Tax on funds transferred to Colombia

calipro says on Mar 5, 2005, 19:59:

calipro I know of guys that transfered large amounts to money into colombian citizens bank accounts. After a certain amount they did have to pay an income tax on the money. I don't know what the limit is but you have to pay a tax but I know they didn't pay anywhere near 33%. I think it was more like 3.3%.

Maybe you should try sendin the money to someone in a lower tax bracket. Just kidding I think they have a flat rate.

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aztec says on Mar 27, 2005, 07:35:

Transfer of funds & purchase of real estate A U. S. citizen may purchase real estate in Bogota, Colombia. All you will need to acquire title is a U. S. Passport or Cedula de Extranjeria from the DAS, Departamento Administrativo de Seguridad. Having said this, you are cautioned to be careful how you transmit your personal funds for this purchase.

There are laws and regulations in Colombia for the import and export of dollars and their monetization (converting dollars to pesos). If you do not follow the exact instructions regarding forms and time frame you will have a painful experience. These funds transferred may be taxed at 42% on the repatriation of same funds.

You must report or make a declaracion to the Banco de la Republica in Colombia:

Declaracion No. 5: This is a form you may use for reporting the importation and monetization of your funds to the Banco de la Republica. Assuming the funds are remaining in Colombia you have no further reporting responsibilities for the importations of your dollars. However, if at a latter date you have a need to sell the property and repatriate, the funds will be taxed at a 42% rate.

Declaracion No. 4 and Declaracion No. 11: A Foreign Investment in Goods or Real Estate is better handled by filing forms 4 and 11. Declaracion of the import of dollars are reported to the Banco de la Republica with Form 4. Within 3 months you must follow-up with Form 11 to legalize your purchase (same procedure for auto or real estate). Form 11 must be presented along with the contract of purchase, or promesa de compra venta, with-in this 3 months time frame. There are some exceptions to the 3 months but better to avoid if possible.

If you have used Form 4 and 11 for the foreign investment you will be able to repatriate the funds without the 42% government tax. Most of us can purchase a house or apartment for our Colombiana with this method. However, if your circumstances are more complicated you might consider setting up a legal off-shore account in the Cayman Islands or Panama, which is called in Colombia paraiso fiscal.

Incidentally, you will need from DIAN a RUT (ID number). This number identifies you as a tax payer in the district and country. You will use this number to report any annual tax liability on assets in the country.

In summary, you are responsible for the reporting to the Banco de la Republica. Many if not most real estate agents are not aware of these reporting requirements for foreign investors. Furthermore, many of the local banking officers are not equipped to advise you regarding which method is best for your set of circumstances. Secure the services of a lawyer and tax accountant experienced with international transactions.

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agucho says on Aug 11, 2005, 07:34:

Easier way If you dont want to pay those taxes just bring the money with you. There are some rules to bring the money if you bring more than 10.000 dollars, but I know they wont charge you that 33% that is a waste.

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vicshere says on Aug 11, 2005, 11:01:

better rate you will get a much better exchange rate on transferred funds than you do for cold hard cash....on 10,000 bucks you could be looking at a difference of 1,000,000 pesos or 500 bucks...sure is worth it for me ...plus you run the risk of losing or get robbed of the cash and with no recourse

listo
"con mucho gusto"
Vic
homepage
http://spaces.msn.com/members/jacintoplace

listo

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DonkeyDust says on Aug 28, 2005, 14:04:

Is a foriegn exchange house a good idea. One such exchange house http://www.customhouse.com/index.htm claims to be better than the banks. I will check them out eventually. They are in the usa also. Anyone know about them?
Not just for buying a house but general funds that you have to have also. But I think it would be hard to beat an atm for that.


"Life is not measured by the number of breaths we take, but by the moments that take our breath away." Life is too short for Trainspotting!

Latitudes attitudes & platitudes.

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viewpoint says on Dec 19, 2005, 10:52:

Penalty Failure To File Form 11 Well I can now tell you for certainity what the penalty for failure to file Form 11 is. I was fined CP$3.100.000 for filing a late Form 11 to record my foreign investment of US$130,000 for the purchase of a home in Colombia. We filed the required Form 4 but failed to file the Form 11 within the required 90 days. When notified about the failure to file Form 11 we immediately filed the Form 11. It took them almost eight months to determine the final amount of the fine.

