COLOMBIA Law and Practice Contributed by: Rodrigo Castillo Cottin, Ana María López and Alejandra Becerra, Rimon, P.C.
Rimôn Calle 84A No 10–33
Oficina 803 Bogotá DC 110221 Colombia Tel: +57 1514 2858 Email: bogota@rimonlaw.com Web: www.rimonlaw.com
Presumptive income is equivalent to a percentage of the taxpayer’s net equity in the prior taxable year. Tax - payers are only required to pay income tax under this system when the presumptive income basis is higher than the taxable income under the ordinary system. In the case of resident individuals, presumptive income should be compared to the general basket income only (as explained below). Presumptive income as from FY 2025 is equivalent to 0% of the taxpayer’s net equity of the prior taxable period. Income tax rate Resident individuals Tax resident individuals are subject to progressive income tax rates ranging from 0% to 39%. Non-resident individuals Income tax derived from non-residents is generally collected through a tax withholding mechanism (at a 20% general rate, with some specific exceptions described in the “Tax withholding mechanism appli - cable to non-resident individuals and foreign entities” subsection, below), the filing of an income tax return or by a combination of both. The applicable collection mechanism depends on the income tax characterisation and whether the appro - priate tax withholding was applied. The income tax rate applicable to non-resident indi - viduals liable to file an income tax return in Colombia is 35%.
1. Tax 1.1 Tax Regimes
In Colombia, tax resident individuals and local entities are subject to income tax on their worldwide income and capital gains. They are also required to report their worldwide net assets. Meanwhile, non-resident individuals and entities dom - iciled abroad are subject to income tax only on their Colombian-sourced income and capital gains and should report their net assets located in Colombia. For details on the tax residency rules applicable in Colombia, see 7.1 Requirements for Domicile, Resi- dency and Citizenship . Colombian-sourced income includes income arising from the rendering of services inside Colombian terri - tory, the transfer of assets located in Colombian ter - ritory at the time the title transfer takes place and the exploitation of tangible or intangible assets located inside the country. Concerning the indirect transfer of assets, income obtained by the transfer of entities or assets in Colom- bia through the transfer of shares, participations or rights in foreign entities or structures may also trigger income tax in Colombia. Income Tax Ordinary income v presumptive income Income tax in Colombia is determined based on the taxpayer’s taxable income (ie, using the ordinary sys - tem calculation: revenues minus costs and deduc - tions) or presumptive income.
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