Question: “Having regards to resident individuals, what are the 2008 compliance requirements for tax returns in Colombia?”
Having regard to residents, individuals who have received income and/or own property as at 31 December of any tax year must submit returns if they exceed the particular ceilings for that purpose. Failure to do so will make the taxpayer liable to a penalty equal to 5 percent of the tax payable for each month or part month in arrears, up to a maximum of 100 percent of the amount payable.
As an exception, the following taxpayers are not required to submit returns for the tax year 2008:
– The employee’s gross equity does not exceed COP 99,243,000 in the year 2008 or the equivalent in U.S. dollars (USD 49,258).
– The employee is not required to account for sales taxes in respect of the non-salaried activity.
– The employee does not earn an amount exceeding COP 72,778,000 in the year 2008 or the equivalent in U.S. dollars (USD 36,122).
– Independent workers whose earnings were subject of withholding, provided that for the fiscal year, the worker gross equity does not exceed COP 99,243,000 in the year 2008 for the equivalent in U.S. dollars (USD 49,258), or that his/her earnings does not exceed an amount of COP 72,778,000 in the year 2008, or the equivalent in U.S. dollars (USD 36,122).
– Non-resident foreign nationals, whose income is derived from dividends, participations, interest payments, commissions, fees, royalties, rents, compensation for personal services or technical assistance, benefits or royalties from copyrights, or artistic or scientific property, that were subject to a 33 percent withholding tax.
Also, there are additional requirements as part of the filing obligation for 2008 income tax returns that individuals should take into account:
– Credit card purchases during the taxable year in excess of COP 61,751,000 (USD 30,649).
– When the total amount of purchases during the taxable year exceed COP 61,751,000 (USD 30,649).
– When the total value accumulated of bank savings, deposits, or financial investments, during the taxable year are greater than COP 99,243,000 (USD 49,258).
The fiscal year runs from 1 January to 31 December. Deadlines depend on the last two digits of the taxpayer’s tax identification number (NIT) and the tax authorities publish the timetable annually.
Foreign nationals are required to obtain a NIT to be used in all their tax affairs.
Tax must be paid at the time of filing of the return. Failure to pay tax when due is penalized with interest at the rate of approximately 32.75 percent (until 31 March 2008) per year on the unpaid taxes, calculated on a daily basis. From 1 April the government must expedite a decree with the applicable rate for the next quarter.
Employers are obliged to apply monthly withholdings from expatriates’ earnings as follows:
– If the expatriate is a non-resident, 33 percent of total monthly compensation.
– If the expatriate is a resident, and is performing an activity of permanent character in the country, whose time of duration is longer than six months by virtue of a work contract, the expatriate will be subject to the same rates of the labor withholding in accordance with the table determined by law. This table applies for residents that taxable base is greater than COP 2.095.000 per month, and the scale of rates begins in 19 percent until 33 percent.
Actually, the Colombian Tax Law gives a benefit to individuals who make contributions to the voluntary pension funds in Colombia or contributions to saving accounts for the promotion of real property acquisition (AFC). These savings are considered as non-taxable income and are excluded of the withholding tax base, provided that these contributions, once added to the obligatory contributions to the pension fund, do not exceed the 30 percent of the assignee’s income. Also, these contributions will have to stay by a minimum term of five years, date when they will be able to be withdrawn without withholding. Contributions to the AFC accounts or the voluntary pension fund that are withdrawn for the acquisition of real property for housing are not taxed either, even if the withdraw occurs before the five year term of permanence.
The withholding tax deducted monthly to the assignee will be taken into account in order to calculate the net income tax to pay for the tax year. Also there is a tax benefit for interests paid on home loans from salary. This amount will be considered as deductible issue from the base of withholding and also of income tax.
In addition, is important to take into account that 25 percent of the labor payments are considered exempt income earned, with a limit of COP 5,293,000 (approximately USD 2,627) for year 2008.