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Foreign Investment in Colombia: What are the Tax Benefits?

Colombia has provided the following tax benefits to attract foreign investors:

Income tax reduction

Colombian Legislation establishes for companies from various sectors the progressive reduction of the corporate income tax rate from 33% to 30%. In addition, it provides for a progressive reduction of the applicable rate in terms of presumptive income from 3.5% to 0% in 2022.

According to this legislation, those investors who decide to start or continue their business in Colombia will also have access to a 50% tax discount on the Industry and Commerce Tax (ICA).

Taxpayers who make investments or donations, directly or indirectly, in projects classified as technological research and development, will have the right to deduct 100% of the investment from their net income in the taxable period in which they are carried out. Said investments may discount 25% of the value invested in said projects in the taxable period in which the investment was made.
This legislation also offers differential rent incentives for new hotel projects —new hotels that are built, remodeled or expanded in municipalities of up to 200,000 inhabitants within 10 years of the entry into force of the financing law— at 9%.

Tax Exemptions

As of 2019, among other cases, the following income will be exempt:

  • Colombian orange economy companies will be exempt for 7 years, provided they meet certain requirements.
  • Income from companies that make investments that increase productivity in the agricultural sector for a term of 10 years, provided they meet certain requirements.
  • Income from the sale of renewable electricity (does not include hydroelectric plants), for 15 years from 2017, meeting certain requirements.
  • Income associated with housing projects of social and priority interest (includes property, first sale of VIS/VIP, urban renewal, financial returns, among others).
  • New forest plantations.
  • Low draft river transport, for 15 years.
  • Income associated with housing projects.

Incentives on capital goods

Colombia provides 0% tariff for the importation of capital goods and raw materials not produced in the country, in addition to the possibility of deducting from the income tax the VAT paid for the acquisition, construction or formation and importation of real productive fixed assets.
Incentive for Megainvestments

In addition, the special mega-investment tax regime has been created for 20 years for income taxpayers who generate at least 250 direct jobs and make new investments within the national territory with a value equal to or greater than 30,000,000 UVT (COP$1,028,100. 000,000 year 2019. Approximately USD $342,000,000).

The benefits include the 27% rental rate, exclusion from the presumptive income regime, exclusion from dividend tax, benefits in terms of depreciation and exclusion from wealth tax.

Additionally, for these investments, a tax legal stability regime is created that will allow them to maintain the benefits in the event of unfavorable modifications to the regime, in exchange for the payment of a premium of 0.75% of the value of the investment made each year. during a period of 5 years.

Investments in hydrocarbons or mining are excluded from this regime.

Free trade zone

Colombia offers investors different options for the construction and establishment of free zones with multiple tax advantages:

  • Single 20% income tax rate for industrial users of goods and industrial users of services. Commercial users who are taxed at the general rate are excepted.
  • Customs taxes (VAT and TARIFF) are not caused or paid for goods that are introduced from abroad, likewise, raw materials, inputs and certain goods that are sold from national customs territory to industrial users of free zones.
  • Possibility of selling 100% of the production of goods or services produced in free zones to the national territory with the respective payment of tariffs and VAT.

More info (source): www.investincolombia.com.co

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Vera Abogados's picture

Vera Abogados Asociados S.A., is a Colombian law firm with specialized lawyers, Founded in 1972 by Jorge E. Vera Vargas. At present, with principal offices in the city of Bogota D.C., and offices in the cities of Cali, Medellin, Barranquilla, at national level, and at an international level in Ecuador and Panama.

The Firm is today a reference in the Andean Community, and it makes part of important international affiliations such as PRAGMA, EEIG. International Network of Law Firm, The International Trademark Association (INTA), Asociación Interamericana de Propiedad Industrial (ASIPI) y la Associação Brasileira da Propriedade Intelectual (ABPI).

Vera Abogados Asociados S.A. offers professional services to prestigious Colombian and foreign companies in the following juridical areas: Industrial property, Trademarks, Patents, Copyrights, New Technologies, Disloyal Competition, Commercial Practices, Sanitary Rights, Community Right, Administrative law, Tax Law, Corporate Right and Foreign Investment and Business Rights.

The Firm offers of equal way a service of integral consultancy in Foreign Commerce, Business administration, Finance and Accountancy.

The team is made up of specialized lawyers in each of the workspaces and expert multilingual professionals (Spanish, English and French) that respond with efficiency and competitiveness to the needs and demands of our customers around the world.

Colombia

Bogotá