|Corporate Income Tax Rate (%)||25 (a)|
|Corporate Income Tax for Equality Rate (%)||9 (b)|
|Corporate Income Tax for Equality Surtax (%)||6 (c)|
|Capital Gains Tax Rate (%)||10|
|Branch Tax Rate (%)||25|
|Withholding Tax (%) (d)|
|Dividends||0 / 20 / 40 (e)|
|Interest||0 / 5 / 14 / 33 (f)|
|Technical Services, Technical Assistance and Consulting Services||10 (g)|
|Branch Remittance Tax||0 / 40|
|Net Operating Losses (years)|
a) Reduced and gradually increasing income tax rates exist (for details, see Section B). Also, a wealth tax applies to companies for 2015 through 2017 (for details, see Section D).
b) This tax applies to local corporate taxpayers required to file an income tax return, which include branch offices and permanent establishments (PEs) of foreign entities. For details, see Sections B and C.
c) The surtax applies to income tax for equality taxpayers on their taxable income that exceeds COP800 million. The surtax apples for 2015 through 2018. The rates of the surtax are 5% for 2015, 6% for 2016, 8% for 2017 and 9% for 2018. The surtax is subject to an advance payment that is calculated applying the corresponding tax rate for the relevant year to the taxable income of the prior year. The surtax does not apply to companies that operate or are located in offshore free trade zones.
d) Corporate income tax rates applicable to nonresidents that receive Colombian-source income not attributable to a branch or PE and that are required to file an income tax return in Colombia are temporarily increased from 2015 through 2018 (2015: 39%; 2016: 40%; 2017: 42%; and 2018: 43%). The National Tax and Customs Administration issued Official Opinions 11676 and 12343 of 2015, which state that withholding tax rates set at 33% were not modified because the increase of the corporate income tax rates for foreign entities did not change the general withholding tax rates. However, these opinions did not address the withholding tax rate applicable to dividends. Consequently, the increase of rates may affect the applicable withholding tax rate on dividends.
e) Dividends paid to nonresidents are not subject to tax if the dividends are paid out of profits that were taxed at the corporate level. If the profits were not taxed at the corporate level, dividends paid to nonresidents that are not attributable to a branch or PE are subject to withholding tax at the corporate income tax rate of 40% for 2016. Dividends paid between domestic corporations are not subject to tax if the company generating the profits out of which the dividends are paid is taxed on these profits in Colombia. Otherwise, the dividends are included in the income tax return of the recipient of the dividends. A 20% withholding tax is imposed on dividends paid to residents if the taxpayer is required to file an income tax return.
f) Interest paid or accrued by Colombian residents to foreign entities on loans with a term equaling or exceeding one year are subject to 14% withholding tax; otherwise, the applicable rate is 33%. Interest paid on loans that have a term equal or greater than eight years and that are related to certain infrastructure projects are subject to a 5% withholding tax. Interest paid by Colombian financial institutions and interest paid by Colombian residents to foreign entities with respect to international trade operations are deemed to be foreign-source income and are accordingly exempt from withholding tax. Certain qualified loans executed before 31 December 2010 do not generate Colombian-source income. As a result, interest on such loans is exempt from withholding tax.
(g) This withholding tax applies to consulting services, technical services and technical assistance services rendered in Colombia or from abroad by nonresidents that are not domiciled in Colombia.
Taxes on corporate income and gains
Corporate income tax. National corporations are taxed on worldwide income and capital gains. National corporations are corporations that have their principal domicile in Colombia or are organiz ed under Colombian law or that during the respective tax year or period have their effective place of management in Colombia (holding board meetings in Colombia is not enough to qualify as a national company).
Foreign companies that obtain more than 80% of their income (other than passive income) in the jurisdiction of incorporation are not considered to have their effective place of management in Colombia. These companies are known as “80% Foreign Income Companies.” Foreign companies that have issued stock or bonds in the Colombian stock exchange or in a recognized foreign stock exchange are not considered to have their effective place of management in Colombia. The subsidiaries of such companies are also not considered to have their effective place of management in Colombia to the extent they are consolidated in the financial statements of its parent; however, such subsidiaries can elect to be treated as a national corporation unless they are 80% Foreign Income Companies.
