Determination of the Filing Obligation for Foreigners

A foreigner's obligation to file an income tax return in Colombia depends fundamentally on whether or not they are considered a tax resident in the country. This distinction is crucial because it determines the scope of their tax liability.

1. Foreigners with Tax Residence in Colombia

A foreigner who meets the conditions of Article 10 of the Tax Statute (Estatuto Tributario - E.T.) will be considered a tax resident in Colombia . In this case, their tax obligation is comprehensive:

• They are subject to income and complementary taxes on their national-source and foreign-source income and occasional gains.

• They must also pay taxes on their assets held both inside and outside the country.

To determine if they are required to file an income tax return, they must verify whether they meet the general exceptions of Article 592 of the Tax Statute—for example, if their gross income was less than 1,400 UVT and their gross assets did not exceed 4,500 UVT in the respective taxable year (Numeral 1 of Article 592).

2. Foreigners without Tax Residence in Colombia

Conversely, a foreigner who is not a tax resident in the country has a limited tax obligation:

• They are only subject to income and complementary taxes regarding their national-source income and occasional gains [1][2].

• They must only pay taxes on their assets held within Colombia.

When is Filing Mandatory and When is it NOT Mandatory for Non-Resident Foreigners?

Colombian regulations establish clear scenarios in which a non-resident foreigner may be exempt from the obligation to file, as well as specific situations that obligate them to do so.

Cases where Filing is NOT Mandatory

Article 592 of the Tax Statute establishes the conditions under which a foreigner without residence in the country is not required to file an income tax return. The main rule is as follows:

"Foreign natural or legal persons, without residence or domicile in the country, when the entirety of their income has been subject to the withholding tax referred to in Articles 407 to 411, inclusive, and said withholding tax has been applied to them.

This means that if all Colombian-source income received by the non-resident foreigner was subject to the corresponding withholding tax, and this tax was effectively paid by the withholding agent, they will not be obligated to file an income tax return.

Additionally, foreign entities that have not obtained national-source income are not tax filers, even if they own assets in Colombia, since they are only taxed on their Colombian-source income.

Cases where Filing IS Mandatory: Taxation by Significant Economic Presence (SEP)

Recently, the concept of Significant Economic Presence (Presencia Económica Significativa - PES / SEP) was introduced into Colombian legislation. This creates a tax obligation for non-resident individuals or entities that have a relevant economic activity in the country, even without having a physical domicile.

When is SEP triggered?

According to Article 20-3 of the Tax Statute, a non-resident individual or entity has an SEP in Colombia and is subject to income tax if they meet two conditions:

1. They maintain a deliberate and systematic interaction with customers or users in Colombia.

2. They obtain gross income equal to or greater than 31,300 UVT during the taxable year from transactions with customers or users in the country.

   
   

This rule applies especially to the provision of certain digital services from abroad, such as online advertising, digital content, mobile applications, streaming, among others [6].

Options and Obligations for Taxpayers with SEP

If a non-resident foreigner meets the SEP criteria, the law grants them two alternatives. They are required to choose one of them:

• Option A: File and pay income tax. If they choose this option, it becomes mandatory for the taxpayer to:

  • Register in the Single Tax Registry (Registro Único Tributario - RUT) as an income tax filer.

  • File the income tax return using the form prescribed by the DIAN for this purpose (currently, Form 115).

• Option B: Pay the tax through withholding at the source. The second option is for the tax to be collected through the withholding tax mechanism. If the taxpayer opts for this route, they are not required to register in the RUT or file an income tax return, as the tax is paid by the customer or user in Colombia who makes the payment abroad.

The choice between these two options is fundamental. If the filing route is chosen, formal obligations such as registration in the RUT and the periodic filing of tax returns are acquired.

Conclusions and Recommendations

To determine if a foreigner must file taxes in Colombia, I recommend following these steps:

1. Define Tax Residence: The first step is to determine if, under the rules of Article 10 of the Tax Statute, the person is considered a tax resident in Colombia. If so, they must pay tax on their worldwide income, subject to the general exceptions for not filing.

2. Analyze Income (if non-resident): If the person is a non-resident, they must verify if the entirety of their Colombian-source income was subject to proper withholding tax. If it was, they would not be required to file.

3. Verify if a Significant Economic Presence (SEP) exists: It is crucial to evaluate whether their activities meet the SEP criteria (systematic interaction and income exceeding 31,300 UVT). If met, the non-resident individual will be obligated to pay taxes in Colombia and must choose between filing an income tax return (which implies registering in the RUT) or undergoing withholding at the source.

The difference between an obligation and a recommendation lies in the concept of SEP. For a taxpayer with SEP, filing is not merely "recommended"—rather, it is one of the two mandatory options imposed by law to comply with their tax duties in the country.