In the final days 2019, President Ivan Duque signed the Economic Growth Law, which was approved by Congress and designed to promote economic development while reducing income equality in Colombia. With strategic benefits, Duque’s government aims to draw more foreign investment, increase infrastructure spending, create jobs, and stimulate local business.
Among the reforms included in the new law are a variety provisions: income tax exemptions, VAT refunds for the poorest citizens, VAT exemptions, asset tax on the wealthy, corporate tax rate reduction, tax benefits creating jobs, and more. The list is long, but below are a few of the relevant aspects for foreign investors.
The Economic Growth Law includes extensions and additions to the Orange Economy, a plan created by President Duque to stimulate development in the creative sector.
- Three areas of business will now be deemed eligible to receive benefits: sports, recreation, free time activities.
- To develop the Colombian countryside additional industries will also receive the benefits: forestry & logging, fishing & hatchery, food processing, and beverage manufacturing.
- Companies in the agricultural sector may have their headquarters wherever they deem most convenient and will still be eligible for benefits (vs. being required to have headquarters in same municipality as their investments).
- The minimum required investment will drop from USD $46,000 to USD $16,000
- The maximum annual gross income is still USD $900,000 but exempted industries now include: agriculture and developers of videos, movies, TV shows, and commercials.
Regarding income tax for businesses a few important changes have also been made.
- The corporate income tax rate will decrease 1% per year from 33% in 2019 to 30% in 2022
- Companies will receive tax benefits for engaging in technological development & innovation, projects of investigation, and hiring specialists that match criteria defined by the National Council of Tax Benefits of Science, Technology and Innovation (CNBT).
- Tax deductions will be given to companies who hire first-time employees 18-28 years old.
The Economic Growth Law also mentions the following changes:
- 1% tax on assets of greater than 5 billion COP (Colombian Pesos)
- VAT Tax cuts on imported capital goods
- Tax cuts for generating more employment
- Tax cuts on dividends
To find out more about how the recent changes may affect your business in Colombia or provide you with additional benefits, contact Ongresso to schedule a consultation.
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