Colombia is quickly becoming one of the best investment markets in Latin America.
In 2011, S&P, Moody’s, and Fitch all awarded Colombia with an investment-grade rating, giving would-be investors even more reason to take advantage of the opportunities here. The World Bank’s 2015 “Doing Business Report” has Colombia ranked as Latin America’s most business-friendly country. The Colombian government has made it an important initiative to bring in foreign investment. Colombia is a solid, stable, economic success story. The country enjoys a solid industrial base, abundant energy, and strong economic growth. For investors looking at real estate in Colombia, Medellin has a very attractive property market. Bogota and Cartegena also offer profitable prospects for rental income.
Under the free trade agreement, Colombia has established itself as major contributor in the world’s commodity markets. Colombia exports of coal, oil, and coffee have drawn investment from foreigners looking to ride these strong markets. There are also big opportunities by investing in Colombia’s agricultural industry, in particular timber.
There are fiduciary institutions that serve as foreign exchange intermediaries, processing funds into and out of Colombia, and also as a broker on the stock exchange, much like a U.S. brokerage house. In addition, like many U.S. brokerages, they offer a number of their own financial products.
Investment Incentives in Colombia
The government, creating an accommodating climate for doing business, incentivizes investment in Colombia. There are specific zones and sectors which the government is looking to develop and entrepreneurs are taking notice.
Colombian Free Trade Zones
The Free Trade Zones (FTZ) of Colombia offer a competitive environment for investment in production and services. There are certain benefits, which help to attract competition:
- No customs tax (VAT and customs duties) on international raw materials imported into the FTZ
- Exemptions on the value-added tax for goods and materials sold from customs territory to FTZ
- Colombia’s foreign trade agreements apply on international exports from FTZ
- Potential for partial processing outside FTZ for 9 months
- Potential to sell goods and services to the national territory without quotas or restrictions (there may be duties on imported goods)
The single income tax rate is 15% within the FTZ, as well as the Equity Income Tax (CREE) and surcharge.
Both Permanent Free Trade Zones and Single Enterprise Free Trade Zones benefit from these regulations.
Benefits by Sector
There are specific benefits offered to individual sectors within Colombia. These benefits among other things include reductions of income taxation.
- Rather than the general 25%, companies would be taxed 0%
- CREE tax of 9%
- CREE surcharge of 6% (In 2018, will go up to 9%)
Reforestation projects of acacia and eucalyptus trees are one of projects where the Colombian government specifically offers cash and tax incentives. The following sectors receive these specific benefits:
- Aquatic Transportation
- Shallow boat and barge services with loaded draft lower than 4.5 ft (through end up 2017)
- (2003 forward) – Benefits for 20 yrs.
- New plantations, sawmills
- Hotel services
- Newly built hotels (2003 until end of 2017) – Benefits for 30 yrs.
- Remodeled hotels (through end of 2017) – Benefits for 30 yrs.
- Publishers of books, brochures, magazines (through end of 2033)
- Developed and IP copyrighted in Colombia, scientific and tech based. Must be certified by Colciencias, Colombia’s Administrative Deptartment of Science. (through the end of 2017)
- Waste energy
- Sales of waste from Aeolian, agriculture, or biomass (through end of 2017)
Scientific and Technology Investments
Investors who pay income tax in Colombia can also benefit by helping develop the science and technology industries. Investments, both direct and indirect, in qualified projects are able to deduct 175% of their investment from their net income, up to 40% of taxable income.
There are many great opportunities to invest in Colombia, you just have to find which one works for you.