Colombia Tax & Business Gude - Deloitte

Basic facts
Population 46.3m Inflation 4.3% (2006)*
Main languages Spanish GDP per head US$2,940*
Currency Colombian peso (COP) GDP growth 6.8% (2006)*
Economic communities Latin America Integration Association, WTO
GDP sources 12.1% agriculture, 35.5% industry, 52.4% services
*Economist Intelligence Unit estimates.
Political environment

Colombia is a unitary republic. The president heads the executive branch and is elected for a four-year term, with re-election allowed by the constitution. Legislative power is vested in a bicameral legislature, elected by popular vote for four years.

The president, Alvaro Uribe, governs with support from the Conservative Party, part of the Liberal Party and independents. Mr Uribe was re-elected to a second term in 2006.
Foreign trade and investment
Exports US$25.2bn (2006)* Imports US$24.9bn (2006)*
*Economist Intelligence Unit estimates.

Main trading partners: The US, Ecuador and Venezuela.

Main exports: Petroleum and petroleum products, coal, coffee and ferrous nickel.

Colombia offers incentives to foreign investors. The capital, Bogot?, is the financial centre.
Business and financing
Business forms Share corporation, limited liability company, branch

The most common forms of business organisation are the share corporation (sociedad an€nimaÛSA), the limited liability company (sociedad limitadaÛLTDA) and the branch.
Labour environment
Unemployment rate 12.1% (2006)* Minimum wage COP 433,700 (monthly)
*Economist Intelligence Unit estimate.

The monthly minimum wage is normally adjusted annually.

Basic pension contributions are 15.5%.

Healthcare contributions are 4% for employees and 8% for employers.

At least 90% of unskilled workers and 80% of skilled workers in a company must be local nationals.
Taxation
Corporate tax
Standard rate 34%

Resident companies are taxed on their worldwide income; non-resident companies are taxed only on Colombian-source income. The tax is charged at 34%. The 7% surtax on remittances abroad was abolished as from January 1st 2007.
Individual tax
Progressive rates rising to 34%

Resident individuals are taxed on worldwide income; non-residents are taxed only on Colombian-source income. An individual is considered resident for a tax year if that individual stays in Colombia for more than six months in the tax year, or for a period of more than six months ending in the tax year. The income tax rate is 34%.
Capital gains
Generally taxed as income

Capital gains are generally taxed as income.
Indirect tax
Standard rate 16%

Value-added tax (VAT) applies to most transactions. Exempt items include insurance, healthcare, leasing of property for housing, financial leasing and utilities. A lower rate of 10% applies to commercial air transport, and a 7% rate applies to certain foodstuffs.
Tax administration and compliance
Tax year Corporations and individuals: calendar year

When filing a tax return, corporate taxpayers are required to make an advance payment in respect of the following yearÌs tax. This prepayment amounts to 75% of the tax calculated in the tax return, or 75% of the average tax liability in the previous two years, at the taxpayerÌs choice.
Additional tax information
Withholding taxes Dividends 0%, Interest 34%, Royalties 34% (technical service fees, 10%).
Tax treaties Colombia has entered into the Integration Agreement of the Andean Community with Peru, Ecuador and Bolivia, which includes the avoidance of double taxation.
Dividends Dividends are taxed at the 34% rate if the profits out of which the dividends are paid were not subject to tax. Otherwise, the rate is 0%.
Revenue protection There is transfer-pricing legislation.
Groups There is no provision for group taxation.
Incentives Forestry; export promotion; assembly operations; cinematography.
Other taxes Excise and import duties, Property tax, Stamp tax, Transfer duty, Municipal industry and commerce tax.