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CORPORATE TAX RATE IN COLOMBIA
Thinking of starting a business in Colombia? Here's what you must know
Whether you’re considering moving directly to Colombia and setting up your own company, or even investing in Colombia from afar, there’s some insight worthy of your attention as to the legal terms regarding the corporate and business panorama in Colombia, that is, the corporate tax rate in Colombia.
The first step to organize your business plan in Colombia must be to evaluate the requirements your business must meet as stipulated by the Colombian law, setting up a company in the country includes taking into account the accounting, laboral, commercial, general and tax obligations.
“When starting your own business in Colombia you must take into account requirements such as the payment of accounting, laboral, commercial and general tax obligations”
This last category will be highly important as you will be required to register your company in the RUT (Unique Tax Register), declare and pay your taxes in Colombia.
Among these types of taxes in Colombia you will be responsible for paying what is known in Colombia as the income tax. The income tax is just, to say, the Colombian version referring to what is known in other countries as the corporate tax.
What is the corporate tax in Colombia for 2023?
Corporate Tax rate in Colombia applies to resident and non-resident legal entities with a permanent establishment in Colombia.
All commercial companies are considered legal entities, including commercial companies such as joint-stock companies and limited companies, but also civil companies and associations.
Resident companies in Colombia are those who have their headquarters in Colombia, this is, referring to Colombia as the place where they make relevant management decisions. Resident entities are subject to tax on their worldwide income, including capital gains.
“corporate tax is levied to those resident and non resident legal entities in Colombia who have a permanent establishment in the country”
The corporate tax rate in Colombia is levied on the income of a corporation in a taxable year or calendar year. In Colombia, the current general corporate tax rate is 35% for the current year, 2023 and an additional 5% surcharge is applicable for financial institutions where taxable income equals 508 million COP.
Even though the tax rate in Colombia is higher compared to other countries, the equal benefit comes with a lower dividend tax rate, being 10% or even less if applied to Colombian residents.
The taxable profit results from the difference between the income obtained and the expenses incurred to obtain it. In simpler words, to calculate the tax rate in Colombia for a company, is to take the total expenses and subtract the expenses based on things such as employees, raw materials, etc.
The tax rate you will have to pay is ultimately calculated according to the difference between the income obtained and the total expenses of the company
The remaining value is called the utility and to this specific remaining value is to what you apply the rate of 35% or the Colombian corporate tax rate.
Certain exceptions may apply to the corporate tax rate in Colombia, including situations such as insurance claims and profits obtained from share transactions on a secondary market (as long as the shares belong to the same economic beneficiary and that the transactions do not exceed 10% of the subscribed capital during the fiscal year in question).
The payment of the corporate tax rate in Colombia is due in the months of April and June, and it corresponds to 75% of the tax value of the preceding year.
Corporate tax rate for non-Colombian residents
When it comes to Non-resident companies that operate in Colombia through a permanent establishment, they will also be taxed on their worldwide income and applying the general Corporate Tax rate of 35%.
Does Colombia tax foreign income?
Fiscal residents (nationals or foreign) are taxed on worldwide income and should report equity owned in Colombia and abroad.
To determine if your company applies to be a tax resident in Colombia, you might want to take a quick look at our article on tax residency in Colombia and get some further insight on the Colombian tax world.
The Colombian tax and investment world
Besides the fact that living in Colombia has great benefits and opportunities for foreigners, lies the fact that Colombia offers a wide range of investment opportunities and incentives you might want to pay close attention to.
Just to mention some of the tax benefits in Colombia, you can find special rates and even a complete tax exemption in determined cases.
As to special rates, for example, taxpayers are granted an income tax credit equivalent to 30% of the amount invested in research, technological development and innovation projects approved by the government.
There’s also a 15-year exemption on income from power-generation activities based on wind, biomass and agricultural waste technologies, and on certain types of income related to projects for the construction of social interest and priority interest housing, as well as mega investments that generate at least 400 direct workplaces and make new investments of at least COP1.14 billion, being eligible for a reduced 27% CIT rate and a reduced two-year depreciation term, among other benefits.
What is the capital gains tax in Colombia?
For the income statement of natural persons in Colombia, the first step is to take a look at the DIAN 2023 tax calendar. It is between August 09/2023 and October 19/2023, that the natural person who meets the previously detailed criteria is required to file their tax return.
The due date for the declaration and payment appears on the dates shown below, taking into account the preceding two numbers of the NIT corresponding to the RUT, (your tax identification numbers).
It is very important to do it before the established date and protect yourself against possible fines.
Corporate tax rate in Colombia: it does not have to be so complicated
As much as it represents an idyllic perspective, it is no secret that starting and setting up your own company in a foreign country may be challenging if you’re not familiar with the regulations of said place, and if there’s a way for you to get started on with your right foot that is to contact and build a trustworthy team able to study your case and specific necessities.
At Nexo Legal we are able to offer the legal assistance you need from the very beginning of your business plan in Colombia, getting the right Colombian Visa Type for your investment in particular, determining if you qualify as a tax resident in Colombia and helping you with the legal process you will face with local bureaucracy in order to correctly set up your business or company.
You can trust us and our professional experts to quickly start your journey and offer you the best possible outcome, we are just a message away, so don’t hesitate to contact us if you have any questions regarding the corporate tax rate in Colombia.