Branches of foreign corporations and PEs are taxed on Colombian-source income and capital gains only. Attribution is based on domestic tax accounting records, which should be supported by an analysis of functions, assets, risks and personnel.
Corporate income tax rates. The standard corporate income tax rate is 25%. However, foreign companies receiving Colombian-source income that is not attributable to a branch office or PE and that is not fully taxable through withholding tax are subject to an income tax rate of 40% for 2016, 42% for 2017 and 43% for 2018. A special reduced corporate income tax rate of 15% applies to legal entities qualified as Indus trial Users of Goods and/or Services in a free-trade zone. Com mercial Users in a free-trade zone are subject to the general corporate income tax rate.
Reduced and gradually increasing income tax rates are available for small businesses (as defined by Law 1429, December 2010) beginning their activities on or after 1 January 2011. Zero percent of the regular corporate income tax rate applies for the first two years. The rate increases by 25% of the regular corporate income tax rate for the third through the fifth years, and the regular corporate income tax rate of 25% applies from the sixth year.
Certain tax credits are available (see Foreign tax relief).
The income tax for equality (CREE) rate is 9%. CREE taxpayers are exonerated from the National Learning Service (SENA) and the Colombian Family Welfare Institute (ICBF) payroll contributions (up to 13.5% of the payroll tax base) assessed on salaries and days of rest, only for employees earning up to 10 minimum monthly wages. Nonprofit organizations and free-trade zone users qualified on 31 December 2012, free-trade zone users in special free-trade zones with a request filed on 31 Decem ber 2012 and new free-trade zone users in an existing permanent free-trade zone at 31 December 2012 are not subject to CREE. For further details regarding CREE, see Section C.
Capital gains. The following gains are considered capital gains, which are subject to tax at a rate of 10%:
- Gains on the transfer of fixed assets owned for more than two years
- Gains resulting from the receipt of liquidation proceeds of corporations in excess of capital contributed if the corporation existed for at least two years
Administration. The tax year is the calendar year.
Each year, the Colombian government sets the due dates for the filing of income tax returns and payment of taxes due. Tax payments are made in three installments between February and October for Larger Taxpayers (large corporations, according to conditions set by the tax authorities) and in two installments between April and June for other legal entities. Advance payments for the current tax year, which generally represent 20% of the income tax payable for the prior tax year after withholdings, must be made with these installments.
Interest on the late payment of taxes is accrued at the daily effective rate of usury certified by the Superintendency of Finance for the consumption credits. A penalty for late filing is levied on the amount of tax assessed in the corresponding tax return at a rate of 5% or 10% for each month or a fraction thereof. The penalty for late filing cannot exceed 100% or 200% of the difference of the tax to be paid or the balance in favor, depending on the timing of the filing. The penalty for amending a return may be 10% or 20% of the difference between the amount shown on the original tax return and the correct amount, depending on the timing of the amendment.
Dividends. Dividends paid to nonresidents are not subject to tax if the dividends are paid out of profits that were taxed at the corporate level (temporal differences can affect this calculation). If the dividends were not taxed at the corporate level, dividends paid to nonresidents are subject to withholding tax at the regular corporate income tax rate of 40% for 2016. Dividends paid between domestic corporations are not subject to tax if the company generating the profits out of which the dividends are paid is taxed on these profits in Colombia. Otherwise, the dividends are included in the in come tax return of the recipient of the dividends. A 20% withholding tax is imposed on dividends paid to residents out of profits not taxed at the corporate level if the taxpayer is required to file an income tax return.
If the non-taxable dividends in a given year are higher than the commercial profits of that year, the difference can be carried back for two years or carried forward for five years to offset the profits of such periods.
Foreign tax relief. For national corporations and resident individuals, a credit for foreign taxes paid on foreign-source income is granted, up to the amount of Colombian corporate income tax and CREE (including the CREE surtax) payable on the foreign-source income.
An indirect tax credit is also granted for foreign taxes paid on income at the level of the foreign company that is distributing correspond ing dividends to Colombian shareholders or quota holders. This tax credit equals the amount resulting from the application of the income tax rate of the foreign company to the amount of distribut ed dividends. If the foreign company distributing the dividends has received dividends from other companies domiciled in the same or other jurisdictions, the tax credit equals the amount resulting from the application of the income tax rate of the foreign company to the amount of the dividends received by the Colombian taxpayer. The sum of the direct tax credit and indirect tax credit may not exceed the corporate income tax and CREE (including the CREE surtax) payable in Colombia on such dividends.
