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Taxation In Colombia

“Kathleen, you folks do excellent work. And, yes, I do love Colombia, especially Medellín.

“Yet, I have been recently informed that Colombia is about to begin taxing one’s worldwide income. Is that a true statement?”

–John B., United States

Colombia has always taxed residents on their worldwide income. It used to be that new residents had a five-year window before their worldwide income was taxed; however, the Colombia government changed that law, and now all new residents are taxed on worldwide income as soon as they become tax resident.

Remember, though, that most countries tax the worldwide income of their residents. This is not to be confused with the United States’ approach to taxation. Americans are taxed on their worldwide income no matter where they reside. Big difference.

The Truth About Taxation Of Foreign Residents And Investors In Colombia

“Kathleen, Medellín needs to come off your prime retirement haven list since Colombia is now taxing pension and social security income after 183-day stay in the country as of 2015. As far as I and a number of others are concerned, we will seek a more friendly governmental climate to retire. This tax rate is not an insignificant amount to Social Security recipients.”

–Carlton J., United States

Colombia has always taxed residents on their worldwide income. Previously, new residents enjoyed a five-year window before they were liable for this tax. However, the Colombia government changed the law recently, and now all new residents are taxed on worldwide income as soon as they become tax resident.

That said, foreign pensions are generally not taxed in Latin American countries. In the case of Colombia, your pension is taxed only if it exceeds a threshold that most would not. The amount at today’s exchange rate is about US$9,000 a month. If your pension is less than that amount, it’s not taxable.

Some blogger somewhere keeps posting bad information on Colombia’s tax laws. We’re getting several e-mails a day asking for clarification and so are publishing a complete rundown on taxation in Colombia, for the expat, the foreign retiree, and the investor in this month’s issue of Lief Simon’s Simon Letter.

Continue Reading: How The Strongs Retired To Ireland

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