Taxes on global income and global assets for Colombian Residents

SanMarcos wrote:

If you stay here for 184 days in any 12-month period for any reason and under any visa then you become a TAX RESIDENT. You must file a tax return in Colombia declaring all assets globally and pay an asset tax, a small percentage of global assets. This includes traditional and Roth IRAs. You must pay a tax on global income including Social Security benefits and IRA distributions. Further, it is presumed that you have a minimum income of 3% of your global assets, and you must pay a tax on that whether or not you actually had any income.

According to my calculations from the Colombian tax chart, I would have to pay 33 percent of my worldwide income to Colombia for any 12-month period in which I was in-country for 184-plus days.

That might be in addition to the global-assets tax that San Marcos posted on.

  -- cccmedia, resident of Ecuador where I pay no income tax ..
     nor do I pay federal income tax to my country of citizenship, USA. 
     Posted from Medellín.

Thanks for your reply.

SanMarcos wrote:

If you stay here for 184 days in any 12-month period for any reason and under any visa then you become a TAX RESIDENT. You must file a tax return in Colombia declaring all assets globally and pay an asset tax, a small percentage of global assets. This includes traditional and Roth IRAs. You must pay a tax on global income, including Social Security benefits and IRA distributions. Further, it is presumed that you have a minimum income of 3% of your global assets, and you must pay a tax on that whether or not you actually had any income.

Based on my further research on Internet sites, it appears there is a consensus...

With 184-plus days in Colombia inside any 12 months, you would be required to pay either the worldwide-income tax of up to 33 percent .. OR .. the 3-percent tax on assets -- whichever is greater.  You do not pay both.

cccmedia from Medellín

It is not a 3% tax on assets. It is presumed that you make 3% income on your assets, and you pay a tax on that income, which you cannot, of course obtain from a US bank. Also - there's no choice - you pay a smaller tax on your global assets.

It seems to me that, beyond the tax itself, Colombian authorities want5 too much information.

Any truth to the post that said tax-residents are exempt from the presumed-assets-income taxation provided that the assets total less in value that one billion pesos?  That amount could be $333,000 to $350,000 US depending on the floating COP-USD exchange.

cccmedia

http://www.medellinlawyer.com/colombia- … claration/

the untaxed asset limit is 127,256,000 pesos.

Hi! My husband and I run a successful advertising agency, serving to local and international clients based in Puerto Rico. Due to the critical political climate in the US (PR is a colony of the US), it's mounting debt and the crisis in PR (that just declared bankruptcy) we a have growing sense or urgency to relocate as soon as possible. Colombia is one of the destinations on our radar. I just posted a question regarding exactly this matter and how expats deal with it. It seems to me then that a permanent relocation is not possible, since I would be paying taxes both to the Us and Colombia?

atreyes5 wrote:

Puerto Rico. Due to the critical political climate in the US (PR is a colony of the US), it's mounting debt and the crisis in PR (that just declared bankruptcy) we a have growing urgency to relocate as soon as possible....

It seems to me then that a permanent relocation is not possible, since I would be paying taxes both to the Us and Colombia?

Dear atreyes5,

Welcome to the Colombia forum.

This appears to be an excellent time to bail on Puerto Rico.  The island's filing for bankruptcy last week (on May 3, 2017) is evidence that things have spiraled downward .. and you-know-who has made it clear he won't lift a finger to make things any better.  (source: CNN Money.)

----

As for Colombia, you have been misinformed.

Colombia does not double-tax its tax residents.

Paid U.S. income taxes are fully deductible on Colombia tax filings.  Income taxes payable in Colombia are due in August or September of the following year, making this process relatively easy.

if you post here again:  where did you read that there is double taxation?  Do you plan to continue running your advertising agency from Colombia or wherever you land?

cccmedia in Medellín

http://taxsummaries.pwc.com/ID/Colombia … nal-income

As I have researched an expat's status in Colombia is determined by 2 factors; Whether or not a double-taxation agreement exists between Colombia and his "home" nation, and his "residential" status in Colombia. If no double taxation agreements exist, and if you have a full, permanent residential visa (After 5 years residence), then YOU WILL BE LIABLE for Colombian tax. I also read that to avoid this I cannot live there more than 6 months a year? If this is incorrect I would be very happy!  Yes, I do plan to continue serving my clients online, with the help of employees based in PR, and of course, explore the market in Medellin, which is the city that interests me the most. Am I on the right track?