A portion of the of foreign tax credit (direct and indirect) is applied against the income tax liability, and another portion is applied against the CREE (including CREE surtax) liability, depending on the portion that each tax rate represents in the combined income and CREE tax rate (this portion is expected to change every year as a result of the scheduled increase in the CREE surtax for each year).
To be entitled to the direct and indirect tax credit, the domestic taxpayer must prove that the corresponding tax was effectively paid in each relevant jurisdiction. In addition, for the indirect tax credit, the investments must be qualified as fixed assets for the taxpayer and possessed for a minimum of two years.
The tax credit may be claimed in the tax year in which the foreign tax is paid or in any of the following four years.
Determination of taxable income
General. Taxable income is determined in accordance with the following calculation: gross income, minus non-taxable income, re – turns, rebates and discounts, equals net income, minus costs and expenses, equals taxable income.
In general, to be deductible, expenses must be related to the activity that generates taxable income and must be proportional and necessary with respect to the productive activity of the taxpayer. Some limitations and prohibitions may apply to the deductibility of certain expenses.
Payments to entities resident outside Colombia are deductible if they meet the general rules above and, for expenses related to Colombian-source income, if the applicable withholding tax is paid. In general, if no withholding tax applies, the expenses are allowed as deductions, up to a maximum of 15% of the taxpayer’s net income before taking into account all costs and expenses abroad not subject to Colombian withholding tax. Costs or expenses incurred abroad that are related to foreign-source income subject to income tax in Colombia are deductible if the general requirements are met, even if withholding tax is not imposed, and the 15% limitation mentioned above does not apply.
Branches of foreign companies may deduct the following types of payments made to their foreign related party if the applicable withholding tax is paid:
- Commissions that are related to the acquisition of raw materials or goods
- Administration fees
- Payments for the use or acquisition of intangible property
Interest and other financial expenses resulting from liabilities owed to foreign-related companies are generally not deductible. Pay ments made to foreign-related parties that comply with the transfer-pricing rules (see Section E) may be deductible even if no income tax withholding is required. However, the 15% limitation describ ed above applies to such payments.
Overhead expenses are deductible for Colombian tax purposes if they are related to services rendered and if they are supported by transfer-pricing studies. It is usually difficult to satisfy these conditions and, as a result, over head expenses are generally not deductible. Transactions subject to transfer-pricing rules (see Section E) are not subject to the limitations provided in the Tax Code for costs and expenses in transactions involving related parties. Consequently, transactions with foreign related parties that are subject to the transfer-pricing rules are deductible for a Colom bian company, even if such payments are not subject to withholding tax. Nevertheless, the limitation provid ed in Article 122 of the Tax Code (up to 15% of the net income computed before taking into account such expenses) applies.
Income generated from the following activities is exempt from income tax:
- Hotel services (new and remodeled hotels)
- Software and medical patents developed in Colombia
- Fluvial transportation services
- Energy generated from wind and biomass sources, and agriculture disposal
The assets used in the above activities are not included in the base for determining presumptive income (see Presumptive income).
Taxable income for CREE is net revenues less costs and certain deductions. Certain exempt income is subject to CREE. The tax base for CREE may not be lower than 3% of the tax equity of the preceding year, which is the base for the calculation of the presumptive income tax (see Presumptive income).
Effective from the 2015 tax year, taxpayers are allowed to reduce the CREE taxable income with CREE losses and the excess of minimum presumptive income over ordinary net income. Under Constitutional Court Decision C-291 of 2015, taxpayers may carry over CREE losses generated in tax years 2013 and 2014 (the court decision does not grant the carryover to the 2013 and 2014 excess minimum presumptive income).
Presumptive income. Under the Colombian tax law, the tax base for corporate income tax purposes is the higher of actual taxable income (see General) or minimum presumptive income, which is equal to 3% of the net equity as of 31 December of the preceding tax year. Certain assets may be excluded from this calculation, and certain taxpayers are not required to calculate presumptive income.
The amount of income tax payable after tax credits may not be less than 75% of the income determined under the presumptive income rules, before taking into account tax credits.
For corporate income tax and CREE calculation purposes, the excess of the presumptive income tax over ordinary net income may be amortized over the following five years.
