The Colombian government offers investment incentives, such as income tax exemptions and deductions in specific priority sectors, including the so-called “orange economy” (creative industries), agriculture and entrepreneurship, according to a report from the Department of State of the United States.

In 2020, the government announced additional incentive schemes that aim to attract large investments exceeding $ 350 million and create at least 250 local jobs, facilitate the recovery from Covid-19, and generate investment in municipalities in conflict.

Investment incentives

According to preliminary figures, in 2020 the Colombian services sector decreased 4.9% in real terms and represented 59.5% of GDP.

As for the manufacturing sector, it decreased 7.7% and represented 11.7% of GDP in 2020.

Investment incentives through free trade agreements between Colombia and other nations include national treatment and most-favored-nation treatment for investors; the establishment of standards of responsibility assumed by the countries with respect to the investors of the other nation, including the minimum standard of treatment and the establishment of rules for the compensation of the investor for expropriation; establishment of rules for the transfer of capital related to investment; and specific tax treatment.

Other supports

The government also offers tax incentives to all investors, such as preferential import tariffs, tax breaks, and credit or venture capital.

Some tax incentives are available for investments that create new jobs or production in areas impacted by natural disasters and municipalities previously affected by conflict.

Companies can request them directly with participating agencies.

According to the report, tax and tax incentives are often based on regional, sector, or company-size considerations.

Border areas have special protections due to currency fluctuations in neighboring countries that can affect local economies.

In addition, national and local governments offer special incentives, such as tax breaks, to attract specific industries.

Tax reform

The Colombian government introduced a variety of sector-specific incentives as part of the 2019 tax reform. Among the incentives are:

• Income from hotels built, renovated, or expanded through January 1, 2029 in municipalities with fewer than 200,000 inhabitants will be taxed at nine percent for 20 years. The same facilities in the largest municipalities will be taxed at nine percent for 10 years.
• Typically 33% taxable income that is invested in agricultural projects or orange economy initiatives (creative) will be tax free.
• Revenues from the sale of electrical energy generated by the movement of wind, biomass, solar energy, geothermal energy or the tides will be tax-free, provided that the carbon dioxide emission certificates are sold in accordance with the Protocol of Kyoto and invest 50% of the proceeds from the sale of the certificate in social projects that benefit the region where the energy was generated.