The cost in attorney fees to contest this penalty would be more than the penalty so I paid it. The initial penalty was 200% or US$260,000 so maybe this is a victory.

When I read the many posts about property purchases in Colombia by foreign people without filing the Form 4s and Form 11s I just cringe.

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Wastelandlive says on Dec 20, 2005, 06:05:

Hey Aztec Thanks for the excellent post. I'm learning, and I want to buy a property soon myself. I've seen this gem about forms 4 and 11 before.

Having witnessed some ugly lawsuits recently, I'm growing attracted to the Paraiso Fiscal option of setting up a Panamanian IBC with which to buy a property.

But you certainly pay for that security - not just initially, which seems to be in the ballpark of $2K, but annually as you pay fees of $500.00 to keep the corporation allive. And then you have to name a few other officers, a favor I'm reluctant to ask of my friends or family, who will automatically see the offshore thing as "shady."

Do I have it about right? Can you tell me more? For example, can I incorporate in Colombia, and hold title with a Colombian corporation? Any advantage to that?

R-

Wasteland

Wasteland

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viewpoint says on Dec 20, 2005, 06:13:

The Panamanian corporation can be set up as low as $500 initially plus the $250 of annual fee. If you use your own directors and officers your only other cost is the $250 annual fee.

Using a Colombian corporation to take title is not an option worth considering as that corporation would naturally be resident in Colombia which you are trying to avoid.

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Wastelandlive says on Dec 20, 2005, 06:29:

OK... Well, it's a good question. I'm mostly worried about liability here in the US, but I suppose it's silly to expose yourself in Colombia if the cost is the same.

Those are some reasonable prices you quote, viewpoint. Would you be willing to recommend to me the agency or law firm that does this, here or via private message?

Thanks for the answer.

R-

MRM

Wasteland

Wasteland

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Wastelandlive says on Dec 20, 2005, 06:45:

Another question for VP or Aztec Listen,

Does anybody have opinions on other typical options besides Panama? Caymans? Nevis? Belize?

Wasteland

Wasteland

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aztec says on Dec 20, 2005, 10:04:

Wastelandlive "viewpoint" is much more knowledgable on the subject. In fact his advice saved my bacon.

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GringoinBucaramanga says on Dec 20, 2005, 11:00:

Purchas a house jj_jp at msn.com
I just purchased a condo in Bucaramanga.
We just asked what banh the seller used.
and for $40 US we wire transfered the money.
No tax so fare.
John

jj_jp@msn.com

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GringoinBucaramanga says on Dec 20, 2005, 11:01:

jj_jp at msn.com
Bank.
This keyboard sucks.

jj_jp@msn.com

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aztec says on Dec 20, 2005, 11:07:

johnp123 When the bank in Colombia processed your transfer they also submitted a form to the National Bank. Why don't you ask them which form(number) they used?

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aztec says on Dec 21, 2005, 02:06:

johnp123 I will bet you the bank filed Form 5. If so there is no need to follow-up with Form 11. There will be no problem for you unless you attempt to repatriate the funds.

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GringoinBucaramanga says on Dec 23, 2005, 08:27:

Yes form 5 jj_jp at msn.com
Form 5
Hope I dont get hit with a lot of tax later
john

jj_jp@msn.com

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aztec says on Dec 23, 2005, 08:48:

johnp123 Only if you attempt to repatriate the funds.

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viewpoint says on Dec 23, 2005, 08:59:

John123 Don't worry the worst that could happen is for the central bank to discover your failure to file the proper forms and the penalty won't be more than the stated penalty of 200% and you should be able to handle that. If you paid $50,000 US for an apartment then the penalty is only $100,000 bringing your total cost to $150,000 no problem for a gringo. You should be able to skate along for a year or two before their auditors contact you but rest assured they will. Maybe you will be lucky like be and be able to correct the problem immediately (within two days of contact) and respond to each request including penalty payment within their five day notice period and get the penalty reduced. But if you are out of the country when you return everything will be done for you including the 200% penalty and seizing your assets.

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aztec says on Dec 23, 2005, 09:58:

John123 Why don't you determine if you can still file Form 4 and Form 11?

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Blanco says on Dec 23, 2005, 11:07:

Living in Cali I am retiring next year and since my wife is from Cali we have been considering living there permanently. I have heard Cali has good internet access (dsl-dont know if they have cable). Does anyone have any info? I also order a lot of books, DVDs, computer games, etc from Amazon.com Anyone have any experience buying things online and shipped to Colombia? How about computer parts or would it be less expensive to just buy them there?