Inventories. Inventories are generally valued using the permanent inventory method.
Provisions. Provisions are not allowed as deductions in determining taxable income, except for provisions for accounts receivables, which are subject to special tax rules.
Depreciation. Depreciation may be calculated using the straight-line method, declining-balance method or other recognized method authorized in advance by the tax authorities.
Individual assets purchased for up to 50 tax units (for 2016, a tax unit equals COP29,753, or approximately USD9.5) may be fully depreciated in the year of acquisition.
The following are the general categories of useful lives established by the tax law:
- Buildings, including pipelines: 20 years
- Machinery and equipment: 10 years
- Vehicles and computers: 5 years
If machinery and equipment are used daily in shifts in excess of a regular eight-hour schedule, a taxpayer may request an additional 25% on the depreciation rate for each additional eight-hour shift and a corresponding proportion for a fraction of such shift. Land is not depreciable.
In Colombia, the same depreciation method may be used for both tax and accounting purposes. Differences in the methods may generate future taxable dividends for shareholders if the expense for tax purposes is greater than the expense for accounting purposes.
Amortization. In general, amortization of ordinary and necessary in vestments used for the purposes of the business, including intangibles (for example, know-how) is allowed. Amortization must be claimed over a minimum period of five years, except for certain intangibles, such as software, for which a shorter period may be allowed, if properly justified.
Amortizable costs and expenses for the oil in dustry may be amortized using the straight-line method over five years, unless a shorter period can be justified. Alternatively, they can be amortized using the units-of-production method. If in vestments in exploration are unsuccessful, the costs and ex penses may be claimed as deductions in the year in which this is determined or in the following two years.
Relief for tax losses. Tax losses may be carried forward with no time limitation.
The tax losses generated for income tax should be treated separately from the tax losses generated for CREE tax purposes. The amount of loss could vary for each of the taxes because the tax bases may be different. Income tax losses can only be carried forward against income tax, and CREE tax losses can only be carried forward against CREE tax.
Restrictions apply to the transfer of losses in mergers or spin-offs (tax-free events for the participating companies for Colombian tax purposes if certain requirements are observed). The surviving entity can offset losses originated in the merged entities, but only up to the percentage of its equity participation in the merged entity’s equity. Similar rules apply to spin-offs of companies. Tax losses generated do not affect the entity’s presumptive income for the respective tax year.
The special treatment of tax losses in mergers and spin-offs applies only if the economic activity of the companies involved remains the same after the merger or spin-off occurs.
Inflation adjustment. An optional tax readjustment of fixed assets may be applied. This readjustment is calculated by applying the percentage certified by the government for the adjustment of the tax unit (see Depreciation). The readjustment affects the tax basis for the transfer of fixed assets, presumptive income and the determination of taxable net equity. Although the inflation adjustments were eliminated, the accumulated inflation adjustments can be depreciated.
Other significant taxes
The following table summarizes other significant taxes.
|Nature of tax||Rate|
|Value-added tax; imposed, unless expressly
excluded by law, on sales of movable tangible
assets, on imports of movable tangible assets
and on most services
|Basic products, such as coffee and wheat||5.00%|
|National consumption tax, imposed on, among
others items, food services in restaurants,
mobile phone services and certain cars; the
Tax paid is deductible for income tax purposes
|4% to 16%|
|Wealth tax; applicable between 2015 and 2017
for companies; and between 2015 and 2018 for
individuals; the tax is due if the net equity for
tax purposes (gross equity less debts measured
in tax terms) as of 1 January 2015 is equal or
Greater than COP1,000,000,000 (approximately
USD322,000); the tax is also payable by foreign
companies and individuals who have equity in
Colombia, regardless of whether they file tax
returns and pay other taxes in Colombia; the tax
base is the net equity for tax purposes as of
1 January of each year; however, for 2016, 2017
and 2018, the tax base is the 2015 tax base
increased or decreased by a percentage equal
to 25% of the inflation of the preceding year;
Shares or quotas in Colombian companies are excluded from the tax base; other exclusions apply; the tax is neither deductible nor
