Contributed By Baker McKenzie S.A.S.
Colombia has a tax reform every two years. This situation leads to great uncertainty and taxpayers are obliged to review their structure regularly. Due to a fear of future tax uncertainty, taxpayers usually consider implementing estate-planning structures located in jurisdictions with greater legal stability or connected with jurisdictions with an enforceable investment protection treaty with Colombia.
There is no transfer tax in Colombia; however, the net gain on the sale of assets is taxed as income or capital gains. The net gain on the sale of fixed assets (assets that are not transferred during taxpayers' ordinary course of business) held for two years or more is considered as a capital gain subject to capital gains tax at a rate of 10%. If the fixed asset is held for less than two years, the gain is treated as taxable income subject to income tax rates as follows: (i) for resident individuals, at income tax progressive rates (0%-39%); and (ii) for non-resident individuals, at 35%.
Transfer of Immovable Property
The transfer of immovable property is also subject to notary fees and registry taxes at 0.3% and 1.5% (including notary fees) of the purchase price, respectively.
As of 2019 a national consumption tax is triggered on the sale of immovable property, different from rural properties destined to agricultural activities, new or used, whose value exceeds 26,800 TU, including those made through assignments of fiduciary rights or funds that are not listed on the stock exchange.
In relation to real estate, a price lower than the cost basis, the cadastral appraisal or the self-appraisal is not accepted, without prejudice of a higher commercial value. When the price agreed by the parties differs significantly from the Fair Market Value (FMV), the Colombian Tax Office may reject it and determine an FMV according to the characteristics, conditions and status of the assets. A significant difference in the price occurs when the consideration differs by 15% or more from the FMV.
Inheritances, gifts and donations are subject to capital gains tax in Colombia at a 10% rate. The transfer of any real estate involved would also trigger registry tax (of approximately 1.5%).
Generally, the applicable taxable base shall be the assets' or rights' registered value as of December 31st of the previous year.
Ave Calle 82
No 10- 62 piso 7
Bogotá, D.C. 110221
+57 1 634 1500
+57 1 376 2211www.bakermckenzie.com