A question we get asked often is from expats asking if their foreign pension is taxable in Colombia. The answer is: it depends on the total amount you receive on a monthly basis. The exclusion amount is relatively high so the vast majority of pensioners should not have to pay any taxes on their pension. Gerencie published an excellent article in Spanish which I have translated into English.
Taxpayers who receive a pension abroad can declare it as exempt income under the terms of section 5 of Article 206 of the tax statute.
Exemption on pensions earned and paid abroad.
Individuals who are tax residents in Colombia and collect a pension earned and paid abroad are entitled to the exemption provided in section 5 of Article 206 of the tax statute, as established by paragraph 3 of the same article. Tax Reform Law 2277 of 2022.
Under the new legislation, the government treats Colombian-source and foreign-source pensions equally. As a result, all pensions, whether sourced from Colombia or abroad, are tax-free up to a monthly allowance of 1,000 UVT (UVT = unidad de valor tributario/taxable value unit). In 2023, 1 UVT equals COP $42,412, making the monthly tax-free amount COP $42,412,000 (approx USD $8,900 for 2023). If your monthly pension surpasses this amount (USD $8,900), tax must be paid on the excess.
This applies both to Colombians who have earned a pension abroad and are tax residents, as well as to foreigners who are tax residents in Colombia.
How to declare pensions paid abroad
Pensions paid abroad are declared under the pension section, as stated in Article 1.2.1.20.2 of Decree 1625 of 2016.
There is no general limit regarding the exemption on income in the pension section. The only limit being 12,000 UVT as established by section 5 of Article 206 of the tax statute.
Double taxation treaties on taxes paid on pensions abroad
The pension amount that exceeds 1,000 UVT per month is subject to income tax, meaning that income tax must be paid on the excess, and it is likely that tax was also paid in the country of origin on the same pension. In this case, double taxation treaties apply as per Article 1.2.1.20.2 of Decree 1625 of 2016:
“Pension income also includes income derived from pensions, retirement savings in life annuity systems, and similar income obtained abroad or from multilateral organizations. This is without prejudice to the provisions of the Treaties to Avoid Double Taxation signed by Colombia and in force.”
In general, under treaties to prevent double taxation, pension income is taxed in the country where the pension was earned and paid. In such cases, these incomes are taxed in that country and not in Colombia, and section 5 of Article 206 of the tax statute does not apply.
If no treaty to avoid double taxation exists with the country paying the pension, tax credits for taxes paid abroad may be applied. Therefore, if the individual must pay tax on those foreign pensions in their country of origin, they can deduct it in Colombia under the rules imposed by Article 254 of the tax statute.
Is an Expat’s foreign pension taxable in Colombia?
To summarize, if your foreign pension is less than ~$8,900 USD per month, it is not taxable. If your foreign pension is over ~$8,900 USD per month, it is likely taxable. Discover Barranquilla assumes no responsibility for the incorrect or late filing of tax returns. We recommend you speak to a tax professional to discuss your particular case.
Can you help me process my retirement or pensioner visa?
Yes, we can assist you with processing your Colombian retirement visa. You can find additional information and our fees by clicking HERE. If you need insurance for your visa, we can also provide you with a quote.