creditable; 2016 rates for companies, which
vary according to the amount of net equity
|COP0 to COP2,000,000,000||0.15% (rate for 2017 is 0.05%)|
|COP2,000,000,000 to COP3,000,000,000||0.25% (rate for 2017 is 0.10%)|
|COP3,000,000,000 to COP5,000,000,000||0.50% (rate for 2017 is 0.20%)|
|COP5,000,000,000 or more||1.00% (rate for 2017 is 0.40%)|
|Industry and commerce tax, on annual or
bimonthly net revenue; rates vary depending
on the company’s activity and municipality;
tax effectively paid during the year is 100%
deductible for income tax purposes
|Bogotá||0.414% to 1.38%|
|Municipalities other than Bogotá||0.2% to 1%|
|Signs and Posters Tax; imposed on
enterprises with advertisements in public
places; tax rate applied to the industry and
commerce tax due; tax effectively paid
during the year is 100% deductible for
Income tax purposes
|Tax on Visible Advertisement Hoardings;
imposed on each advertisement on hoardings
or billboards with a size equal to or larger
than 8 square meters (86,111 square feet);
for the 2016 tax year, a minimum wage equals
COP689,454 (approximately USD222)
|5 minimum wages|
|Debit tax (financial transactions tax); imposed
on the amount of each financial transaction,
such as disposals of funds from savings
accounts, current bank accounts and deposit
accounts, which involve cash withdrawals by
checks and through other mechanisms, and
on the amount of certain accounting entries;
tax effectively paid during the year is 50%
Deductible for income tax purposes
|Social security contributions and payroll taxes|
|Pension (foreigners who remain in Colombia in accordance with an employment agreement may voluntarily enroll in the pensions system); contributions calculated on the monthly ordinary salary of the employee; if the monthly salary is more than 25 times the minimum wage, contributions to the social security regime are calculated on a maximum base of 25 minimum wages (COP17,236,350 [approximately USD5,550] per month); for employees earning integral (all-inclusive) salary, 70% of the salary is the base, but the maximum limit described above applies|
|Health; contribution calculated on the monthly
ordinary salary of the employee; subject to
the same maximum limitation and integral
salary rules as the pension contributions
|(Employers are not required to pay the 8.5%
health contribution for employees earning less
than 10 [COP6,894,540; approximately
USD2,220] minimum legal wages.)
|Solidarity Fund; payable by employer on the
monthly ordinary salary of the employee;
contribution required only for employees
who earn a monthly salary greater than
4 minimum wages (COP2,757,816
[approximately USD888]); subject to same
maximum limitation and integral salary
rules as pension contributions; rates vary
according to the amount of monthly salary
earned by employee
|Employees earning up to 16 minimum
Wages (COP11,031,264 [USD3,552])
|Employees earning monthly between
16 and 17 minimum wages
(COP11,031,264 to COP11,720,718
[USD3,552 to USD3,774])
|Employees earning between
17 and 18 minimum wages
(COP11,720,718 to COP12,410,172
[USD3,774 to USD3,996])
|Employees earning between
18 and 19 minimum wages
(COP12,410,172 to COP13,099,626
USD3,996 to USD4,218)
|Employees earning between
19 and 20 minimum wages
(COP13,099,626 to COP13,789,080
USD4,218 to USD4,440)
|Employees earning between
20 and 25 minimum wages
(COP13,789,080 to COP17,236,350
[USD4,4440 to USD5,550])
|Labor risk; payable by employer on monthly
ordinary salary; rate depends on a legally
established scale based on the degree of
risk represented by the economic activity
of the company; the Social Security office
makes the classification at the time of
enrollment; subject to same maximum
limitation and integral salary rules as
|0.348% to 8.7%|
|Payroll taxes to National Learning Service
(SENA), Colombian Family Welfare Institute
(ICBF) and Family Compensation Fund; payable by employer on the monthly ordinary
salary earned by the employee; no ceiling
applies; subject to same integral salary rules
as pension contributions; reduced and
progressive rates apply to small businesses
(see discussion in Section B regarding
CREE taxpayers and the SENA and ICBF
|Custom duty, on Cost, Insurance, Freight
(CIF) value; general rates
|0% to 15%|
|Real estate tax; municipal tax imposed on
the ownership of land or immovable property;
tax rate is applied to the commercial value
of the property; rate set by the municipality
and varies according to the location and use
of the property; the tax effectively paid during
the tax year is 100% deductible for income
Tax purposes; general range of rates
|0.4% to 3.5%|
Foreign-exchange controls. A controlled exchange market and a free market exist. The controlled exchange market primarily covers foreign-trade operations (imports and exports of goods), external indebtedness, foreign investment in Colombia and Colombian investment abroad. Commercial banks and financial institutions admin ister the controlled exchange market.
