How are income taxes calculated in Colombia?

Income tax in Colombia is calculated based on a progressive tax system, where the tax rate increases with higher income levels. Both residents and non-residents are subject to income tax, but the rates and applicable deductions may vary.

Key Components of Income Tax Calculation

  1. Tax Residency:
    • Residents: Individuals who stay in Colombia for more than 183 days within a 365-day period are considered tax residents and are taxed on their worldwide income.
    • Non-Residents: Individuals who do not meet the residency criteria are taxed only on their Colombian-sourced income.

Taxable Income

  1. Gross Income: Includes all earnings such as salaries, bonuses, allowances, and other benefits.

  2. Exemptions and Deductions: Certain exemptions and deductions can be subtracted from the gross income to arrive at the taxable income. Common deductions include:

    • Contributions to health insurance (EPS) and pension funds (AFP).
    • Voluntary contributions to pension funds up to a certain limit.
    • Payments for dependents’ education and health expenses, under specific conditions.

Tax Rates

Colombia uses a progressive tax rate system, which means that the tax rate increases with higher income brackets. The tax rates for residents are structured as follows (the exact brackets and rates may be updated annually):

Taxable Income Bracket (in UVT)Tax Rate
0 - 1,090 UVT0%
1,091 - 1,700 UVT19%
1,701 - 4,100 UVT28%
4,101 - 8,670 UVT33%
8,671 - 18,970 UVT35%
18,971 - 31,000 UVT37%
Over 31,000 UVT39%

Calculation Example

  1. Determine Gross Income: Calculate the total annual gross income.

  2. Subtract Deductions: Apply any allowable deductions and exemptions to the gross income to determine the taxable income.

  3. Apply Tax Rates: Calculate the tax for each portion of the taxable income according to the progressive tax rates.

Example Calculation:

  • Gross Annual Income: COP 100,000,000
  • Deductions: COP 10,000,000 (for health insurance, pension contributions, etc.)
  • Taxable Income: COP 90,000,000

Using a simplified tax bracket system (assuming 1 UVT = COP 36,000 for example purposes):

Taxable IncomeTax RateTax Calculation
Up to COP 39,240,000 (1,090 UVT)0%COP 0
COP 39,240,001 to COP 61,200,000 (1,091-1,700 UVT)19%(61,200,000 - 39,240,000) × 19% = COP 4,170,000
COP 61,200,001 to COP 147,600,000 (1,701-4,100 UVT)28%(90,000,000 - 61,200,000) × 28% = COP 8,064,000
Total TaxCOP 12,234,000

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