretically be tracked down by the Colombian government.

cccmedia

OsageArcher wrote:

This article lists some of the changes including a 20% fine for those evading taxes in amounts less than 100 million COP....

https://www.dinero.com/economia/articul … eto/235166

Brother Archer noted above the 20 percent fine for non-payment of taxes, as reported in the dinero.com Spanish-language article he posted.  It's not clear from my reading of the article whether this is a one-time fine .. a monthly fine .. or an annual fine for cases in which a tax-delinquent fails to cancelar his tax debt within a certain number of months of first being due.

As reported in other places on the Internet, in previous years the Colombian government boosted minimum fines to higher levels, depending on length of delinquency .. and whether a warrant for a non-payment was eventually issued.

cccmedia

Three more points about the Reforma 2016, as I understand it after reading the dinero.com article....

1.  Jail time would be the punishment for big-time tax avoiders -- non-payment of "5.000 millones" or more Colombian pesos.  You can figure the Expat math by googling:  convert 5,000,000,000 COP to US dollars.

2.  It appears the government has not yet signed off on the new edition of the Reforma, which was prepared by bureaucrats of La DIAN.  The version described in the dinero.com article was being presented to the "jefe de la cartera" -- possibly equivalent to Treasury Security or Chancellor of the Exchequer.

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If an Expat or Colombia tax-resident had North American income in 2017 but (in the opinion of the Expat or his/her Colombian accountant) is not liable to pay taxes to Colombia and does not file a tax return this year, what is the fine for non-filing of a return?  I don't see this mentioned in the dinero.com article.  Internet posts put this fine for failure to file a return .. at below $200 US in previous years.  An example of such a case is when an Expat has already paid more money to the USA Internal Revenue Service for a tax year than would otherwise be owed to La DIAN, producing a full Colombia deduction .. and did not file a Colombia tax return for that year.

cccmedia

They are gonna need all that money from the expats, and the even much larger  amount from the Colombians hiding money overseas juts to build the prisons to house all of them

Dont even have enough pace for the child rapists, sicarios and serial murderers.
Not to mention all those people filming the movies in the  cinemas with their cameras who get the 4 year prison term

Took them 4 years to get that pervert Colombia, Jake, and only after the US state Department put pressure on him, even though every expat knew what he was doing.

And what about the people who tear the label  off of the mattress?

Here's the rub about income taxes in Colombia (in my opinion).
As expats, we move to poorer countries as a rule. In poorer countries the income tax brackets are way different and work to the monetary disadvantage of the expat (I'm talking strictly income tax here). For example
I can have an income in Canada of 40 million pesos without having to pay income taxes. That is the basic income tax deductions in doing individual Canadian income tax calculations. After that, the Canadian tax bracket is about 18 percent until we get to 71 million pesos annually. It jumps in increments as your income gets higher.
If you have an an annual income in Colombia of 70 million pesos I think your Colombian tax bracket will probably be 33 to 50% For expats.....a significant difference with out of pocket expenses.
So as expats we pay taxes from our own country and then on top of that we pay at least an additional 1/3 of what's left over. Those expats with significant income will be in the 50% Colombian tax bracket whereas their tax bracket in their home country will be far less.
AND you gotta pay an accountant to do your income taxes for you. In Canada I can do them for free online in 10 minutes.
In rough terms....I can live in Columbia for 6 months out of a year for a little more than 1/3 of my cost of living in Canada. When I get a Colombian visa longer than 3 months I can live here for about 1/2 of my cost of living in Canada because of the extra income taxes collected by the Colombian government.
Bottom line.....that will scare away many expats BECAUSE!!!
I do not mind paying extra income tax to the Colombian government. I DO mind paying 33 to 50% of what's left over after I pay my yearly taxes in Canada. It's a Catch/22!!!! If you come here to increase your standard of living you have to pay an unacceptable amount blood money back to the government. Gimme a break! Be reasonable or I won't stay. I'll find a more reasonable location.
33 to 50% extra expenses on my annual income is not fair. Don't penalize me because I was fortunate enough to be born in a country that is not poor. (the tax bracket thing) Maybe I'm missing an important point but surely the Colombian government can come up with a more reasonable amount of income tax that expats have to pay. Don't chase us away. We can contribute far more to the Colombian economy than the Colombian can collect on an unfair income tax system. Why? Because we will happily stay here.
It's all about being reasonable. Fair. Equitable. Friendly. If that is not in the cards for Colombia income tax right now so be it.

Just saying

CanadaDoug wrote:

If you have an an annual income in Colombia of 70 million pesos I think your Colombian tax bracket will probably be 33 to 50%

Can you please provide your sources for that claim?

