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When buying real estate properties in Cartagena, Colombia, foreign investors can use these key strategies to minimize taxes and maximize ROI.
Investing in real estate in Cartagena, Colombia, is a profitable and rewarding venture. As a foreign investor, you must know the tax implications of purchasing a property in Cartagena. By using some key strategies, foreign investors can reduce the taxes they pay and maximize their returns on investment. Here are some tips on how to minimize taxes as a foreign investor buying real estate properties in Cartagena, Colombia.
Take Advantage of Tax Treaties
Colombia has tax treaties with many countries, such as Canada and European countries. These treaties can help reduce taxes for foreign investors by eliminating or reducing double taxation. Double taxation occurs when a foreign investor is taxed on the same income by both the country where the income is earned and the country where the investor is a resident. Taking advantage of tax treaties, foreign investors can reduce their tax liability and maximize their returns.
Corporate-Owned Property
Investing in a Colombian corporation can be tax-efficient for foreign investors who own real estate properties in Cartagena. Furthermore, holding property through a Colombian corporation allows foreign investors to reduce their tax liability and provide asset protection. Also, it gives you the opportunity to take advantage of tax deductions and credits unavailable to individual investors.
Another related option is to place your property in the name of a foreign LLC. There are tax incentives and deductions that apply to foreign-owned property. Depending on the country, you may be able to claim things like property depreciation, management expenses, interest, and property taxes, to name a few.
The amount of time you use the property for personal use vs. as a for-profit rental will affect taxes as well.
Consider The Capital Gains Tax
The capital gains tax is a tax on the profits from selling an asset, such as a real estate property. In Colombia, the capital gains tax rate is currently 15%, but it can vary depending on the type of asset and the length of time it was held. Foreign investors should be aware of the capital gains tax when selling real estate properties in Cartagena, as it can significantly impact the overall return on investment.
Stay Up-To-Date With Tax Laws and Regulations
Tax laws and regulations in Colombia are regularly changing. It is crucial for foreign investors to stay up-to-date with any changes that may affect their tax liability. By staying informed about tax laws and regulations, foreign investors can take advantage of new tax-saving opportunities and avoid penalties and fines for non-compliance.
Don't Overstay Your Welcome
An often unknown strategy to reduce your tax bill is to NOT live in Colombia. If you remain in the country less than 180 days a year, you are considered a non-resident.
Non-residents are only required to pay tax on Colombian-sourced income. For this reason, you do not have to report earnings from any activity undertaken outside of the country.
Keep Accurate Records
Keeping accurate records is essential for reducing taxes as a foreign investor. By maintaining detailed records of all expenses related to real estate property, foreign investors can claim tax deductions and credits. In addition, accurate records can help foreign investors avoid penalties and fines for failing to comply with Colombia's tax laws and regulations.
Hire a Local Accountant or Lawyer
The best way to ensure you can take advantage of the above-mentioned strategies is to hire a local accountant or lawyer. By being more familiar with Colombia's tax laws and regulations, a local expert can help guide you; they will better understand the tax obligations and help you identify tax-saving opportunities that may not be immediately apparent to you as a foreign investor.
Use a Management Company to Manage Your Properties
When it comes to saving on taxes, knowledge is power. Many of the tax-saving strategies mentioned above require understanding the local laws and regulations. A property manager can help you with the following:
Keeping up-to-date with local legislation, such as Colombia's National Tourism Registration (RNT), contracts, and market fluctuations
Promoting your property according to cultural and local marketing standards
Ensure your property rates are competitive with the local market & profitable in high and low season
Liaising with a trusted accountant and service providers to pay appropriate taxes and service rates.
Use a Qualified Real Estate Team
Using a qualified real estate agent can help foreign investors navigate the real estate market in Cartagena and identify properties that offer the best return on investment. A skilled real estate agent can also provide advice on tax-saving strategies and help foreign investors comply with the tax laws and regulations in Colombia.
Not all real estate companies in Cartagena understand what benefits foreign investors. Even if they are reputable realtors for local investments, they may underestimate the intricacies of purchasing real estate as a foreigner. Always do your due diligence before hiring someone.
Full-Service Concierge: The One Stop Solution
It is not easy to find a trusted lawyer, accountant, and property manager to meet each of your needs. Hiring a full-service concierge professional is the best way to ensure all these tax-saving strategies are optimized for your investment needs.
Not only can they help you save on taxes, but they can advise you on the purchasing process, as well as the day-to-day management of your property.
Get in touch today and see why we are the best team to help you navigate your investment.