Living in Colombia as a US citizen, or managing a business from abroad, sounds like a dream—until tax season comes around. Tax for expats in Colombia can quickly become a headache if you’re unfamiliar with the rules. Whether you’re enjoying life in Medellín, running a rental property in Cartagena, or managing your Colombian company from the US, understanding your tax obligations is key.
What catches many foreigners off guard is that Colombia’s tax authority, DIAN (Dirección de Impuestos y Aduanas Nacionales), has strict rules. Ignorance isn’t an excuse, and failing to comply can lead to steep fines. But don’t worry—this guide will walk you through what you need to know, so you can focus on your business or enjoy your time in Colombia without tax stress.
Who needs to pay taxes in Colombia?
Living in Colombia as a resident expat
If you live in Colombia for more than 183 days in 12 months, you’re considered a tax resident. That means you must declare your global income—yes, even the money you earn from the US or other countries. Many Americans assume that only their Colombian income is taxable, but that’s not the case.
US citizens with businesses or property in Colombia
Even if you don’t live in Colombia full-time, you might still have tax obligations if you own property, rent out a vacation home, or operate a business here. For example, rental income from your apartment in Bogotá is considered Colombian income and must be reported to DIAN. Similarly, if you started a coffee shop in Medellín, you need to file annual tax declarations, regardless of where you live.
Common mistake:
Many foreigners think that if their Colombian business isn’t generating income, they can skip taxes. Wrong. Even a company with zero revenue must file declarations to avoid penalties.
Key tax for expats obligations you should know
Annual income tax declaration
Tax residents and non-residents with Colombian income must declare taxes every year. In 2024, individuals with assets over COP 190 million (approx. USD 48,000) or income above COP 59 million (approx. USD 15,000) were required to file taxes. DIAN updates these numbers yearly, so staying informed is crucial.
Withholding tax on rental income or business transactions
If you rent out a property in Colombia, withholding tax (retención en la fuente) may apply to your rental income. Similarly, businesses must withhold taxes on certain payments to employees, suppliers, or service providers.
VAT (Value Added Tax) for business owners
If your business generates over COP 148 million annually (approx. USD 37,000), you may need to register for VAT (IVA in Spanish) and include this tax in your sales.
Wealth tax for high-net-worth individuals
Colombia introduced a wealth tax in 2023 for individuals with assets over COP 3 billion (approx. USD 770,000). This includes property, businesses, and investments—whether in Colombia or abroad.
What happens if you don’t file taxes?
Fines for late declarations can start at USD 400 and increase depending on the delay and the value of your assets. In some cases, DIAN can freeze your Colombian bank accounts or take legal action to recover unpaid taxes.
Even if you don’t live in Colombia full-time, having property or a business means DIAN can track your obligations. Foreigners often assume they can return home and ignore Colombian taxes, only to face legal issues when trying to sell property or transfer money later.
Why it’s smarter to work with experts for tax for expats
Language barriers and complex laws
Tax laws in Colombia are constantly changing, and official documents from DIAN are only available in Spanish. Many expats struggle with this, leading to errors in declarations or missed deadlines.
Gutierrez Group: your bilingual tax partner in Colombia
Our team at Gutierrez Group has worked with over 2000 foreign clients, ensuring their taxes are accurate and up to date. We speak fluent English and Spanish, so there’s no risk of miscommunication when handling sensitive tax matters.
We help you:
- File annual tax declarations as a resident or non-resident.
- Declare rental income and calculate withholding tax.
- Understand VAT requirements if you own a business.
- Handle tax audits or inquiries from DIAN without panic.
- Plan tax-efficient property sales to reduce your capital gains tax.
Owning property in Colombia? Don’t forget property tax
Municipal taxes depend on the location
Property tax in Colombia varies by city. In Medellín, you’ll pay around 0.5% to 1% of the property’s value annually, while in Cartagena, rates can differ slightly.
When selling property: capital gains tax
If you sell a property within two years of purchasing it, you’ll face a capital gains tax of 10% on the profit. After two years, the rate remains, but deductions may apply. Gutierrez Group ensures you optimize deductions to lower this tax burden.
Running a business in Colombia? Accounting matters
Ongoing financial obligations
Even small businesses with no revenue must file reports and renew licenses annually. Failure to do so can result in fines from DIAN and business closures.
Payroll and employee contributions
Hiring employees? Employers in Colombia must contribute an additional 50% on top of the salary towards health, pensions, and other social security costs. Many expats underestimate this expense, causing financial strain later.
Conclusion
Living or investing in Colombia is an incredible opportunity, but tax for expats can be tricky. With the right tax support, you can enjoy the benefits of your property or business without legal headaches.
At Gutierrez Group, we’ve seen it all. Whether you need help with DIAN declarations, business taxes, or simply want peace of mind, we’ve got your back.
Let us handle your taxes, so you can enjoy your Colombian investment—worry-free.