Prior to the Reforma Tributaria of 2016 the marginal tax rates were 19%, 28% and 33%.  That annual income of 70 million pesos would have had a total tax burden of less than 10% overall, even without any deductions which could have reduced it even more.  That income's top rate would have been in the 28% tax bracket, never reaching the 33% marginal rate.  See
https://en.wikipedia.org/wiki/Taxation_in_Colombia

Now with the Reforma Tributaria of 2016 the taxes will go up, but the top tax rate is still only 33% for income (up to 35% for dividends).  According to this article:
https://www.dinero.com/pais/articulo/re … les/235165

...taxes will go up but still there is no 50% rate.  Here is some of what the article says:

*  New 10% rate on any income exceeding 600 UVT (17,851,800 COP/year, about $6260 USD/year or about $522 USD/month - previously below about $1300 USD/month there was no tax liability)

*  Automatic 25% discount on your taxable base with up to an additional 10% discount - however in no case may this up to 35% discount exceed 3500 UVT or about 104 million COP.

The bottom line:  Taxes will go up but it's an open question as to how much for the average expat (if such an animal exists, they're all different LOL).  Colombia is both reaching down and reaching up to get more tax money - reaching down to tax a larger number of people whose income has never been taxed before, and reaching up to impose higher taxes on the "rich".

Consult a Colombian tax professional, or several, to find a strategy that minimizes your liability.  But realize it's possible to get widely differing answers as not all tax professionals are equally aware of the new law and its twists and turns or equally adept at minimizing your taxes.

My strategy was to live in Colombia for one tax year (2017) and see how it worked out.

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How it seems to have worked out:

As I stated above, after consulting various contadores, I ended up paying little in taxes for the year (possibly subject to La DIAN review). 

However, I have decided that I would be subjecting myself to potential and undesirable tax issues if I remained in Colombia for more than half of any tax year, going forward.  The income-tax laws change often, the true amount owed in income taxes may be unascertainable prior to filing a return .. and with the government having to finance the 'era of peace' transition, it's increasing taxes upwards and down as Brother Archer explained on this thread.

So, in a matter of weeks, as I approach six months in Colombia this year, I will pack up my stuff into my Ecuador-plated car and drive it to Quito.

cccmedia near the Colombia-Ecuador border
      in Ipiales, Nariño, Colombia

OsageArcher wrote:

Now with the Reforma Tributaria of 2016 the taxes will go up, but the top tax rate is only 33 percent (dividends 35 percent)

...taxes will go up but still there is no 50% rate.

The above citation is correct. 

Also, it's worth re-stating that for USA Expats, any income tax already paid to the IRS is deductible against what might otherwise be owed to Colombia.

cccmedia in Depto. de Nariño

I stand corrected on the 50%. Only looked at this briefly up to now. 33% is still a burden.

Hey cccmedia

You might be in an ideal situation knowing both Ecuador and Colombia. Sorta a hybrid perpetual tourist living in both countries? Or does Ecuador have laws where you are not allowed to tweak the situation?
The situation in Costa Rica, Nicaragua and Panama has been good for perpetual tourists over the years. Fair.
What about Colombia Ecuador? Not interested in Venezuela....too dangerous right now.  Can you share what have you learned about the possibility living in both countries as a strategy to avoid unfair income taxes?
Let me be clear. I have no objection to paying extra taxes but I'm not gonna let anybody fleece me heheheh.

CanadaDoug wrote:

33% is still a burden.

Yes, it is.  But you only pay the marginal 33% rate on any amount over about $38,000 USD/year, and you can deduct any of your country's income taxes paid from your Colombian tax bill - and also you can avail yourself of Colombian deductions and discounts that a good tax professional can find.

Many expats do not realize how "rich" they are considered to be by the standards of Colombia, where the average income is only about $700 USD/month (around 2 million COP/month) and less than half of the working population is even subject to the government-set minimum wage of 781,242 COP/month ($272 USD/month) for "formal" employment - those who have "informal" employment may make more or less than that, but the best estimates are that most make less than the government minimum wage.

https://colombiareports.com/informal-workforce/

Thanks OsageArcher

Great info. At a crossroads right now. I decided to settle in Colombia, got my three year cedula then discovered the "extra" taxes. If my Colombian taxes are 10% additional expense that's fair. If it's more I'll look elsewhere.
cccmedia is correct I think. This tax change won't flush out until later. In the meantime I'll study it hard and make my decisions.
In any case I will stay here for a while. I enjoyed visiting other Latin America countries but this one will take extra time. So much to see and explore for me. Awesome.
This traveling in your retirement days is an evolving process. An opportunity to learn new things and adapt to your situation.