Exchange operations that are not covered by the controlled market are conducted through the free market. These operations in clude the purchase of foreign currency that is used to open free-market bank accounts abroad.
Foreign investors may receive abroad, without limitation, annual pro fits derived from an investment that is registered with the Colombian Central Bank (Banco de la República de Colombia).
Effective from October 2011, Colombian residents may receive foreign loans from non-Colombian residents without any restriction. However, nonresident individuals are authorized to do so only under certain circumstances (for work capital and pre-financing of exports). Before October 2011, only financial institutions recogniz ed as such by the Colombian Central Bank could lend money to Colombian residents.
Controlled foreign companies. Colombia does not have special measures for controlled foreign companies.
Debt-to-equity rules. Interest paid on loans (with third parties or related parties) that in average exceeds a 3:1 debt-to-equity ratio is not deductible. For this purpose, the equity taken into account is the taxpayer’s net equity for the preceding year, and the debt taken into account is debt that accrues interest.
Transfer pricing. The transfer-pricing regime includes several of the methods contained in the Organisation for Economic Cooperation and Development (OECD) rules. However, as a result of rulings of the Constitutional Court, the OECD guidelines may not be directly referred to for purposes of interpretation of the Colombian transfer-pricing rules and are considered auxiliary criteria for interpretation. Significant aspects of the transfer-pricing system in Colombia include the following:
- All events that create economic linkage are specifically mentioned in the tax code.
- The rules do not cover local operations between related companies established in Colombia, except for transactions between local entities and free-trade zone users.
- Parties that have gross equity exceeding 100,000 tax units as of the last day of the tax year or gross revenues for the year in excess of 61,000 tax units must prepare contemporaneous documentation and file transfer-pricing information returns. In addition, information regarding comparables must be sent to the tax authorities in electronic form.
- Penalties are imposed for not meeting filing requirements, submitting erroneous or incomplete reports or failing to meet other requirements.
The tax haven jurisdiction list was first issued in October 2013 and is updated yearly. The last update was issued in October 2015.
Anti-abuse rules. Under anti-abuse rules, tax abuse is defined as the use or implementation of a transaction or several transactions for purposes of the following:
- Changing or modifying artificially tax effects that would otherwise have arisen for the taxpayer, or its related parties, shareholders, or effective beneficiaries
- Obtaining a tax benefit
Typically, transactions subject to the anti-abuse rules are those that do not have a valid and reasonable business purpose that serves as the main cause for the transactions.
If at least three of the specified criteria apply (for example, the use of a tax haven or a related-party transaction), the taxpayer must disprove the abuse. For such purpose, the taxpayer must demonstrate business purpose or the market value of the transaction under transfer-pricing methodologies. The Dirección de Impuestos y Aduanas Nacionales (DIAN), which is the tax authority, may re-characterize the transaction, pierce the corporate veil, and assess the tax due together with fines and penalties
The decision that a tax abuse has occurred is made by a body composed of representatives of several governmental institutions, including the director of the DIAN.
Colombia has entered into a multilateral tax treaty with Bolivia, Ecuador and Peru, which follows the source criteria. In addition, Colombia has double tax treaties in effect with Canada, Chile, India, Korea (South), Mexico, Spain and Switzerland, which are based on the OECD model convention.
Colombia has entered into tax treaties covering certain international air transportation services with several countries, including Argentina, Chile, France, Germany, Italy, Panama, the United States and Venezuela.
On 25 June 2015, Colombia signed a double tax treaty with France, which is not yet in effect.
The following table presents the withholding tax rates for dividends, interest and royalties under the Canada, Chile, Czech Republic, India, Korea (South), Mexico, Portugal, Spain and Switzerland treaties.
- a) Dividends that are not taxed at a corporate level are subject to a tax rate of 40% at the shareholder level. However, the 40% rate may be reduced if the dividends are exempt from income tax at the corporate level and are reinvested for a three-year term.
- b) For details regarding these rates, see Section A.
- c) The 26.4% rate applies to software.