Deductions and Allowances
Find out about the deductions allowed on taxable income, as well as details of any other taxes that may be due, and how to file a tax return in Colombia...
The main deductions that can be set against income tax are:
- Costs: Charges related to the acquisition or production of income, as long as they are directly related to the activity, and are necessary and proportional to the work. These costs include amortisations, loans, rent of offices, lawyer, accountant or consultant fees, and uniforms or clothing items with a company logo, and transportation costs. This applies for both businesses and self-employed individuals.
- Expenses: Outlays incurred in connection with the administration, sales, research and financing of income, as long as they are directly related to the activity, and necessary and proportional to the work. These expenses include travel expenses, health, education or pension funds, and apply to businesses, self-employed individuals or workers who earn a salary.
- Taxes: 100% of the industry and commerce tax as well as the real estate taxes paid in the fiscal year are deductible from income tax. 50% of the financial transaction tax will be deductible from income tax until 2018, for businesses and individuals.
- Interest: Interest payments on loans from financial institutions.
- Cross Border payments: Cross border payments can be deducted as long as they are directly related to the main activity of the taxpayer.
- Withheld Taxes: 100% of the withheld taxes from salaries are deductible from income tax. This deduction applies to individuals.
- Donations: 100% of charitable donations are deductible from income tax, as long as they do not exceed 30% of the net income.
- Investments: 100% of the value of investments in environmental protection and improvement is deductible from income tax, as long as it does not exceed 20% of the net income. This also applies to 175% of the value of direct or indirect investments in scientific or technological projects, as long as it does not exceed 40% of taxable income.
Since 2014 costs and expenses paid in cash have not been deductible from income tax.
Created in 2009 this tax is paid on the wealth or assets of people who declare and pay income tax, when their assets exceed the annual stipulated amount.
The tax is calculated on the net worth of the assets of a person or business, and the rates are as follows:
- More than $1,000,000,000 COP = 1%
- = or > $2,000,000,000 COP = 1.4%
- = or > $3,000,000,000 COP = 3%
- = or > $5,000,000,000 COP = 6%
Capital Gains and Occasional Earnings
Capital gains derived from the sale of assets that have been held for at least two years must be taxed under Colombian law. When the asset has been held for less than two years, it is considered income and not capital gain, and its value is added to the net income for tax purposes. The rate for capital gains tax is 10%.
Capital gains that are derived from an inheritance or a gift are treated as taxable income.
Filing a Tax Return
Residents are required to file an income tax return form, when their assets exceed a limit set each year by the government. This form is also used for filing wealth tax, and occasional earnings or capital gains tax declarations; a single form is used for all declarations. The form is available online, and must be filed according to the yearly calendar determined by the tax authorities, which is available on the Tax Office website.
Penalties for late filing are 5% for each month’s delay, with a maximum limit of 100% of the tax due. In the case of late filing and summons by the tax authority DIAN, the penalty increases to 10% monthly up to a limit of 200%. Interest is charged on late payments. The penalty for corrections is 10% of the additional payment per month.