CanadaDoug wrote:

.


cccmedia...

What about Colombia - Ecuador? Not interested in Venezuela....too dangerous right now.  Can you share what have you learned about the possibility living in both countries as a strategy to avoid unfair income taxes.

Under certain circumstances it's absolutely possible to live in Colombia and Ecuador to avoid the morass that is Colombia's income-tax law.

I can do it as I have a permanent Ecuador visa (based on the value of my Quito condo) and getting up to 180 days a year in Colombia is relatively easy.

It might be tricky to do the two-country tango as a tourist, since both countries have historically given Expats 90-day tourist stamps, renewable for (at least) an additional 90 days.

Ecuador's relatively new immigration law may or may not allow for more than 90 additional days when renewed by a 'tourist'.   You'd have to look into that.

The scenario you might want to avoid is getting up to 180 days in each country and being five days short of a year.  Might have to hop over to Panama for a week once a year if you're not visiting North America.

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I got extra time in Colombia through a one-year TP-7 visa (now M class visa) based on income .. and a border run to Ecuador when the visa expired in March.  In all, I've been in Colombia every day since December 2016 (about 18 months).

I've had my Ecuador-plated car with me under DIAN 'permisos' since December 2016, except for about 90 days (December-February 2018) when the DIAN rules prohibited extending a car 'permiso' until my personal visa expired.  During those three months, I had the car parked at a Chevy dealership in Tulcán, Ecuador, less than ten miles from here.

cccmedia in Ipiales, Nariño, Colombia ..
     near the Rumichaca border crossing into Ecuador

CanadaDoug wrote:

I decided to settle in Colombia, got my three year cedula then discovered the "extra" taxes. If my Colombian taxes are 10% additional expense that's fair. If it's more I'll look elsewhere.

In any case I will stay here for a while.

Now that you've got your Colombia cédula, you may be required to obtain a Colombia tax ID number .. potentially exposing you to extra DIAN scrutiny.  The personal tax number is required to file a return and is available at your local DIAN office.

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Keep in mind that in some recent years, Colombia has taxed the worldwide assets of so-called tax residents (183-plus days) if those assets exceeded one billion pesos (roughly $330,000 US). 

cccmedia in Depto. de Nariño

"Keep in mind that in some recent years, Colombia has taxed the worldwide assets of so-called tax residents (183-plus days) if those assets exceeded one billion pesos "

Can you name one person you know of personally this has happened to?

"Now that you've got your Colombia cédula, you may be required to obtain a Colombia tax ID number .. potentially exposing you to extra DIAN scrutiny"

Yeah sure..Migracions saying you have to get a NIT and RUT now when you collect your cedula....sure thing LOL...

Quechimba wrote:

"Keep in mind that in some recent years, Colombia has taxed the worldwide assets of so-called tax residents (183-plus days) if those assets exceeded one billion pesos "

Can you name one person you know of personally this has happened to?

.

In a word, no.

cccmedia

DIAN is aware of the widespread evasion of taxes, and does have access to information on what people make, both their citizens and expats, in other countries.  I will not be surprised if they start cracking down.

https://www.dinero.com/empresas/articul … tos/245487http://caracol.com.co/programa/2016/02/ … 73279.htmlhttps://www.dian.gov.co/dian/cifras/Cua … -2012..pdf

Bottom line for me is this. I believe I have over a year to file my 2018 income taxes in Colombia (second half of 2019?). Plenty of time to think and figure out my extra costs. Plenty of time to decide whether I will stay in this country. I do not believe I am required to pay tax installments until then or am i missing something?
What occurs to me is that Quechimba is saying is that it's a little less formal in Colombia. I know it's less formal than in my home country Canada. Nothing wrong with that, it works I guess. Like.... I did not get asked for my exit ticket when I arrived here last year. No enforcement of the law. I'm retired. I wouldn't be traveling if I didn't have a steady retirement income. As an old guy with a criminal record I would not have the ability to be in possession of a valid Canada passport. Non enforcement provided me with the opportunity to save money. I had bought several stupid expensive return tickets prior to that on my latin america travels. I repeat...I'm retired. I explore at my leisure. I do not have to work any more!  I do not always want to leave after 3 months!!! Gimme a break!

I was ATTRACTED to Colombia because I had read foreigners were not actually being asked for an exit ticket. And there are many other reasons I decided to come to Colombia next. Glad I did.

So....Colombia is less formal....more gray areas than I'm used to. I know that's a fact in Colombia because I observe non enforcement every day. I'm pretty good at adapting. I'm in no rush. Not gonna panic yet.

