Gastos Notariales - Everything You Need to Know | MedellinAdvisors.com

Gastos Notariales – Everything You Need to Know

Notary fees are an important aspect when buying a property in Colombia

Gastos Notariales - Everything You Need to Know

Anyone who has purchased a home in North America or Europe understands that there are typically “closing costs” associated with a sale. Lawyers, land title registration offices, and other government agencies, among others, take their cut for services rendered and these expenses are over and above the final agreed upon price for what comes out of the buyer’s pocket. Sellers, too, are subject to these expenses, being line items that reduce the net receivables from the sale.

Colombia is no different – you’ll have to pay sums to a notary and the government in order to properly acquire property. But what are these expenses? How much are they – and who do they go to? This article seeks to provide detailed answers to these questions using real examples and citing the relevant laws that obligate these payments. 

Buying real estate in Colombia
Gastos Notariales in Colombia are like closing costs in your country

The amount paid in gastos notariales corresponds to the value put on the deed. Anyone engaged in the real estate industry here knows that Colombians almost always try to put a lower amount on the deed than the actual sale price. Con razon! Each of these expenses is reduced with a lower price on the deed. And while often the amount paid works out to a fairly even split between buyer and seller, it is wrong to assume that these expenses are simply split 50-50. It is not that simple.

I decided to write this article after closing a number of deals wherein both the buyer and seller were really unclear about how notary expenses worked. 

Why are they confusing? Well, for starters – there are 5 ‘gastos notariales’ that are common, but one of them is quite literally expenses/costs paid to the notary, which is often called gastos notariales on its own (#1 below). For the purposes of simplicity for this article, we’ll refer to it as derechos notariales which is another moniker, and save gastos notariales as the umbrella term for all of these expenses combined.

Notary fees are an important aspect when buying a property in Colombia
Buyers can expect to pay approximately 1.5% of the deed price in Gastos Notariales. The rest of the article explains how to calculate exact amounts


What are The Gastos Notariales?

I’ll start with the common name for each and an extremely concise definition, before developing each in much more detail and with examples below.

(1) Derechos notariales:
Sometimes confusingly called gastos notariales, these are fees that are earned by and payable to the notary for conducting the transaction. These are split 50-50 between buyer and seller.

(2) Rentas Departamentales:
This is a tax paid to the Government of Antioquia. It is also split 50-50 between buyer and seller.

(3) Registro:
This is a tax paid to the City of Medellin for registering the property in your name. This is paid 100% by the buyer. 

(4) Retención en La Fuente:
This is a 1% tax for the seller only, and only if the property is in their personal name. If the property is owned in the name of a business, such as an SAS, then this amount is not withheld.

(5) Impuesto de Timbre
Introduced in January 2023, this is a progressive tax on the most expensive properties, implemented with Gustavo Petro’s Tax Reform. 

(1) DERECHOS NOTARIALES

Notaries are big business in Medellin – and property sales are their cash cow. They want you to walk in the door to do a deed transfer, as they can make a decent chunk on every sale. 

According to resolution of the Superintendencia del Notariado y Registro Nº:  01299 of February 11, 2020, the rate for the payment of derechos notariales is called tres por mil –  three per thousand (3×1000 – not to be confused with the notorious cuatro por mil 4 x 1000 which is a 0.4% financial transaction tax).

So you take the deed price, multiply it by 0.3%, and then add 19% IVA to that amount to get the total amount payable to the notary. Then that amount is split evenly between buyers and sellers. 

Sound confusing? Hopefully the examples below will help make it a little more clear. 

Notarial Expenses
The payment of derechos notariales is assumed in equal parts between buyer and seller


For each of the first four gastos notariales, I’ve included examples of three different price points. A sale of 325,740,000 because it was a sale I recently did and have exact amounts and receipts to compare, along with sales of COP 500 millones and COP mil millones. As of April 2024 exchange rates, these amounts are $84K USD, $129K USD, and $259K USD, respectively. 

