lawyers in colombia

Free trade zones in Colombia after the 2016 tax reform

Colombia´s last tax reform was passed during the month of December, as Act 1819 of 2016. Among the most notable features of the law regarding foreign investment, is the preferential tax treatment for companies (foreign or national), operating in Free Trade Zones.

While the income tax rate for corporations (foreign or national) established in ordinary customs territory was set at 34%[1], the income tax rate for corporations in free trade zone was set at 20%. Additionally, such companies will be exempt from payroll taxes.

There are three types of Free Trade Zone users. Those dedicated to the provision of services, the manufacture or transformation of goods, and commercial activities such as marketing shipping or storage. The tax advantages described here are applicable to users dedicated to services and/or goods, not to commercial activities.

Another tax feature which actually existed before the tax reform is, Free Trade Zone users don’t pay VAT on purchases or raw materials or finished products, as long as the purchases are related to the commercial purpose of the company.

Finally, from the customs point of view, a Free Trade Zone user does not pay customs duties on raw material or finished products imported into the Free Trade Zone. There would be customs duties only when the Free Trade Zone user sells products to clients in the Colombian customs territory

[1] The income tax rate for 2017 will be 34%, plus a surcharge of 6% for companies with profits of more than COP 800’000.000.oo. For fiscal year 2018 the income tax rate will be 33% and 4% surcharge (same profit bracket), and for 2019 there will be a unified income tax rate at the 33%.

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