A Complete Tax Guide for Expats in Medellín, Colombia
If you are reading the articles on this site, you probably already know the basics of how to buy property in Medellín. You have a sense of the right neighborhoods, you understand the role of the real estate attorney, and you know that the Promesa de Compraventa is not something to sign lightly. But there is one side of the transaction that most foreign buyers only think about after closing — and by then it is too late to plan properly: taxes.
Colombia has a relatively complex tax system, and the rules for non-residents are not always intuitive. Some foreigners assume that, because they do not live in the country, they have no obligations with the DIAN (Colombia’s tax authority). Others assume the opposite — that the Colombian tax authority charges them for everything, everywhere. The truth lies in the middle, and understanding it well can save you thousands of dollars a year.
This article walks through the main tax considerations a foreign investor should keep in mind before buying property in Medellín: wealth tax, income tax on rentals, capital gains tax when selling, property tax, and the question many investors end up asking themselves — does it make sense to buy through a Colombian SAS instead of in your personal name? Figures are updated for the 2026 tax year.
Disclaimer: This article is for informational purposes only. It is not tax or legal advice. Colombian tax regulations change frequently — in 2026 alone, two relevant decrees have already been issued — so before making any decisions involving real money, sit down with a qualified Colombian tax advisor.
1. The First Question: Are You a Tax Resident Or Not?
Everything in Colombian taxation starts here. The rules that apply to your case depend on whether the DIAN considers you a tax resident or not.
You are a tax resident in Colombia in any of the following situations:
- You are physically present in Colombia for 183 days or more (continuous or not) within any 365-day period.
- Your spouse or dependent minor children are Colombian tax residents.
- 50% or more of your income, your assets, or the assets you manage are located in Colombia, under certain conditions defined in the Tax Code.
The difference matters enormously. A non-resident only pays tax on Colombian-source income — for example, the rent from an apartment in El Poblado or the gain from selling a property here. A resident, on the other hand, pays tax on worldwide income, including pensions, investments, and rental income anywhere in the world. Residents must also file an informative declaration of foreign assets if they exceed a certain threshold.
Practical tip: if you plan to spend more than half the year in Medellín, you will most likely become a Colombian tax resident — and the tax picture changes significantly. Many investors who buy property here and use it as a base to travel around the region carefully track their days to remain non-residents. Either option is legitimate; what matters is making the decision consciously.
2. Wealth Tax: When Does It Apply To You?
Colombia is one of the few countries that still charges an annual tax on net wealth. Originally conceived as a temporary measure, the wealth tax was made permanent by the 2022 tax reform (Law 2277 of 2022) and is now part of the regular tax landscape.
Who pays the wealth tax?
For the 2026 tax year, the permanent wealth tax regime applies to:
- Individuals (Colombian or foreign) who are tax residents in Colombia, on their worldwide net wealth.
- Non-resident foreign individuals, on net wealth held directly in Colombia or indirectly through a permanent establishment in the country.
- Foreign companies that are not income tax filers in Colombia and own assets located here — real estate, yachts, aircraft, mining or oil rights, works of art — other than shares, accounts receivable, or portfolio investments.
The threshold and the rates
You are only subject to the wealth tax if your net wealth as of January 1 of the year equals or exceeds 72,000 UVT. The UVT (Tax Value Unit) is the unit Colombia’s tax system uses to keep values updated with inflation. For 2026, one UVT equals COP 52,374, which means the threshold is approximately COP 3,770,928,000 — around USD 940,000 at the current exchange rate.
In plain terms: if the net value of your assets in Colombia (as a non-resident) or your worldwide assets (as a resident) is below approximately USD 940,000, you do not pay wealth tax. Most foreign buyers in Medellín — who buy apartments in the USD 150,000 to USD 500,000 range — will not be anywhere near this threshold based on their Colombian property alone.
Starting in 2027, the top rate should drop to 1.0% for wealth above 122,000 UVT, although — as always with Colombian regulations — future reforms could change this.
Important: The Temporary 2026 Wealth Tax On Legal Entities
Decree 0173 of February 24, 2026 (amended by Decree 0240 of March 12, 2026), issued under the economic emergency, created an additional and temporary wealth tax for the 2026 tax year. It applies to Colombian legal entities (SAS, S.A., Ltda., etc.) and to permanent establishments and branches of foreign entities with net wealth equal to or greater than 200,000 UVT (approximately COP 10.47 billion or USD 2.6 million) as of March 1, 2026. The general rate is 0.5%, with a special rate of 1.6% for the financial and extractive sectors.
