How can an Umbrella Company Help with Contracting in Colombia?
Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.
They’re called Umbrella Companies (or, contractor management companies).
Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.
Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in Colombia. Even better, most are experts in Colombia and expat tax law, meaning they’ll also help you optimise your earnings in Colombia.
Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.
Can I Organise My Taxes and Work Permit Myself?
Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for Colombia.
If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.
Also, are you familiar with the intricacies of the tax system in Colombia, as well as your own country’s laws on overseas earnings? If so, good on you!
However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in Colombia and your home country can seem like full-time work in itself.
A Contractor’s Guide to Taxes in Colombia
One of the most consistently challenging aspects of contracting in Colombia is complying with the country’s tax system. As well as paying tax in Colombia, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.
How do I calculate my taxable income in Colombia
If you’re working in Colombia under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. This means that they calculate and process your taxes in Colombia for you and then send you a net wage. Your income tax, public health insurance, social security and other deductions will all be covered by this payment. This is the easiest way to handle your income tax in Colombia, but contractors may not be offered this service because of their short stay with each employer.
Anybody who can’t pay their tax in Colombia through PAYE is left with the prospect of doing everything themselves.
Do you know much about Colombian Tax Law? Does Colombia have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in Colombia can range from 0 to 35 percent, and you need to be sure you are placed in the correct tax brackets.
Tax Filing as a Contractor in Colombia
| When Do You Need to Lodge Your Tax Return? | The tax year is the calendar year. Tax returns may be lodged after the end of the tax year. |
| Tax Filing Deadline | Each year, the Colombian government establishes deadlines for filing income tax returns. Filing deadlines range from August to October. The exact deadline depends on the last two digits of your Colombian tax ID. |
| Can you file it online? | Yes, https://muisca.dian.gov.co/WebArquitectura/DefLogin.faces |
How to File Taxes in Colombia as a Contractor
The process for filing taxes in Colombia involves:
Step 1: Request a Registro Único Tributario (RUT) form from the DIAN Office. This RUT form will contain your Colombian Tax ID number, which is known as a Número de Identificacíon de Tributaria (NIT). You will need to bring your original ID (cedula or passport) and a copy of your ID (front and back of cedula or data page of passport).
Step 2: Log in here(link is external), using your NIT number and identification number.
Step 3: File the relevant form.
- Form 210: Declaration of Income and Complementary returns
- Form 160: Declaration of Assets abroad
Step 4: Once your tax return is completed, you can pay your tax via e-billing. You may also take your completed forms to any bank to pay the tax due. If you do not owe any taxes, the bank will stamp your form and process it without payment.
Tax Figures in Colombia
| Currency | Colombian Peso (COP) | ||||||||||||||
| Tax-free Threshold in Colombia | 1090 UVT (COP 36,140,040) | ||||||||||||||
| Income Tax Rates |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Notes | The above progressive rates apply to annual employment income of employees.
The following progressive rates apply to non-employment income and capital income.
*In December 2006, the Colombian government approved a reform of the Colombian tax system. Such reform incorporated the tax unit (Unidad de Valor Tributario or UVT) which is equivalent to COP 33,156 for fiscal year (FY) 2018. |
Tax Residency in Colombia
When do you become a tax resident in Colombia
You become a tax resident in Colombia when:
You remain in Colombia for more than 183 continuous or discontinuous days during a 365-day period.
Does the 183 day rule apply in Colombia
Yes
Am I taxed on my global income in Colombia
Yes, if you are a Colombian resident. Non-residents are subject to tax on their Colombian-source income only.
Can you set up your own Limited Company in Colombia?
| How long does it take to set up | 11 Days |
| How much does it cost | COP 1,192,200 + 0.7% capital registration tax. |
| Is it easy? | Starting a Business Rank: 96 |
Tax Calculator in Colombia
If you are a contractor and want a calculation on your tax and net retention in Colombia, we can supply it to you free of charge.
Using an Umbrella Company for Income Tax in Colombia
Contractors in Colombia are faced with masses of paperwork and numerous wasted hours filing a tax return unless they find an alternative option. A Colombian umbrella company can act as your employer during your stay in the country whilst still allowing you the freedom of a contractor. The only difference is that you submit your timesheets to them; they’ll calculate and pay your taxes as you earn, and then you receive a net wage (as well as documentation for your records).
The companies are experts in Colombian taxation, and they’ll ensure that you keep the largest proportion of your earnings whilst complying with local laws. They can deal with any issues with the Colombian tax office or tax department directly including processing your tax refund if you are eligible.
How We Can Help You with Tax in Colombia
We work with numerous umbrella companies in Colombia, many of whom are experts in tax and immigration laws. If you have any questions about tax in Colombia, we’ll get the answers from them directly so you can rest assured you’ll be getting accurate information. We have comprehensive knowledge of the different services they provide, and can help you find the right company to handle your income tax. We help oil and gas workers, software developers, IT project managers, testers, business analysts and telecommunications contractors get tax efficient payments and sponsorship for their Colombian work permit.
Our advice is 100 percent free, and comes with no obligations. You will be paying taxes in Colombia but without the overhead of directly dealing with the Colombian tax authorities. Get in touch with us today for some reliable advice on tax in Colombia!
A Contractor’s Guide to Work Permits in Colombia
Immigration is one of the primary concerns for any contractor hoping to start working in Colombia. Permanent employees will find it easy to get their Colombian work permit because they’ll receive “sponsorship” for their entire stay from their prospective employer.
The Colombian work permit, known more commonly as the PIP-6, is dependent on this sponsorship because it confirms that you’ll be earning money during your stay in the country. Contracting in Colombia is more difficult because the work permit is tied to one employer, so you have to change it to suit each new contract. Thankfully, umbrella companies provide a convenient and effective solution to this issue.
How Does an Umbrella Company Work?
Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.
When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.
While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in Colombia (which means avoiding fees, fines, or even worse penalties).
How Can We Help You?
There’s a huge variety of Umbrella Companies with different specialities and advantages in Colombia. How do you find the right one for your circumstances?
We work closely with Umbrella Companies all throughout Colombia and match contractors with the right company for them. If you’ve already secured a contract in Colombia, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).
