Legal and tax incentives
Hotel and tourism incentives
A 9% income tax rate will be applicable 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.
Sales tax on imports, manufacturing, construction, or acquisition of productive fixed assets
VAT registered companies will be able to deduct the VAT paid to acquire, build, or manufacture and import productive real fixed assets from their income tax payable, including VAT on services required to make them available for use.
First employment deduction
Per Article 88 of Law 2010/2019, which incorporated Article 108-5 to the Tax Law, taxpayers who file a tax return can deduct 120% of the salaries paid to employees under the age of 28.
Energy efficiency – Non-conventional energy sources (NCES) (Law 1715/2014)
50% income tax deduction:
Taxpayers with efficient energy management shall be able to deduct up to fifty percent (50%) of the investments’ value for up to 15 years, starting on the fiscal year following the year in which the investment operations start. The deducted value in no case shall exceed 50% of the taxable income as estimated before subtracting the value of the investment.
To encourage the use of energy from NCES, domestic or imported equipment, components, machinery, and services used for pre-investment or investment for the generation and use of energy from non-conventional sources, as well as for the measurement and assessment of potential resources, shall be exempt from VAT.
Owners of new investments in NCES projects shall be exempt from the payment of import tariffs on machinery, equipment, materials, and supplies exclusively for pre-investment and investment work on projects that use these energy sources. This tariff benefit shall be applicable to machinery, equipment, materials, and supplies not produced domestically and that can only be acquired by import.
Energy production derived from NCES will enjoy the accelerated depreciation regime.
Imports with 0% tariff
By means of Decree 272/2018, the Ministry of Trade, Industry and Tourism established a 0% tariff on the import of products classified in the Standard Classification by Economic Use or Destination (CUODE, as per its Spanish acronym) as raw materials or capital goods that are not domestically produced. More than 3,000 tariff subheadings listed in Article 1 of the Decree will be subject to a 0% tariff at the time of import. The list is reviewed and updated annually by the Ministry of Trade, Industry and Tourism.
Use of exempt income in agricultural and orange economy projects.
Social interest housing (VIS, as per its Spanish acronym) and priority social interest housing (VIP, as per its Spanish acronym) related income
Disposal of property for project development, first transfer of social housing, and disposal of property for urban renovation projects.
Colombian holding company (CHC) regime
Designed for domestic companies whose main activities may include: to hold securities, invest or hold stock or shares in Colombian and/or foreign companies or entities, and/or manage the aforementioned investments.
Dividends distributed to the holding company by companies that are not domiciled in Colombia are exempt from income tax.
Dividends paid by the holding company to residents are subject to dividend tax. Dividends paid to non-residents shall not be subject to income tax - they count as income from a foreign source.
This is a special 20-year tax regime for income taxpayers who generate at least 400 direct jobs and make new investments in Colombia for a minimum of 30 million tax units (UVT, as per its Spanish acronym) (approximately $1.068 trillion COP in 2020, USD 273.9 million).
Benefits under this regime include a 27% income tax rate, exclusion from the presumptive income tax regime and dividend tax, depreciation benefits, and exclusion from the equity tax.
Additionally, a legal and fiscal stability regime is created for these investments, which will guarantee the benefits in case of unfavorable amendments to the regime in exchange for a premium of 0.75% of the annual investment value, for up to five years. Investments in hydrocarbons and mining are excluded from this regime.
Incentives for investments and donations to scientific and technological development
Income taxpayers who directly or indirectly make investments or donations to projects classified as research and technological development shall have the right to deduct 100% of them from their net income in the fiscal year in which they are made. Additionally, 25% of the value invested in these projects can be deducted in the fiscal year the investment was made.
Ten-year income tax exemption to develop rural Colombia
Ten-year (10) income tax exemption for companies who invest in agriculture, fishing, and rural development to increase productivity. To have access to this incentive, companies must be registered as a legal entity as of December 28, 2018, start economic activities prior to December 31, 2022, and generate a minimum number of direct jobs to comply with the requirements.