Why this matters to the foreign real estate investor: if you set up a Colombian SAS to buy a single apartment, this temporary tax does not affect you — the threshold is well above the value of typical real estate investments. But if you are building a portfolio of properties through a Colombian company and consolidated wealth approaches USD 2.5 million or more, then it does come onto the radar.
A worked example: Sarah, a Canadian retiree, is a non-resident for Colombian tax purposes. She owns an apartment in Laureles assessed at COP 800,000,000 (approximately USD 200,000) and has no other assets in Colombia. Her Colombian net wealth is well below the 72,000 UVT threshold. She pays no wealth tax in Colombia. Mark, an American investor, owns four apartments in Medellín with a combined value of COP 4.5 billion (approximately USD 1.12 million). He exceeds the threshold by about COP 730 million. He will pay roughly 0.5% on that excess — around COP 3.6 million a year (USD 900). Manageable, but it should be included in the return-on-investment calculation.
3. Income Tax On Rentals
If you rent out your apartment — whether long-term to a local family, medium-term to digital nomads, or short-term through Airbnb — that income is Colombian-source and is taxed in Colombia, regardless of where you live.
For non-residents: a flat 35% rate
Article 247 of the Tax Code sets the general income tax rate for non-residents at 35% on net taxable Colombian-source income. That is considerably higher than the progressive rates for residents (which start at much lower levels). It sounds harsh — and it can be — but there is a structural relief: you may deduct legitimate costs and expenses associated with generating that income.
Typically deductible costs and expenses:
Property tax paid to the municipality.
- Building administration fees (HOA dues).
- Maintenance and repairs.
- Fees paid to the property management company.
- Insurance premiums on the property.
- Utilities, when paid by the owner.
- Depreciation, in some cases.
Withholding at source
If your tenant is a company or any other entity classified as a withholding agent, they are required to withhold a percentage of the rent and remit it to the DIAN as an advance against your income tax. The general withholding rate on real estate rentals is 3.5% on the payment or accrual.
If you rent through a property management company (the norm, and what we recommend at Medellín Advisors), they typically handle the withholding for you and at year-end provide a withholding certificate that you use when filing your return.
Are non-residents required to file an income tax return?
This is one of the questions we get most often. The general rule, under articles 592 and 594-3 of the Tax Code, is that a non-resident is not required to file a Colombian income tax return if 100% of their Colombian-source income was subject to withholding under articles 407 to 411 of the Tax Code, and they meet the income and wealth thresholds.
However, the nuances matter. In practice, many non-resident landlords end up filing a Colombian return (using Form 110, the form for non-residents) for several reasons:
- To deduct the costs and expenses associated with the rental, which is not possible if they simply leave the withholding as-is.
- To recover excess withholding when it exceeds the actual tax due.
- Because the tenant is an individual and does not withhold.
- Because they sold a property during the year (the sale of real estate by non-residents always triggers the obligation to file).
Practical tip: although the law allows certain non-residents not to file, most foreign owners benefit from filing anyway. The 3.5% withholding is usually higher than the actual tax once costs are deducted, and the resulting credit or refund can be significant. Talk to a Colombian accountant — their fees are reasonable (typically COP 1.5 to 3 million a year for a simple return) and the savings usually far exceed the cost.
4. Capital Gains At The Time Of Sale
When you eventually sell your property, the gain (sale price minus tax basis) is taxed in Colombia. How it is taxed depends on one critical factor: how long you held the property.
The two-year rule
Under article 300 of the Tax Code, the gain on the sale of real estate qualifies as ganancia ocasional (Colombia’s equivalent of long-term capital gains) only if two conditions are met:
•The property must be a fixed asset of the seller (not part of an inventory of properties traded in the ordinary course of business).
•It must have been held for two years or more, counted from the date of acquisition to the date of sale.
If you sell before reaching two years, the gain is taxed as ordinary income — which for non-residents means the 35% rate, and for residents can reach 39% on the progressive scale. If you sell after the two-year mark, the gain is taxed at the much friendlier flat capital gains rate.
The rate: 15%
For the 2026 tax year, the capital gains rate is 15% — for both residents (article 314 of the Tax Code) and non-residents (article 316). This is one of the most attractive features of investing in Colombian real estate from a tax perspective: hold the property for at least two years and your exit is taxed at a flat 15% on the gain, not on the sale price.
