Doing Business In Colombia
Projected Growth
According to a recent article in The Economist, GDP growth in Colombia looks to outpace other Latin American powerhouses.
INVESTMENT INCENTIVES
Colombia is a country that offers a favorable business environment with a stable legal framework. Furthermore, the national government has introduced several incentives to support and encourage foreign investment. These include incentives for several economic sectors, including tourism.
HOTEL AND
TOURISM
INCENTIVES
A 9% income tax rate will apply for 10 years to services offered by new hotels built in municipalities with 200,000 inhabitants or more. This benefit will be available until 2022, and the same rate will be applied for 20 years for those built-in municipalities with less than 200,000 inhabitants. In this case, the incentive will be available until 2028. These rates and terms will also apply for hotel renovation and/or expansion, provided that the amount invested in the expansion is no less than 50% of the property’s purchase price.
New theme parks, ecotourism, agrotourism, and marina projects built in municipalities with a population of 200,000 or more will also benefit from a 9% income tax rate for ten years. Companies will be able to access this benefit until 2022. The same income tax rate (9%) will apply for a 20-year term when these projects are located in municipalities with a population of less than 200,000. In this case, the benefit will be offered until 2028.
HOSPITALITY
AND TOURISM
INFRASTRUCTURE
The hotel and tourism infrastructure sector is vital for the country, as Colombia is considered a one-of-a-kind destination thanks to its mega diversity, variety of climates, cultural wealth, the warmth of Colombian people, and its tourist attractions; this allows foreign visitors to live unparalleled experiences throughout all regions in the country..
Colombia is a world-class tourist destination.
The USTOA, the largest tour operators association in the United States, chose Colombia as the number 1 country from the list of recommended tourist destinations in 2020.
In the 2019 World Travel Awards, Colombia was recognized as a leading destination in South America.
Colombia demonstrates its potential to become a leading destination in nature and adventure tourism, as it is the second most biodiverse country in the world and the number one in terms of most bird species.
Tourism Growth in Colombia is twice the global average.
Between 2012 and 2019, the arrival of non-resident visitors to the country showed an average annual growth of 9%, while the average global growth was 5.3% and 4.4% in the Americas. [1].
The number of non-resident visitors in 2019 was 4,525,892, leading to a 2.9% increase in hotel infrastructure compared to 2018. In addition, hotel occupancy rates hit a record high of 57.8%, increasing the hotel sector’s income by 10.6%.
Active Tourism Investment supported by government incentives
Between 2018 and 2019, around 62 hotels opened in different cities, adding approximately 6,400 rooms[2]. More than 43 hotels are expected to open, adding 6,200 rooms in the next three years.
Leading international hotel chains have arrived and invested in Colombia. These include Accor, Four Seasons, Hyatt, IHG, Marriott, Meliá, NH Hotels, Wyndham, and BlueBay Hotels, among others.
The new economic growth law of 2019 offers a preferential income tax rate for hotels, theme parks, agritourism, ecotourism, and new docks.
Income tax in municipalities with less than 200,000 inhabitants will be 9% for 20 years and this incentive will be in effect until 2029.
TAXES IN
COLOMBIA
In Colombia, there are both national and regional taxes. National taxes (income, VAT, excise) apply to all individuals or legal entities with fiscal residency in the country. Each department or municipality determines regional taxes (industry and commerce, property) within the parameters established by law.
TAX TYPE |
DEFINITION |
RATE |
| Income, Occasional Gains and Dividends | National tax levied on profits derived from a company’s ordinary operations. Occasional gains tax is complementary to the income tax and is levied on profits derived from activities not included in ordinary operations. | Income tax: 32% for 2020. Occasional Gains: 10% Dividends 10% |
| Value Added Tax (IVA) | An indirect national tax on services rendered and the sale and import of goods. | Three rates based on types of goods or services: 0%, 5%, and 19% |
| Excise Tax | Indirect tax levied on the vehicles, telecommunications, and food and beverage sectors. | 2%, 4%, 8%, and 16% |
| Financial Transactions Tax | Tax on all withdrawals from checking and savings accounts, and on cashier’s cheques. | 0.4% per operation |
| Industry and Commerce Tax | Tax on industrial and commercial activities, or services rendered in municipal or district jurisdictions by a taxpayer with or without a commercial establishment. This tax is determined and collected by the corresponding local authorities. | From 0.2% to 1.4% of company income |
| Property Tax | Tax levied annually on the right of ownership, usufruct, or possession of real property in Colombia. This tax is determined and collected by the municipalities or districts where the property is located. | From 0.5% to 1.6% |
For more information about taxes in Colombia, visit https://investincolombia.com.co/en/how-to-invest/taxes-in-colombia
HOW TO BUY
REAL STATE
Per Colombia’s real estate regime, acquiring a property generally begins with the signing of a promise of sale and is finalized with the respective purchase agreement, where the seller is obligated to transfer the right of ownership. This contract must be formalized as a public deed at a notary public’s office, where the following documents will be requested:
Authenticated copy of the property tax for the year in which the deed is formalized, which must be duly paid.
Original certificate stating that taxes on the increased value of the property are paid, issued by the Urban Development Institute (IDU, as per its Spanish acronym).
Original certificate of good standing from the building association if the property is subject to the horizontal property regime.
Proof of payment of the national consumption tax when applicable.
Once the public deed is available, it must be registered at the Public Registry Office to validate the sale and update the ownership of the asset. The acquisition of the real property ends with its formal delivery.
Costs associated with the transaction will differ based on the value of the property to be acquired. The following is the list of costs for a real estate sale:
Notary fees: The seller and the buyer pay in equal parts.
Withholding tax: Paid by the seller (1% of the property value).
Registration tax: The seller and the buyer pay in equal parts (1.67% of the property value).
Certificate of Delivery and Unencumbered Property: Paid by the seller.
Registration right: Paid by the buyer (0.5% of the business value).