Corporate income tax (CIT)
National companies (i.e. incorporated in Colombia under Colombian law) are taxed on worldwide income. Foreign non-residents are taxed on their Colombian-source income only. The current general CIT rate is 31% for FY 2021, it will decrease to 30% in 2022 in a progressive way. This rate is applied upon taxable income.
Taxable income is generally defined as the excess of all operating and non-operating revenue over deductible costs and expenses. The customary costs and expenses of a business are generally acceptable as deductible expenditure for CIT purposes, provided they are necessary, reasonable, and have been realised during the relevant tax year under the accrual or cash method of accounting, as the case may be.
The current general capital gains tax rate is 10%.
Qualifying businesses located in Free Trade Zones (FTZs) enjoy a reduced rate of 20% (while subject to capital gains tax at 10%, where applicable).
Worldwide income earned by non-resident entities that is attributable to branches and PEs will be taxed at 31% for FY 2021 or 10%, depending on whether the income is to be treated as ordinary income or capital gain.
Minimum presumptive tax
CIT payers were required to pay a minimum amount of income tax (until FY 2020), which was determined based on the presumptive income method. Under this method, presumptive taxable income was measured at 0.5% of net equity as of 31 December of the previous year, in accordance with the information provided by the taxpayer on such year’s CIT return. However, the presumptive tax was phase out as of FY 2021.
The nominal CIT rate was then applied to the greater of regular taxable income (revenue less allowable costs and expenses) or presumptive taxable income (exempting certain business activities).
Income tax for equality (CREE)
CREE was repealed with the tax bill of 2016; nevertheless, there are some minimum base excesses (CREE taxable income less CREE minimum base) that can be offset during FY 2017 and following years, respecting a cap of five years from the moment in which the excess was generated. CREE tax losses can also be offset during FY 2017 and following years without a time limitation.
Stability Agreement Regime
As of 1 January 2013, the Legal and Tax Stability Framework was repealed. Applications under consideration will be grandfathered and approved if they meet the applicable requirement. Any already executed Legal Stability Agreements will continue to apply until expiration.
Local income taxes
In addition to CIT, there is a local (municipal) tax, known as industry and trade tax. For more information, see Industry and trade tax in the Other taxes section.