Social security contributions
Every employee whose work contract is governed by Colombian labour regulations (with the exception of some foreign employees who may become voluntarily affiliated to the pensions system) must be affiliated to the integral social security system, which includes the:
- general pensions system
- health social security system, and
- general system of professional risks.
The basis for contributions is determined by the monthly salary (excluding non-salary items) earned by the employee, which may not be, for ordinary salaried employees, less than the minimum legal monthly salary (COP 908,526 in FY 2021) and may not exceed 25 minimum legal monthly salaries (COP 22,713,000 in FY 2021).
For employees who earn an integral salary, the basis for pension contributions will be the lower of 25 minimum legal monthly salaries or 70% of such integral salary.
In the two regimes (public and private), the contribution amounts are currently 28.5% of the monthly salary.
Out of this percentage, 75% (approximately 20.5% of the monthly salary) must be borne by the employer and 25% (approximately 8% of the monthly salary) must be borne by the employee.
As such, for the mandatory health system, the employee should contribute 4% and the employer 8.5%. Note that starting from 2014, for employees with salaries below ten minimum monthly wages (COP 9,085,000), the mandatory contribution to the health system on behalf of the employer does not apply. As such, the 8.5% contribution applies only to salaries above ten minimum monthly wages.
In regards to the mandatory contribution to the pension system, the employer should contribute 12% over the basis and the employee 4%.
Note that employees who earn more than four minimum legal monthly salaries (COP 3,634,000) must contribute an additional 1%, which will be destined to the pension solidarity fund, created by law to cover the risks of workers with scarce resources. Also, employees who earn more than 16 minimum monthly salaries (COP 14,536,000) must contribute an additional percentage (between 0.2% and 1%), depending on the amount of salary received.
For professional risks (Aportes de Riesgos Profesionales), the employer must pay a contribution ranging from 0.522% to 6.96% of the monthly salary, which is an insurance that covers risks of labour-related illnesses or accidents, permanent disability, death, and incapacity also derived from the employee's activity.
In addition, for employees with salaries higher than ten minimum monthly wages, employers must pay a 9% payroll tax on salary items only, the basis of which is 100% for ordinary salaried employees and 70% for integral salaried employees.
Capital gains taxes
Capital gains are considered extraordinary income received by an individual from the occurrence of an exceptional economic act. The different kinds of capital gains in Colombian tax law are:
- Gains derived from the sale of assets (shares, bonds, etc.) held for at least two years.
- Gains derived from the liquidation of a company that has been in existence for at least two years.
- Gains derived from inheritances, legacies, or donations (such as the portion of the estate received by the spouse or the heir).
- Gains derived from lotteries or gaming.
The general tax rate for capital gains in Colombia is 10%.
In the case of gains derived from lotteries, gaming, or similar activities, the tax rate is 20% (of the gain).
Value-added tax (VAT)
The general VAT rates are 19% and 5%. See the Other taxes section in the Corporate tax summary for more information.
- Taxable years 2020 and 2021 (for individuals, the tax is imposed through 2021).
- Triggering event is the holding of net wealth for tax purposes (assets less allowable liabilities) as of 1 January 2020 in excess of over COP 5 billion.
- It is likely that tax reform bill is filed during 2021 proposing an Equity tax going forward.
- Accrual and taxable basis will be measured as assets less liabilities (for tax purposes) as of 1 January of each year (as opposed to the taxable basis being fixed to 1 January 2020) so that the legal obligation to pay the tax will arise annually as well.
- Taxpayers include non-residents that directly hold equity in the country and non-residents that indirectly (through branches or permanent establishments [PEs]) hold wealth in Colombia. For the last case, the branch/PE is responsible for filing the tax return.
- The applicable tax rate is 1% on each year’s taxable income base.
- Where net equity in 2021 is greater than that as of 1 January 2020, the taxable basis will be either the net equity as of 1 January 2020 (adjusted upwards by 25% of the inflationary index for the year before) or the net equity as of 1 January of the taxable year of reference, whichever is lower.
- Where net equity in any year beginning from 2021 is lower than that as of 1 January 2020, the taxable basis will be either the net equity as of 1 January 2020 (adjusted downwards by 25% of the inflationary index for the year before) or the net equity as of 1 January of the taxable year of reference, whichever is higher.
- Taxable basis does not include:
- The value of the taxpayer’s home up to TVU 13,500 (COP 490,158,000).
- 50% of the under-reported assets that are disclosed as of 1 January 2020.
Net wealth tax is neither deductible nor creditable, nor can the liability be offset against tax receivables.
There is no inheritance or gift-specific tax, as such, in Colombia. However, for tax purposes, inheritance and gifts are considered extraordinary income, and, as such, the heir/beneficiary will be liable to capital gains tax.
Property tax is a municipal tax and is imposed depending upon the nature and usage of the property, and generally the rates range between 0.4% and 1.2%. See the Other taxes section in the Corporate tax summary for more information.
Financial transactions tax
The financial transactions tax is a permanent tax on financial transactions, the collection of which is the responsibility of regulated financial institutions and the Central Bank (Banco de la República).
The tax rate is 0.4%, and the taxable event is the carrying out of financial transactions that involve the disposal of resources deposited in checking or savings accounts, as well as in deposit accounts with Banco de la República and the issuance of cashier’s checks.
50% of the total tax paid is deductible for corporate income tax (CIT) purposes, regardless of whether or not the transactions have a causal nexus with the income-producing activity of the taxpayer.
The law establishes a series of operations and transactions that are exempted from this tax.