The far right column in the table above is the amount that each party will owe to the notary on the day of the deed transfer.

For the cheapest sale, the buyer will owe COP 581,445 to the notary, and the seller will owe the same. As the price on the deed increases, so does the amount payable to the notary. 

Did you do a sale recently, and the receipts show something slightly different than the formula? Well another reason notary expenses are tricky to pin down is that, despite being regulated by a Government formula, they can vary for a variety of reasons - including, but not limited to: # of pages on the deed, # of people on the deed, # of sellers, if there is a mortgage, if the buyer decides to leave a trust to someone upon their death, and more. However, usually these variations are small and these formulas and examples should provide you with an accurate estimate of what to expect. 

(2) RENTAS DEPARTAMENTALES

The official name of this gasto notarial (Impuesto de Registro y Estampillas Prodesarrollo) lends itself to even more confusion because the word “registro” appears – however this is THE name for #3 (below). Don’t let that confuse you –  this expense is simply referred to as “Rentas Departamentales“. 

It is a tax that is paid to the Government of Antioquia (or whatever province you purchase the property in). Two calculations are made –  which comprise 1.037% of the escritura value and 0.5% for stamps (estampillas). These amounts are added together. Other small expenses could also be added to this for servicios informáticos or something similar.  Each provincial entity may, within its powers, request additional charges and payments, and you really won’t know the exact amount until this bill is generated – typically a week or two after the deed transfer.  

Notarial Expenses

The examples above illustrated the total amount of rentas departamentales to be paid. The far right column is the total bill and this amount should be divided equally between buyer and seller

This is a very typical opportunity where a seller will try to take advantage of your lack of knowledge in the local real estate market and get you to pay the entire amount – I’ve seen it more times than I can count. This amount should be split 50-50. 

The only reason this should not be split 50-50 is if the promesa de compraventa says something different. 

For example, if the seller drafted the promesa de compraventa (something I never recommend) – then they might have included a clause that says rentas departamentales, or, even more sinisterly, ALL gastos notariales are payable by buyer. However, absent language like this, this amount should be split 50-50. Additionally, this example should highlight the importance of having an excellent lawyer draft or review your promesa de compraventa

(3) REGISTRO

Unlike the previous example, this one does fall squarely on the buyer. Registro – the most expensive of the closing costs you are likely to face. The official title is a mouthful, being  Gastos de Oficina de Registro e Instrumentos Públicos + 2% de Conservación y Sistematización.  In accordance with the provisions of resolution No.: 02436 of 03-19-2021 of the Superintendencia del Notariado & Registro, the fees for the registration of titles, acts and documents vary according to the value of the deed. In the following table you can see the range of current rates:

Notarial Expenses


The table above illustrates the rate used to calculate the Registro expense. Another example of progressive taxation – the higher the value in the escritura, the higher the rate. Most expats will buy a property for more than COP 350 millones, so the top rate will apply (0.924%). From that amount, an extra 2% is added. Thus, just like rentas departamentales, two calculations are needed. 

Buying Properties in Medellin

Take note of how much the Registro expense increases as the price on the deed increases. 

Another thing you need to be clear on is when to pay these expenses. Some notarias will offer “full service” wherein you pay all these expenses at once on the day of La Escrituracion (deed transfer). They will keep the full amount in their bank account and pay these expenses as they are generated. 

While the pandemic certainly threw into a state of uncertainty the timeline for when these payments are generated, the rentas departamentales bill is usually generated about a week or two after the deed transfer, and the registro bill is generated 2-5 weeks after the rentas are paid. 

Therefore, you may need to pay all of these expenses at the notary on the day you take possession, or, you may not have to pay the largest expense until up to two months later. Ask your lawyer or real estate agent for clarification on this point. 

(4) RETENCION EN LA FUENTE

 Called Impuesto de Retención de La Fuente, this one is the easiest to calculate. It is equivalent to 1% of the value of the sale. If the seller is a legal corporation, it does not apply. Thus, it may be advantageous to buy the property in a company name, if you’d like to avoid this tax upon resale. However, there are ongoing costs and bureaucratic headaches associated with operating a business that may make this not even worth it. 

