Incentives to Invest in Colombia

Main incentives:

Incentives to the hotel and tourism

Special tax rate of 9% for income related to tourism

a) For 20 years for projects developed between December 31, 2020, and December 31, 2030, in municipalities with populations of up to 200,000 inhabitants. Such as:

• New Hotels.
• Renewed or expanded hotels.
• New theme park projects.
• New ecotourism and agrotourism parks projects.
• New boat dock projects.

b) For 10 years for projects developed between December 31, 2020, and December 31, 2026, in municipalities with 200,000 inhabitants or more. Such as:

• New Hotels.
• Renewed or expanded hotels.
• New theme park projects.
• New ecotourism and agrotourism parks projects.
• New boat dock projects.

c) For 10 years for Income from renewed or expanded theme parks when the projects are developed between December 31, 2020, and December 31, 2026

d) For 10 years for Care, food, nursing, accommodation, recovery, physiotherapy, and other assistance services provided in assistance centers for elderly tourists that started operations between 2020 and 2026 or that had started operations before January 1, 2020 and carried out renovations or extensions from 2020 to 2026 of at least 50% of the property acquisition value.

Sales tax on imports, manufacturing, construction, or acquisition of productive fixed assets

VAT registered companies will be able to discount 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

Taxpayers can deduct 120% of the salaries paid to employees under the age of 28 if it is their first job.

Energy efficiency – Nonconventional energy sources FNCE (Act 1715 of 2014 and 2099 of 2021):

Income tax deduction of 50%:

Taxpayers with investments in research, development, and production of electric power from Non-Conventional Energy Sources, which includes green and blue hydrogen (NCES or FNCE for its acronym in Spanish); and measures for Efficient Energy Management; including Smart Metering, 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.

VAT exclusion:

Domestic or imported equipment, components, machinery, and services used for pre-investment or investment for the generation and use of NCES, as well as for the measurement and assessment of potential resources, shall be exempt from VAT to encourage the use of energy from NCES.

Tariff Incentives:

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.

Accounting Incentive:

Energy production derived from NCES will enjoy the accelerated depreciation regime, up to 33.33% annually for machinery, equipment, civil works for generation with renewable energies, and energy efficiency actions/measures. This incentive can be obtained simultaneously with the 50% income tax deduction for the same investments.

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.

Social interest housing (VIS, as per its Spanish acronym) and priority social interest housing (VIP, as per its Spanish acronym) related income:

Income tax exemption for income from disposal of property for project development, first transfer of social housing, and disposal of property for urban renovation projects.

Colombian holding company Colombia (CHC):

Designed for domestic companies whose main activities may include: holding securities, investing or holding stock or shares in Colombian and/or foreign companies or entities, and/or managing such 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. Those paid to non-residents shall not be subject to income tax - they count as income from a foreign source.

Mega investments:

This is a special 20-year tax regime for income taxpayers who generate at least 400 direct jobs (250 in IT industries) and make new investments in Colombia for a minimum of 30 million tax units (UVT, as per its Spanish acronym) (approximately $1.140 trillion COP in 2022, USD 291,000,000). TRM COP: USD 3.915 (January-June 2022 average) .

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 credited 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, request investment approval from the Ministry of Agriculture before October 14, 2022, and generate annually a minimum number of direct jobs and investments to comply with the requirements.