Understanding the costs of buying and owning a property in Colombia: A guide for foreigners
When you decide to invest in real estate in Colombia, it is important to understand the costs involved in the process to guarantee that you can afford your investment. In addition to the purchase price of the property, there are some other costs that you should consider when buying and owning a property in 2023:
Costs on the purchase of the property - when purchasing a property in Colombia, there are different costs that may apply, including:
a. Notary fees: One of the main costs that you will encounter when purchasing a property in Colombia are the notary fees. Notary fees are charged for the services of the notary who will handle the public deed of sale. These fees can vary depending on the value of the property. The base of this fee is 3x1.000, which means that for every 1.000 COP (Colombian Peso) you pay, the notary charges 3 COP. For example, if you buy a property for $100.000.000 COP, you will have to pay for this fees COP $300.000 plus VAT.
b. Registration fees: Once the public deed has been granted, it is necessary to register it before the Land Registry Office (Oficina de Registro de Instrumentos Públicos, in Spanish). The registration fees are usually charged by the notary and are typically amount to 1% of the purchase price of the property. By a commercial costume, these fees are shared equally between the buyer and seller, but in the promise to purchase agreement can be established something different.
c. Registration tax: This tax is caused by the registration of the public deed in the respective Land Registry Office and is different front the previous tax, since it is paid before the department (state) where is located the property.
The tax is calculated based on the value of the property and varies depending on the jurisdiction where the property is located. In general, the tax rate is around 1% of the value of the property.
d. Stamp Duty Tax (Estampillas in Spanish): This tax cost varies depending on the municipality and in some municipalities this value is not charged. For example, in Barranquilla this tax is charge and it is around 1,5%, but Antioquia does not charge this tax.
e. Deed Execution Tax (Impuesto de Timbre in Spanish): This tax is paid depending on the value of the property:
When the property price is more than $848.240.000 COP but less of $2.120.600.000 COP (2023 value), the formula to calculate this tax is: (Property price - $848.240.000 COP) x 1.5%.
When the property price is more than $2.120.600.000 COP (2023 value), the formula to calculate this tax is: (Property price –$2.120.600.000 COP) x 3% + $19.085.400 COP.
f. Withholding tax: Is paid by the seller directly to the notary when the property is sold. It is around 1% of the value of the property.
2. Taxes and fees once you own a property – Once you acquire the property, you must consider:
a. Property Tax: Is based on the cadastral value of the property. It could be paid annually, every trimester or semester.
b. Valuation tax: Also known as appraisal tax, is a tax levied by some local authorities in Colombia. This tax is usually levied when the municipality or the department (state) is enhancing the value of the zone through improvements of infrastructure.
c. Condominium fees: If the property is subject to the condominium regime, you will have to pay every month this fee. It is calculated depending on the location, area, among other things.
d. Public utilities: These utilities include sewerage, water, electricity, and gas, which are paid every month.
In conclusion, buying and owning a property in Colombia involves various costs that you need to consider in addition to the purchase price of the property. These costs include notary fees, registration fees, taxes, legal fees, appraisal fees, public utilities, and condominium fees. By understanding the costs involved, you can better prepare yourself financially for your property investment in Colombia. It is important to work with experienced professionals such as lawyers to help guide you through the process and ensure a successful transaction.