Main income tax incentives include the following:
Investments in agricultural plantations for (i) reforestation activities, (ii) cultivation of fruits, coconuts, olives, rubber and cacao, (iii) irrigation, and (iv) infrastructure are deductible. This deduction is limited to 10% of the taxpayer's net income.
Investments in environmental enhancements or control are deductible in the same year, provided that the environmental authority accredits them. The amount to be deducted is limited to 20% of the taxpayer's net income before deducting these investments.
In addition, the importation of equipment or machinery not produced in Colombia, for recycling garbage and waste, for waste-water treatment and for environmental control and monitoring, is not subject to VAT.
Income derived from the operation of public service utility companies (e.g. suppliers of water, electricity, local telecommunications and natural gas) are not obliged to apply the presumptive income to determine their income tax liability.
The applicable income tax rate for taxpayers in a FTZ is 15%.
In addition, companies in an FTZ or that have requested qualification as an FTZ or FTZ-user until 31 December 2012 are not subject to the recently enacted income tax for equality – CREE ( Impuestosobre larenta para la equidad– CREE), applicable as from 1 January 2013.
Small enterprises (companies and individuals) with less than 50 employees and total assets not exceeding 5,000 monthly minimum legal wages, incorporated as from 29 December 2010, are subject to tax at the following reduced income tax rates:
- 0% income tax rate during the first 2 years of activity;
- 25% of the general tax rate during the third year;
- 50% of the general tax rate during the fourth year;
- 75% of the general rate during the fifth year; and
- 100% of the general tax rate as from the sixth year.
As a corollary to the above, they are not subject to income tax withholding.
In addition, during their first 5 years of activities, they are not obliged to apply the presumptive income tax regime.
Payroll taxes and the commercial registry before the Chamber of Commerce are also reduced.
The incentives apply for longer periods for small enterprises incorporated in the departments of Amazonas, Guainía and Vaupés.
The benefits apply exclusively to operational or ordinary income derived from a commercial activity. Any other income derived by the taxpayer is subject to the general rate. For this purpose, taxpayers must segregate in their books the costs and expenses related to eligible income, and proportionally attribute common expenses to eligible and non-eligible income.
New small enterprises or pre-existent enterprises which in the fifth year derive from their commercial activity a total gross income lower to one thousand (1,000) UVT are entitled to apply 50% of the general income tax rate.
The application conditions (net assets and number of employees) must be fulfilled during the entire period during which the benefits may apply. Failure to comply with this condition entails the recapture of any benefits granted. Benefits are also lost if the taxpayer fails to comply with certain obligations such as the renewal of the commercial registration, the payment of payroll contributions and the filing and payment of taxes.