Expat taxes in Colombia: what foreigners need to know

Navigating expat taxes as a foreigner in Colombia can be confusing. Many expats are unaware of their tax obligations, and misinformation often leads to costly mistakes. Whether you own a business, have rental income, or simply reside in Colombia for an extended period, understanding local tax laws is crucial. The good news? You don’t have to figure it out alone. Working with an expat tax advisor in Colombia can help you avoid legal issues, optimize your tax payments, and stay compliant without the stress of language barriers or bureaucracy.

In this guide, we’ll break down the essentials of expat taxes in Colombia, common pitfalls, and how professional advisors can make the process seamless.

Why expats need to understand taxation in Colombia

Are expats required to pay taxes in Colombia?

A common misconception is that foreigners don’t have tax obligations unless they work in Colombia. In reality, the country applies tax residency rules that can affect expats differently. If you spend more than 183 days in a calendar year in Colombia (consecutive or not), you are considered a tax resident, meaning you must declare your global income, not just what you earn in Colombia.

Even if you’re not a tax resident, Colombian-source income—such as rental earnings from property or business revenue—could be subject to local taxation.

Tax residency vs. non-residency: what’s the difference?

• Tax Residents: Must report and pay taxes on worldwide income.
• Non-Tax Residents: Only taxed on Colombian-source income at a flat rate.

Understanding where you fall on this spectrum is critical to avoiding penalties and optimizing your tax strategy.

Common tax mistakes expats make (and how to avoid them)

1. Not filing a tax return when required

Many expats assume they don’t have to file taxes if they don’t work in Colombia. Wrong. If you meet the tax residency criteria, you must declare your worldwide income—even if it’s earned in another country.

2. Ignoring wealth tax obligations

Colombia has a wealth tax applies to individuals with assets exceeding a certain threshold. You may be liable for additional tax obligations if you own real estate, bank accounts, or investments in Colombia.

3. Not keeping proper documentation

The DIAN (Colombia’s tax authority) can request income, deductions, and documentation of foreign assets. Many expats get in trouble because they fail to keep organized financial records.

4. Misunderstanding tax treaties

The U.S., Canada, and some European countries have tax treaties with Colombia to avoid double taxation. However, many expats fail to structure their finances correctly, leading to unnecessary tax burdens.

5. Trying to do it alone

Colombian tax laws are complex, and without expert guidance, you might end up paying more than you should—or worse, facing fines. A bilingual expat tax advisor in Colombia ensures compliance while helping you take advantage of tax-saving opportunities.

Key taxes expats should be aware of

1. Income tax (impuesto sobre la renta)

• Progressive tax rates apply to tax residents, ranging from 0% to 39%.
• Non-tax residents are subject to a 35% flat tax on Colombian-source income.

2. VAT (IVA – impuesto al valor agregado)

• Standard VAT rate is 19%, applied to most goods and services.
• Certain industries, like tourism, benefit from lower rates or exemptions.

3. Wealth tax (impuesto al patrimonio)

• Applies to individuals with assets above COP 3 billion (around $750,000 USD).
• Includes real estate, foreign assets, and financial holdings.

4. Capital gains tax

• The tax rate is 10% on real estate sales if the property has been held for over 2 years.
• Short-term sales may be taxed at higher income tax rates.

How an expat tax advisor in Colombia can help

Why you should work with a professional

Navigating the Colombian tax system alone can be overwhelming. Hiring a tax advisor who specializes in expat taxes ensures that:

• You comply with all local regulations.
• You don’t pay more taxes than necessary.
• You avoid fines and penalties for late or incorrect filings.
• Your investments and assets are structured in a tax-efficient way.

When choosing a tax professional in Colombia, ensure they:

• Speak fluent English and understand international tax treaties.
• Have experience with expat-specific tax situations.
• Offer comprehensive services, including tax planning and business structuring.
• Are registered with Colombian tax authorities (DIAN).

Conclusion

Dealing with taxes in a foreign country doesn’t have to be stressful. Whether you’re an entrepreneur, a retiree, or a remote worker, staying compliant with Colombian tax laws is essential to protecting your financial future. With the help of an expat tax advisor in Colombia, you can focus on enjoying life in this fantastic country while knowing your taxes are in expert hands.

If you’re looking for professional assistance with expat taxes, Gutierrez Group has helped hundreds of foreigners stay compliant and optimize their tax strategy. Don’t risk costly mistakes—get expert guidance today!