Colombia

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 35%. This rate is applied upon taxable income.

An additional 5% surcharge is applicable through 2027 for financial institutions, including insurance and reinsurance companies as well as stock and commodities brokers and infrastructure suppliers to the stock and securities markets, with taxable income equal to or greater than approx USD 1,440,000 FY 2024.

A permanent surcharge is introduced for crude oil and coal extraction and production industry players with taxable income equal to or greater than approx. USD 603,000 FY 2024. The surtax rate goes from 5% up to 10% (15% for oil extraction), subject to current year averaged market prices being at or over 65% of averaged prices over the preceding 120 months.

A 3% temporary surcharge for years 2023 through 2026 is introduced for hydro-electric power companies with taxable income equal to or greater than approx. USD 362,000 for FY 2024.

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, starting FY 2023, is 15% (up from 10% previously).

Qualifying businesses, such as offshore (exploration and production) companies, qualified companies operating at onshore FTZs (port services, permanent FTZs dedicated to the refining of fuels derived from petroleum or the refining of industrial biofuels), and qualified FTZ companies providing logistic services to FTZ management entities located in FTZs, enjoy a reduced rate of 20% (while subject to capital gains tax at 15%, where applicable). 

The preferential 20% rate for other qualified FTZ companies will only survive for those taxpayers qualified until 2022 and during the initial term of the qualification, for taxpayer qualified after 2022, the preferential rate is subject to an export-oriented plan to be submitted for approval by the government.

Worldwide income earned by non-resident entities that is attributable to branches and permanent establishments (PEs) will be taxed at 35% or 15%, depending on whether the income is to be treated as ordinary income or capital gain.

Minimum presumptive tax

The minimum presumptive tax was phased out as of fiscal year (FY) 2021.

Minimum effective tax rate (METR)

Starting from FY 2023, drawing from the OECD-propelled Pillar II, but certainly broader in scope and goals, an METR of 15% is introduced for resident corporations (with exemptions for social interest housing, zomac, and entities with adjusted profits equal to or lower than zero, among others).

Subject to a formulaic system, in-scope taxpayers will be required to true-up the METR to 15%.

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.

Significant Economic Presence Rules 

Starting January 1, 2024, a new rule of taxation called Significant Economic Presence Rules (“SEP”) was introduced in Colombia. This rule intends to tax the income obtained by non-residents from the sale of goods and/or provision of digital services into Colombia when certain thresholds are fulfilled. 

Executive Order defines digital services as: “those services provided through the Internet or an electronic network in an automated manner that require minimal human involvement by the service provider and are impossible to guarantee in the absence of technology. Services that have tax treatment established in other provisions are excluded, such as technical services, consulting and technical assistance, even if they are provided through an electronic network or platform.” 

A non-resident entity will have an SEP in Colombia for (i) the sale of goods and or (ii) the provision of digital services provided (a) there is a deliberate and systematic interaction with the Colombian market, as well as (b) a certain minimum level of revenue from Colombia.

It is presumed that a non-resident maintains a deliberate and systematic interaction with the Colombian market (i.e., with customer(s) and/or user(s) located in Colombia), when at least one of the following conditions is met: a) Interaction or marketing outreach with three hundred thousand (300,000) or more customers and/or users located in Colombia during the previous or current taxable year; or b) Prices are displayed in Colombian pesos (“COP”) or payment is allowed in COP.

Customers are defined to be any individuals, entities or otherwise unincorporated entities that buy and pay for goods or services, while users are those who have access to a website, portal, or app (digital interface) with a username and password.

Additionally, to create an SEP, the non-resident must obtain gross revenue equal to or exceeding US$330,000 (31,300 Tax Value Units) from transactions involving the sale of goods and/or provision of services to customer(s) and/or user(s) located in Colombia, during the previous taxable year or the current taxable year.

SEPs thresholds are to be measured at a group level. Thus, if more than one entity sells goods and/or digital services into Colombia, the aggregate of such entities should be taken into account in determining the threshold tests and all of the entities are considered to be covered by the SEP rules.

Foreign entities that trigger SEP will either be subject to a 10% withholding tax if they decide not to register before the Colombian tax office or, 3% tax on gross revenue if they decide to register and submit annual income tax return in Colombia. If the Company fulfils the thresholds to have an SEP in Colombia and opts for the voluntary registration, it is important to consider that advance payments in 2 months at a 2% rate are also required.

Minimum Effective Tax Rate

Drawing from OECD´s Pillar II, but certainly broader in scope and goals, a Minimum Effective Tax Rate (“METR”) of 15% was introduced beginning 2023 for resident entities (a few industries are exempted.

METR will be determined by dividing the Adjusted Corporate Income Tax Liability and Adjusted Financial Profits. For METR purposes, Adjusted Corporate Income Tax Liability corresponds to the annual income tax liability plus/minus certain adjustments, while Adjusted Financial Profits represent all financial profits plus/minus certain adjustments

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.