Using the same three sales price examples – the calculations would be as follows: 

Gastos Notariales
By far the easiest to calculate, retencion en la fuente is equiivalent to 1% of the price of the deed and is payable by seller

The preceding examples highlight the four different expenses that are referred to by the term Gastos Notariales. While it is common to say that these are split evenly, in fact it is never exactly 50-50, unless in the bizarre coincidence where the retencion and the registro came out to the same amount. 

USE YOUR KNOWLEDGE AS AN OPPORTUNITY TO NEGOTIATE

In the seven years since I started investing in Medellin in a personal capacity and the three years that I’ve worked as a buyer’s agent, there are two things I’ve seen time and time again: 

– Astute sellers will use gastos notariales as an opportunity to save money if possible – trying to take advantage of an inexperienced buyer. 
– Buyers can save $ if dealing with an extremely busy seller or an inexperienced seller in this field. 

Negotiation Example #1 – Seller owes less

For example, let’s say the purchase price of your property is COP 500 Millones. You can use this article quickly calculate what the buyers and sellers obligations will be. 

Buyer: Derechos notariales COP 892,000 + Rentas COP 2,717,500 + Registro COP 4,712,400 = COP 8,321,000

Seller: Derechos notariales COP 892,000 + Rentas COP 2,717,500 + Retencion COP 5,000,000 = COP 8,609,500

In this case, of the total gastos notariales due (COP 16,930,500), buyer will pay 49% and seller will pay 51%. However, if the seller was a company (SAS), that amount would change to 70% payable by buyer and 30% by seller. The seller would be legally obligated for gastos notariales of just COP 3,609,500. Here’s a perfect example of where you could throw out a lowball offer but then say: 

“Pagaré y me haré cargo de todos los procesos relacionados con los gastos notariales”

At the end of the day, the notary is going to be doing the calculations and the processes, mentioned above. 

The seller may not know that their obligation is less, or may be very enticed by not having to deal with this part of the transaction at all. Ultimately the notary will take care of the tramites so offering to take charge of that is a little disingenuous – but hey – that’s business. Maybe you can get COP 10 or 15 millones off the purchase price just by picking up their COP 3.6 millon share of these costs. 

Negotiation Example #2 – Seller stuck on a price
Many sellers have a fixed price in mind for their property and they absolutely will not want to sell below that price. It may be a nice, round number, such as COP 1,000,000,000 (mil millones de pesos example #3 from this article).  Your notary expenses for this amount will be COP 16.6 millones. If you are haggling out what the exact price will be, you can say something like: 

“Bueno, te pagaré el precio completo que quieras, pero tienes que pagar todos mis gastos notariales”

If they agree, you’ve essentially reduced the purchase price to COP 983,400,000 – because they’ve agreed to pick up your share – but the seller still feels as if they got that minimum floor price that they wanted. It’s more of a psychological thing than anything, but I have seen it work. 

The Promise of Purchase and Sale is a contract that is signed prior to the purchase of the property
Every aspect of the property acquisition process is negotiable - and notary expenses are no exception - be sure to know what you are talking about


(5) IMPUESTO DE TIMBRE: PETRO 2022 TAX REFORM ADDING NEW "GASTO NOTARIAL"

During Colombian President Gustavo Petro’s first year in office, he proposed a new “notary fee” in his tax reform (Article 519 of Law #2217 of 2022). This tax, now called Impuesto de Timbre, is a levy that only affects properties with a deeded value above a certain minimum amount, an amount that for the year 2024 is COP 941,300,000. The examples below show how it is calculated.

Accordingly, properties with a deed transfer price below COP 941,300,000 will not be affected, which represents the vast majority of transactions from a local perspective. However, when considering properties in which foreign buyers are interested, more of them will be subject to this tax because foreigners tend to be interested in more expensive properties.

