Investing in Colombia (2025): Rental Income & Tax Rules

Being a property owner or investing in Colombia can be an excellent opportunity to generate passive income through rental properties.

However, these earnings — even if they seem simple — are subject to clear tax regulations established by the DIAN (Colombia’s tax authority).

Both foreigners and residents must determine whether their rental income is taxable, whether VAT or withholding tax applies, and how to correctly file their tax return.

This guide explains, step by step, how to manage the taxes related to the rental of residential or commercial properties in Colombia during 2025.

Step 1 — Define Your Tax Profile: Resident or Non-Resident?

Before thinking about taxes, the first step is to determine what type of taxpayer you are before the DIAN, because that changes everything — the rates, the forms, and even whether you must file a return or not.

Tax resident:
If you live in Colombia for more than 183 days within a 365-day period, or meet the conditions set out in Article 10 of the Tax Code, you are considered a tax resident.

Residents must file income tax on all income earned, both inside and outside Colombia, whenever they exceed the established thresholds or receive Colombian-source income such as rental payments.

👉 Filing dates: For the 2024 taxable year, individual returns must be filed between August 12 and October 24, 2025, according to the last two digits of the taxpayer’s NIT (DIAN).

Non-resident:
If you do not meet the above conditions, you only pay taxes on Colombian-source income (for example, rent from property located in Colombia).

Payments made abroad for rentals to non-residents are generally subject to a 20% withholding tax (Art. 408 of the Tax Code).

When this full withholding is applied, you are usually not required to file an income tax return, unless you exceed other thresholds or have additional local income.

💡 Legal tip: If you are a investing in Colombia and earning rental income through a Colombian company or permanent establishment (PE), the mechanics change. Without a PE, the 20% withholding for non-residents applies. If you have a PE or a local entity, you are taxed under the general corporate income tax rules. (Source: Actualícese)

Step 2 — VAT on Rentals: When Is It Triggered?

VAT on rentals in Colombia depends entirely on the type and use of the property.

By law (Article 476 of the Tax Code), residential leases are exempt from VAT, while rentals of commercial properties (offices, retail spaces, warehouses, parking lots, workshops, etc.) are subject to a 19% VAT rate.

In short:

• 🏠 Residential use: exempt from VAT.

   

• 🏢 Commercial or productive use: subject to 19% VAT.

   

A simple example:
If you rent a family apartment, you don’t charge VAT. But if you rent a storefront or office, you must issue an invoice with 19% VAT.

📅 When is VAT triggered?
According to Article 429 of the Tax Code, VAT is triggered on the date of invoicing, completion of the service, or payment/credit — whichever occurs first.

This means VAT is not triggered merely by “charging the rent,” but rather when the invoice is issued or payment is received.

Step 3 — Withholding Tax (ReteFuente) on Rent Payments

When you receive rental income, the payer (tenant or company) may be required to apply withholding tax.

The rate and process depend on your tax residency status.

If the landlord is a Colombian resident (individual or legal entity)

• Rate: 3.5% of the rental amount.

   

• Minimum base 2025: 10 UVT = COP 497,990 (UVT 2025 = COP 49,799).
  It used to be 27 UVT, but since Decree 572 of 2025, it dropped to 10 UVT (Art. 1.2.4.10.6 of Decree 1625/2016).

   

Practical example:
If the monthly rent is COP 2,000,000, the withholding agent (a company, institution, or large taxpayer) withholds COP 70,000 (3.5%).

If the contract is for a commercial property, ReteICA (local industry and commerce withholding) also applies, according to each city’s rates (see haciendabogota.gov.co).

If the landlord is a non-resident (without a permanent establishment)

When the landlord is a foreigner without domicile or branch in Colombia, the tenant must apply a 20% withholding tax on the total payment (Art. 408 of the Tax Code).

Generally, this withholding settles the non-resident’s tax liability, meaning they do not need to file a tax return in Colombia, except in special cases.

Step 4 — Municipal ICA and Activity Registration

In addition to VAT and income tax, rental income may also be subject to the Industry and Commerce Tax (ICA), which is a local municipal tax.

You must register with the local tax authority (Secretaría de Hacienda) in the municipality where the property is located (e.g., Bogotá or Medellín) and apply the CIIU code rate corresponding to rental activities, according to the applicable municipal resolution or agreement.

Each city has its own rates. In Bogotá, for example, ReteICA is calculated on the monthly rent amount and varies depending on the type of economic activity. 

You can check updated rates on the official website of the Bogotá District Treasury Department.

Step 5 — Supporting Costs and Deductions (Key to Reducing Your Tax Burden)

One of the most common mistakes among landlords is failing to properly document expenses — and that can be costly when filing taxes.

To deduct expenses related to the property (administration fees, property tax, insurance, maintenance, professional fees, etc.), you must have valid invoices or supporting documents:

• If your supplier is required to issue invoices, request an electronic invoice.

   

• If your supplier is not required to issue invoices, you (as the landlord) must generate a “Supporting Document for Non-Obligated Suppliers” in the DIAN’s invoicing system to validate the deduction.

   

The invoicing rules are set out in Articles 615, 616-2, and 617 of the Tax Code, and in Resolution 000042 of 2020, updated by the DIAN.

In its 2025 rulings, the DIAN reaffirmed that all sales or services must be invoiced, except for the specific cases listed in Article 616-2.

Step 6 — Filing Dates and Forms for 2025

Meeting deadlines is essential to avoid penalties.

• Individual income tax (tax year 2024): from August 12 to October 24, 2025, depending on the last two digits of your NIT (DIAN).

   

• UVT 2025: COP 49,799 (DIAN Resolution 000193 of December 4, 2024). Use this value to determine minimum bases, penalties, and thresholds.

   

• Withholding agents: must declare and pay monthly the withholdings applied, following the DIAN’s official tax calendar.

   

Frequent Scenarios (Quick Checklist)

1️⃣ I’m a foreign non-resident renting out my apartment in Medellín

✔️ The platform or property manager paying you must withhold 20% (Art. 408 E.T.).
✔️ If your income was fully subject to that withholding, you don’t need to file a tax return in Colombia.
✔️ If you become a tax resident (through presence or investing in Colombia), your situation changes — you’ll be taxed on worldwide income and must file an annual return.

2️⃣ I own a SAS company in Colombia that rents out commercial properties

✔️ You must charge 19% VAT since it’s a commercial rental.
✔️ Your clients, if they are withholding agents, will apply 3.5% withholding tax if the payment exceeds 10 UVT.
✔️ You must file VAT, withholding, and ICA returns monthly or according to the municipal schedule.

3️⃣ I rent a residential property to an individual (not a company)

✔️ You don’t charge VAT (residential use).
✔️ In most cases, there’s no withholding tax, since the tenant isn’t a withholding agent.
✔️ However, you must still file an income tax return if you exceed the thresholds and support all expenses with invoices or supporting documents.

Conclusion: File Correctly and Avoid Penalties

Owning property and earning rental income can be a great way of investing in Colombia, but it comes with specific tax obligations.

Knowing whether you’re a resident or not, understanding when VAT applies, how to calculate withholding, and how to document your expenses are all key steps to avoid fines, optimize your taxes, and stay compliant with the DIAN.

If you’re investing in Colombia, always seek personalized tax advice — each case can differ depending on your income structure, type of ownership, and double taxation treaties.