Just like having a bus ticket out of the country when you arrive (as a back up) I will make sure I have a back up plan on this tax issue (for now). My philosophy is "Hope for the best but prepare for the worst".

And thanks to everyone for this valuable information. This expat forum can save us all one heck of a lot of unnecessary problems.

Plenty of stuff gets overlooked by police and other authorities in Colombia .. so long as nobody gets hurt and your low profile is maintained.

But if you get picked up by officials when you least expect it .. and they find out you entered the country without valid ID such as a passport and have overstayed your 90 days without permission .. that's when you get fined or deported or both.

Same thing could happen if you get into a scuffle in a bar and the police are considering some charge against you.

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i stayed in Popayán last year for a few days while heading south from Medellín in my Ecuador-plated car.  Out of the blue one day at noon, two DIAN officers accost me in the lobby of my hotel .. take me to the local DIAN office .. and tell me I face a stiff fine for not obtaining a cédula ID.

Two hours in, they get confirmation that I had registered my visa in Medellín and had formally requested a cédula although I didn't pick it up in Medellín by a putative six-month deadline.

In Popayán, there was no fine, no reprimand.  I got off real easy, probably because I had all my other papers in order -- my USA  passport, my one-year Colombia visa, my car permiso and my Ecuadorian drivers license.

I still have no idea who tipped off DIAN to track me down at my hotel and investigate my papers.

----

Don't mess around with the laws in Colombia.  If you get stopped unexpectedly or get discovered at the wrong place or wrong time, se armó la gorda . That's a South American expression, roughly meaning the porquería has hit the ventilador.*

Right, Brother Archer?

cccmedia in Depto. de Nariño




*Also translated as all hell breaking loose.

cccmedia wrote:

Don't mess around with the laws in Colombia.  If you get stopped unexpectedly at the wrong place or wrong time, se arma la gorda . That's a South American expression, meaning the porquería is gonna hit the ventilador.

Right, Brother Archer?

This pearl of wisdom applies everywhere in Latin countries, I would guess.  I remember a confrontation in 1978 in the Dominican Republic where on a college biology field trip our group was stopped because one car had the rear trunk open, but secured with a rope, because everything wouldn't fit.  Against the law, at least according to the police.

Several of the young American students even though they spoke no Spanish wanted to argue with la policía who prominently wore a very big pistol on his hip and was getting more irritated by the minute.  I was able to defuse the situation by being very compliant and apologizing profusely in Spanish, and showing him the license of one of the biology teacher chaperones even though I was the one driving, although illegally...

It is always so much better to have everything in order as best you can, and to do everything and obey all laws,  cumplir al pie de la letra, crossing every t and dotting all the i's.  At least then even when you get into trouble you probably won't be spending the night (or more) in jail...

To ignore Colombian laws is to play craps with loaded dice, and not in your favor.  You may skate for a while but you'll probably end up paying the piper, and paying dearly.

What was the percentage?

I agree with you - that's why I'm looking at other places to live

Be polite, courteous and friendly when you get shaken down by law enforforcment in latin america. Perhaps a little cash will help and always always deal with the first cop only! They are underpaid. Give em a break and yourself too if these unfortunate encounters happen.
And by the way, using all your money to prevent going to jail will be worth it. Failing to prepare is preparing to fail.

It is wonderful to read well thought out, researched information.

I'm curious if anyone knows when a new resident should file taxes. I'm planning on moving from Canada to Colombia next month with a Migrant visa (Rentista)

Would I be considered a tax resident immediately once I land in Colombia and get my Cedula/RUT? Or does this start after having spent the 183 days in Colombia?

If the latter is correct, I would become a tax resident around January 2019. In that case, I'm assuming I wouldn't have to file anything until 2020 (since 2019 would be my first tax year in Colombia).

louis_e wrote:

I'm curious if anyone knows when a new resident should file taxes. I'm planning on moving from Canada to Colombia next month with a Migrant visa (Rentista).

Dear Louis

Welcome to the Colombia forums of expat.com ....

Your first income-tax payment and/or tax filing will be due in August or September of the year after you become a tax resident Colombia or earn/obtain taxable income generated in Colombia.  Have your tax professional tell you the exact deadline.

cccmedia in Depto. de Nariño

louis_e wrote:

Would I be considered a tax resident immediately once I land in Colombia and get my Cedula/RUT? Or does this start after having spent the 183 days in Colombia?

You will be considered a tax resident after living 183 out of 365 days in Colombia, regardless of whether that 365 days spans two calendar years.  Also regardless of your visa/cédular/RUT ID status.

cccmedia in Depto. de Nariño

Thanks for laying it out so clearly cccmedia