The “Impuesto de Timbre” basically consists of 3 levels (2024 figures):

Level 1: COP 941.300.000 million or less – 0%.

Level 2: COP 941.300.000 million to COP 2.35 billion = 1.5% on the amount exceeding COP 941 million.

Level 3: COP 2.350.000.0000 millions or more = 3% on the amount exceeding COP 2.350.000.000 millions PLUS COP 21.1 million (the maximum amount of the previous level)

These amounts are all linked to the “Unidad de Valor Tributario” (UVT)”. Which in 2024 is 47,065 Colombian pesos, and as such, will be adjusted in 2025 and in subsequent years as the DIAN changes the UVT.

If you are going to buy a property you will have to pay the Impuesto de Timbre in Colombia.
Petro added a fifth 'gasto notarial' called Impuesto de Timbre - it must be paid when acquiring more expensive properties

Examples of Impuesto de Timbre - Different Deed Prices

Examples calculation impuesto timbre
The "Impuesto de Timbre" will depend on the value of the properties to be acquired

To calculate the Impuesto de Timbre, let’s first determine what level the values to be recorded fall into and then apply the corresponding formula.

 

For Example #1:
• Deed value: COP 941,299,000. Since it is less than 20,000 UVT (COP 941,300,000), Level 1, percentage (0%) is applied.
You do not pay “Impuesto de Timbre”.

For Example #2:
• Value of Escrituras: COP 1,200,000,000. • Since the amount is greater than 20,000 UVT (COP 941,300,000) – COP 2,353,250,000, it falls into Level 2.• Amount that exceeds 20,000 UVT = COP 1,200,000,000 – COP 941,300,000 = COP 259,000,000.
• Tax payable: 1.5% of COP 259,000,000 = COP 3,885,000 

For Example #3:
• Value of Escrituras: COP 1,800,000,000. Since it exceeds 20,000 UVT (COP 941,300,000), it falls into Level 2.
• Amount that exceeds 20,000 UVT: COP 1,800,000,000 – COP 941,300,000 = COP 858,701,000.
• Tax payable: 1.5% of COP 858,701,000 = COP 12,880,550.

When the deeds exceed the value of 20,000 UVT, the Impuesto Timbre must be paid
When the deeds exceed the value of 20,000 UVT, the Impuesto Timbre must be paid

For Example #4:

• Value to Escrituras: COP 4,000,000,000. Since it is greater than 50,000 UVT (COP 2,353,250,000), it falls into Level 3. Amount that exceeds 50,000 UVT = COP 4,000,000,0000 – COP 2,353,250,000 = COP 1,646,750,000.

• Tax payable: 3% of COP 1,646,750,000 + COP 21,100,000 = COP 49,500,000 + COP 21,100,000 (level 2 maximum) = COP 70,600,000.

To be well-versed in Gastos Notariales, one must be able to navigate a number of different complicated Spanish terms, a number of different mathematical formulas and a number of different Governmental resolutions that lay the legal framework for these costs.

I recognize that this may be overwhelming, so, in my opinion, these are the most important things to keep in mind. 

Key takeaways:

  • There are 5 different “Gastos Notariales”. Three are split 50-50, 1 is only payable by buyer, 1 is only payable by seller
  • As a buyer, a rough estimate of 1.6% of the price of the deed should give a good approximation of the 3 different notary expenses you will pay, unless the property is very expensive and a high impuesto de timbre is applicable. 
  • Buy the property in a company name to avoid paying retencion en la fuente in the future. However, there are other headaches involved in maintaining a business here so it may hardly be worth it.
  • DO NOT allow the seller to tell you rentas departamentales are the sole responsibility of the buyer. Despite what they say, it is much more common to split this 50-50 unless the promesa says otherwise. 
  • Understanding these expenses well can help you use them to negotiate the final terms of a property purchase. 

Still confused? Send me a message with the specifics of your deal and I would be happy to guide you through what you should or shouldn’t owe and how to negotiate your best possible deal. 

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