Colombian tax legislation includes a tax levied on capital gains, which is ancillary to the income tax, but its taxable base is assessed separately from such tax.
This tax is levied on:
- the disposal of fixed assets owned by the taxpayer for more than 2 years (gains derived from the alienation of assets held for less than 2 years are subject to ordinary income tax);
- donations and inheritance;
- amounts derived from the liquidation of companies or corporations; and
- prizes of lotteries, raffles and gambling.
Individuals and entities considered as exempt from income tax are also exempt from capital gains tax.
In the case of the sale of assets, the gross income or loss is the difference between the sale price and the fiscal cost of the assets. When the asset is depreciable, the income should be attributable, in the first place, to depreciation recovery (taxable income). Any remaining amount is considered as income or capital gain.
The sale price is defined as the price agreed by the parties paid in cash or in kind, unless it differs substantially (by more than 25%) from the average market value of goods of the same kind on the same day the disposal takes place. If the compensation agreed substantially differs from the average value, the tax authority may disregard the price agreed by the parties and establish a new price to determine the taxable income, taking into account the details and circumstances surrounding the transaction.
For immovable property, the sale price cannot be lower than its cost, the cadastral value or the self-valuation for real estate purposes.
As a general rule, any amount distributed in excess of the invested capital as a consequence of liquidation is taxable at the ordinary tax rates. The earnings will be treated as ordinary income or capital gain, depending on the duration of the company (more or less than two years).
The tax code provides the following special rules:
- amounts corresponding to profit that may be distributed will be subject to the tax rules applicable to dividends;
- the equity revaluation account ( cuenta de revalorización del patrimonio) can be distributed tax free at the moment of liquidation; and
- the refund of contributed capital is tax-free.