Thanks for any info provided.

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pedram says on Mar 29, 2006, 20:36:

getting rental income out of colombia We have purchased an apartment in Bogota for the purpose of renting it to an embassy or tras-national corporation. We (two partners, one resident in Canada and me living in colombia with a cedulla extranjeria) brought in the funds legally, using the Baco de la Repulica forms (#4 and #11). All is well so far. Now I find out that if we want to withdraw the rental income out of Colombia to our account in the USA, we are going to be charged a flat 35% withholding tax, which essentially negates the whole idea of getting into investment in real estae in Colombia. Is there any way to avoid this that would not be blatantly illegal? We have been told of a couple of options: 1. for me to withdraw the funds here locally as I am a resident and then change them to dollars at a casa de cambio to be taken out in cash on a trip. 2. To demand rental payments from our tenant to be wired from outside of Colombia to our account in the USA (outside of Colombia). This way we don´t have to actually receive funds here in Colombia to be then taken out and there is no record of funds being received or withdrawn here. Any ideas would be much appreciated.

pedram

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pedram says on Mar 29, 2006, 20:41:

legal-tax advise on real estate purchase for rental income Aztec, you seem to have some experience in this field. do you know of a good accountant or lawyer who has handeled issues for foreign (non colombians) who have purchased investment property in Colombia?

pedram

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Brians says on Mar 30, 2006, 03:53:

Pedgram That would be how I understand it. You would be taxed on the movement of money back to the states. Even when you purchase a stock in foreign markets outside the USA they withold. However that is at a rate of 15%. I would think that you get a Credit back on the witholding in the USA like you would if you had witholding on a foreign stock. The credit is dollar for dollar against any income tax in the USA. As far as transfering the money from one bank to another then I don't know how they could catch you but if they do I would be nervous. You are dealing with unknown situations.

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NewBoy says on Mar 30, 2006, 09:26:

pedram No way that I know of, other than the two you mentioned, that I know of.

Even if you find a legal way, you will have to pay bank charges and currency exchange costs.

I would just leave the money in a Colombian bank account, then use that money on your visits to Colombia, instead of using the money from your home Country, I am presuming you visit Colombia, if you bought an investment property here.

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AnnieCoyote says on Mar 30, 2006, 10:01:

Forms 4, 5 & 11 I am an American married to a Colombian living now in Bucaramanga. We purchased a lot in February upon which we intend to build a house. Which form(s) do I need to file and when? Cost was about $20,000 USD. Also we bought a car in November. Didn't know about any forms...should we file something for that? Thanks for any advice. How would it work if we build a house? Of course I want the option to repatriate funds w/o tax.

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aztec says on Mar 31, 2006, 11:22:

"legal-tax advise on real estate purchase for rental income" By pedram.

Yes I do but I recommend asking viewpoint for a recommendation. He has much more experience negotiating the financial and legal requirements.

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pedram says on Apr 2, 2006, 22:56:

putting wife´s name on property title Regarding the advantages/disadvantages of including your wife´s name in the title of an investment property, it is said on this site that you (aztec) ¨can explain this issue as artfully as any attorney could.¨ So now after this fine review, let us know the deal. I (non colombian with a cedella extr.) along with my wife (colombian) have purchased an apartment for rental income. We were planning to include my wife´s name in the title. Is there any potential tax/regulatory problem with this based on your experience?

pedram

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aztec says on Apr 8, 2006, 07:45:

Learned there are subtle differences in Law and Tax regulations between Colombia and The United States. On the surface things appear the same and indeed many lawyers and bankers will tell you "no problem".

Trouble is that most of these people while well meaning simply don't have experience with foreign investments. Better to secure the services of well versed professional and avoid problems that latter will cost you more money correcting the errors. I learned this the hard way and owe viewpoint a thanks for helping me avoid an expensive and potentially disastrous complication.

Your personal situation will dictate how you arrange your investments in Colombia. For example.

Will your purchase of a house in Colombia for your Colombian citizen wife create a wind fall profits tax for her?

Do you want to leave/will the house/apartment to your spouse upon your death? In Colombia if you have children either by a former wife or a current spouse you cannot leave 100% your estate to the spouse.

Only raise these questions to point out some roadblocks that can be avoided with the right counsel. There will be other items impacting on your personal situation that only a visit with a professional can ameliorate.

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