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colombia jurisdiction international company solutions

At a glance

Colombia is strategically located at a midpoint between North and South America. The country has 1,800 miles of coastline and has ports on both the Pacific and Atlantic Oceans, which connect to 3,710 routes worldwide and which are close to the two entrances of the Panama Canal. Colombia therefore is well placed to service the markets of Central, South and North America.

Colombia is often listed as having one of the fastest growing economies in Latin America with huge potential in terms of economic growth. This is based on its resources, clear governance, and a unified vision by both public and private sector leaders.

Tax summary

National corporations are taxed on worldwide income and capital gains. National corporations are corporations that have their principal domicile in Colombia or are organized under Colombian law or that during the respective tax year or period have their effective place of management in Colombia (holding board meetings in Colombia is not enough to qualify as a national company).

Foreign companies that obtain more than 80% of their income(other than passive income) in the jurisdiction of incorporation are not considered to have their effective place of management in Colombia. These companies are known as "80% Foreign Income Companies". Foreign companies that have issued stock or bonds in the Colombian stock exchange or in a recognized foreign stock exchange are not considered to have their effective place of management in Colombia.

The subsidiaries of such companies are also not considered to have their effective place of management in Colombia to the extent they are consolidated in the financial statements of its parent; however, such subsidiaries can elect to be treated as a national corporation unless they are 80% Foreign Income Companies.

Branches of foreign corporations and PEs are taxed on Colombian source income and capital gains only. Attribution is based on domestic tax accounting records, which should be supported by an analysis of functions, assets, risks and personnel.

Corporate income tax rates

The standard corporate income tax rate is 25%. However, foreign companies receiving Colombian source income that is not attributable to a branch office or PE and that is not fully taxable through withholding tax are subject to an income tax rate of 39%. This rate will increase to 40% for 2016, 42% for 2017 and 43% for 2018. A special reduced corporate income tax rate of 15% applies to legal entities qualified as Industrial Users of Goods and/or Services in a free-trade zone. Commercial Users in a free-trade zone are subject to the general corporate income tax rate.

Withholding tax

Dividends paid to nonresidents are not subject to tax if the dividends are paid out of profits that were taxed at the corporate level. If the dividends were not taxed at the corporate level, dividends paid to nonresidents are subject to withholding tax at the regular corporate income tax rate of 33%.

Tax treaties

Currently Colombia has tax treaties in force with Canada, Chile, India, Korea (South), Mexico, Spain and Switzerland.

For more information please contact:

HBM Group
Holland House
Calle 90 No 19-41
Oficina 801 Edificio Quantum
Bogotá, Colombia