This is the second time I have heard about the 6 month time limit and that the Colombian Government may start to tax us. I am retired we are on a fixed income for now.   I was going to get a Marriage Visa which is good for at least 2 years.  Also once you have been in Colombia with any form of visa for at least 3 years, I believe you can qualify for a 5 year visa.  I still return home to visit my father every 3 months or so and this helps me avoid the 6 month problem.  I am considering not filing for a Marriage Visa as I believe this will trigger the tax requirement regardless if I leave every 3 months.    So I am laying low for now.  The other day, my wife and I had business in Paraguay and the reset my 90 clock without needing a Visa.  So perhaps even a quick trip to Equador could reset your 90 clock at low cost.  Just some thoughts.

Mark Leon wrote:

once you have been in Colombia with any form of visa for at least 3 years, I believe you can qualify for a 5 year visa.

Mark is misinformed on the above point.

Expats living in Colombia on renewable one-year temporary visas do not typically qualify to apply for the five-year residency visa in three years' time.

They need to renew their visas for a continuous total of at least five years in-country .. before obtaining the residency visa is possible.

It is widely reported by Expats that five renewals will normally be necessary because of the difficulty of 'threading the needle' to get exactly five full years via four renewals. 

cccmedia in Medellín, TP-7 visa holder

Thanks for the clarification.  That data was something I pulled up while researching a Marriage Visa.

I just had the same clarity of taxes.  I was starting the process for a marriage Visa which is good for 2 years when it became quite clear that I would be taxed at the 35% rate.  I need to do some research, for if they validate the US taxable income from the IRS and if I can write off the Federal taxes, I might only have to pay 12K to stay the year.  I am heart broken.  I love Medellin and am so grateful to be away from the states.  So I too will have to leave and return to conserve the balance of my 183 allowable days.  My wife has a company and we are seeing if as a volunteer for one year if I can avoid the taxes.  So far I don't see any flexibility in the Colombian tax law with DIAN.  I would greatly appreciate any ideas!!!!! At the current potential tax rate I would not be able to make my alimony payments and live here year round.

Thanks for all of your helpful information.  By any chance are you aware of any loop holes?  Perhaps relations to the US government, volunteering to a non profit in Colombia for a year etc..  I have resolved that I have 77 of 207 days left in Colombia.  I am prepared to pay the price which I calculate to be about 12k if they use taxable income.  Do you know any good Tax accounts in Colombia who have experience with American Tax law and speak english?

Mark Leon wrote:

I love Medellin and am so grateful to be away from the states.  So I too will have to leave and return to conserve the balance of my 183 allowable days.  My wife has a company and we are seeing if as a volunteer for one year if I can avoid the taxes.  So far I don't see any flexibility in the Colombian tax law with DIAN.  I would greatly appreciate any ideas!!!!!

Dear Mark,

IMO you won't arrive at tax clarity doing your own research.  You need a Colombian tax professional on the case, even if it's just for a tax opinion at the moment.

Volunteering does not offset your liability as a tax resident.

cccmedia in Medellín

Mark Leon wrote:

are you aware of any loop holes?  Perhaps relations to the US government, volunteering to a non profit in Colombia for a year etc...

I am prepared to pay the price which I calculate to be about 12k if they use taxable income.

There are loopholes, though they are apparently not the ones you are suggesting (volunteer work or "relations to the US government").

For instance, most Expats are unaware that income from an inheritance is taxed as capital gains at ten percent, not up to 33 percent.  That's just an example.

Your biggest offset could be payments made to the IRS (US filing) if applicable in your case, which are 100 percent deductible in a Colombia tax filing.

cccmedia in Medellín

Thank you for the information past and present!  I will seek professional advice.  So far my research has a confirmed everything that you have stated in your blogs.    My wife and I are going to explore possibly living in another South American Country for the balance of the year.  So we may open up a business in Ecuador or Argentina.

Mark Leon wrote:

I will seek professional advice.  So far my research has a confirmed everything that you have stated... My wife and I are going to explore possibly living in another South American Country for the balance of the year.  So we may open up a business in Ecuador or Argentina.

As I will explain below, I suggest that you immediately seek a professional's tax opinion for your theoretical tax-resident status.  I realize you are not a tax resident yet, Mark, but the professional opinion could be based on the concept that you would remain in Colombia for most of the year.

When I obtained such a tax opinion in late 2016, I was advised that I would have no tax liability in Colombia as a tax resident if I continued (legally) to pay no taxes to the U.S.  That was a surprise to me .. and, as a result, I decided to become a Colombia tax resident for tax year 2017. 

Get the tax opinion now so you don't have to leave Colombia early .. nor put work into starting a new business in Ecuador or Argentina when you might not have to leave Colombia.

Tax opinions can be inexpensive.  The one I got was passed on to me from a Colombia accountant via Langon Law Colombia .. and was a freebie.

cccmedia in Medellín