Colombia's Tax System and Structure in 2025

Colombia maintains a centralized tax framework, with the national government exercising primary authority over taxation. Local governments have limited power to impose taxes, focusing mainly on municipal-level levies. The country operates under a unified system centered on income tax and value-added tax (VAT). National taxes include corporate income tax, equity tax, temporary income tax, wealth tax, VAT, financial transaction tax, stamp duty, conveyance tax, and excise duties. Local jurisdictions may collect business tax, property tax, local excise taxes, and vehicle license fees.

Tax liability in Colombia is determined by residency, not nationality. Entities legally established in Colombia and individuals residing in the country are taxed on their worldwide income. Foreign entities without a legal presence in Colombia and non-residents are taxed only on income sourced within the country.

Main Taxes and Rates in Colombia

In recent years, Colombia has implemented significant tax reforms aimed at enhancing fiscal sustainability, promoting equity, and supporting environmental goals. Key changes include introducing green and corrective taxes, increasing income and dividend taxes for high earners, imposing a wealth tax, revising corporate tax rates, and eliminating previous tax exemption days. Below is an overview of the major taxes under the updated 2025 framework.

Corporate Income Tax

All domestic and foreign companies operating in Colombia are subject to the same corporate income tax regime. As of 2025, the standard rate remains at 35%. However, certain sectors benefit from preferential rates: publishing, tourism, and hospitality firms pay a reduced rate of 15%. Additional surcharges apply to specific industries—hydroelectric power (3%), financial institutions (5%), and oil and coal producers face a progressive levy ranging from 5% to 15%, linked to international commodity prices.

Investors making large-scale capital expenditures that generate over 400 direct jobs, companies located in free zones, and those active in tourism services may qualify for further reductions, with effective tax rates dropping between 9% and 27%, depending on compliance with regulatory criteria.

Personal Income Tax

Residents in Colombia are taxed on a progressive scale based on annual income, divided into seven brackets. The rates range from 0% for low-income earners to 39% for high-income individuals. This tiered structure aims to ensure fairness while generating revenue for public programs. Non-residents are taxed only on Colombian-sourced income, typically at flat withholding rates.

Temporary Income Tax

A 10% temporary income tax applies to gains from the sale of assets held for more than two years, whether by individuals or corporations. This measure targets long-term capital appreciation and contributes to short-term revenue stabilization.

Dividend Withholding Tax

To increase tax fairness and reduce profit-shifting, Colombia has raised the dividend tax for non-resident shareholders to 20%. When combined with the corporate income tax, this results in a total effective tax burden of approximately 48% for foreign investors receiving dividends from Colombian operations.

Value-Added Tax (VAT)

VAT is applied to most goods and services sold domestically, as well as imports. Colombia employs a multi-tiered VAT system with three rates: 0%, 5%, and 19%. The standard rate is 19%, while essential goods such as staple foods and basic consumer items for low-income households are taxed at reduced or zero rates to mitigate regressive impacts.

Financial Transaction Tax

A 0.4% tax is imposed on financial transactions affecting deposit, checking, and savings accounts, including bank drafts. This tax is automatically withheld by financial institutions at the time of transaction. Notably, 25% of the paid amount can be credited against annual income tax calculations, offering partial relief for taxpayers.

Conveyance Tax

Documents registered with public authorities or chambers of commerce—such as contracts, deeds, and legal agreements—are subject to conveyance tax. Rates vary between 0.3% and 1% of the declared value, depending on jurisdiction and document type.

Business Tax (Industry, Commerce, and Services)

This municipal-level tax applies to businesses engaged in industrial, commercial, or service activities within city limits. Rates are set locally: industrial activities are taxed between 0.2% and 0.7% per month, while commercial and service operations face rates from 0.2% to 1%. In Bogotá, rates can reach up to 3.3% monthly. Businesses must file annual returns, though in Bogotá filings occur every two months.

Real Estate Tax

Municipalities levy real estate tax on urban properties, with rates typically ranging from 0.4% to 1.2% annually. Paid real estate taxes can be deducted proportionally when calculating taxable income for corporate purposes. Payments are generally due every two months.

For authoritative updates, visit the official website of Colombia’s National Tax and Customs Directorate (DIAN) at DIAN, and explore investment guidance via Invest in Colombia Taxes.

Special Economic Zones in Colombia

Legal Framework for Free Zones

The foundation for Colombia’s free zone regime was established through Law 1004 of 2005 and Decree 4051 of 2007. These regulations govern the creation, management, and operation of special economic areas designed to attract foreign direct investment and boost industrial growth. A key reform transferred administrative oversight of free zones from DIAN to the Ministry of Trade, Industry, and Tourism (MinCIT), streamlining processes and improving coordination.

Detailed information is available on MinCIT’s portal: MinCIT Free Zone Reports, and through ProColombia’s directory: Free Zone Directory.

Overview of Colombia’s Free Zones

Since 2005, Colombia has authorized 114 free zones across 19 departments, including major regions like Antioquia, Bolívar, Atlántico, Cundinamarca, and Bogotá. These zones span approximately 4 million square meters and are located in 64 cities. They have attracted over COP 43 trillion (roughly USD 11.6 billion) in investment and generated around 307,000 jobs.

Companies operating within these zones enjoy significant incentives, including:

• Reduced corporate income tax rate of 15%
• Exemption from import duties, VAT, and other customs charges on machinery, raw materials, and equipment brought in from abroad
• Exemption from VAT on purchases made from the domestic market for use within the zone

Under certain conditions, single enterprises can establish proprietary free zones, gaining full access to these benefits—a model increasingly adopted by multinational manufacturers and logistics providers.

According to data from Colombia’s National Administrative Department of Statistics (DANE), free zone exports reached USD 2.78 billion in 2021, marking a 14.5% year-on-year increase. Key export markets include the United States, Puerto Rico, India, and neighboring Latin American nations. Imports totaled USD 1.69 billion, rising 60.1%, primarily from the U.S., China, and India. These figures highlight the growing strategic importance of free zones in Colombia’s trade ecosystem.

SailGlobal offers tailored offshore human resource solutions for international firms establishing operations in Colombian free zones, helping streamline compliance, payroll, and cross-border employment structures.

This article draws from publicly available sources, including reports from China’s Ministry of Commerce.