Note: There is a tax reform bill in Congress (filed in late 2025) proposing to raise the rate from 15% to 30% and extend the minimum holding period from 2 to 4 years. As of mid-2026 it has not been approved and its future is uncertain. But it is a reminder that Colombian tax rules can change, and today’s conditions are not guaranteed forever.
How the tax basis is calculated
The gain is the sale price minus the tax basis. The tax basis is not just what you originally paid — it can be adjusted upward in several legitimate ways:
- The acquisition price as recorded in the original public deed.
- Notary and registration fees paid at the time of purchase.
- Properly documented improvements that extended the useful life or capacity of the property (renovations, additions, structural improvements — not routine maintenance repairs).
- Valorization assessments (special municipal levies) paid during the holding period.
- An annual inflation adjustment under article 73 of the Tax Code, set each year by decree. For tax year 2025, the adjustment factor was 5.81%.
Critical tip: keep every invoice, every receipt, and every bank transfer that supports your improvements. Pay through the banking system, not in cash. The DIAN only recognizes costs that are properly supported and channeled through financial institutions. We have seen too many sellers lose legitimate basis adjustments because they paid contractors in cash and have no paper trail.
Notary withholding
At the moment of signing the public deed of sale, the notary is legally required to withhold a percentage of the sale price as an advance against capital gains tax. Under article 398 of the Tax Code:
- 1% withholding on the first 20,000 UVT (approximately COP 1.05 billion in 2026) when the property is the seller’s primary residence.
- 5% withholding on the total sale value when it is not a primary residence — which is the case for almost all properties owned by foreign investors.
This withholding is not the final tax. It is an advance credited against actual capital gains tax when you file your annual return. If the 2.5% withheld exceeds 15% of the actual gain, you generate a credit balance. If it is less, you pay the difference.
The primary-residence exemption
For Colombian residents who sell their primary residence, the first 5,000 UVT of gain (about COP 261.87 million in 2026) are exempt from capital gains tax, provided the property was held for at least two years and the proceeds are used to buy another home or pay off a mortgage. This exemption generally does not apply to non-residents on investment properties.
A worked example:
James, a non-resident American, bought an apartment in El Poblado in 2020 for COP 600,000,000. He invested COP 80,000,000 in a renovation, fully supported by invoices and bank payments. He sells in 2026 for COP 950,000,000. Tax basis: 600M + 80M + inflation adjustments ≈ COP 720M (approximate). Gain: 950M − 720M = COP 230M. Tax: 15% × 230M = COP 34.5M (approximately USD 8,600). Notary withholding (2.5% × 950M): COP 23.75M. James files his Colombian return and pays the additional COP 10.75M to settle the balance.
5. The Annual Property Tax
This is the most predictable tax in the picture. Property tax (impuesto predial) is an annual municipal levy based on the cadastral value of the property, which is generally lower than the market value. In Medellín, rates range from approximately 0.5% to 1.2% of the cadastral value, depending on the type and use of the property (residential, commercial, etc.) and the estrato.
For a typical El Poblado apartment with a market value of COP 800 million, property tax typically falls in the COP 2 to 4 million per year range (USD 500 to 1,000). Paying early in the year (usually before the end of March) generates a discount on the order of 10%. Failing to pay generates interest and can eventually result in liens that block the sale of the property — which is exactly what the Paz y Salvo Predial certificate checks during a transaction.
6. The Big Question: Does It Make Sense To Buy Through a Colombian SAS?
This is one of the most common questions among foreign investors who have more than one property in mind. The Sociedad por Acciones Simplificada (SAS) is Colombia’s most flexible corporate vehicle: it can be set up with a single shareholder, foreign individuals or entities can own 100%, formation is relatively quick (a few weeks), and it offers limited liability.
The question is whether the tax and operational benefits justify the additional cost and complexity. The answer depends on the size and nature of the investment.
Arguments in favor of buying through a SAS
- Limited liability. Your personal assets are shielded from claims against the property (tenant lawsuits, accidents, etc.).
- Income tax rate on rentals. The SAS pays corporate income tax of 35% on net profit. Although the nominal rate is the same as for non-resident individuals, a SAS can deduct a broader range of expenses, including depreciation under more aggressive criteria, salaries paid to managers, and operating costs.
- Estate planning. Transferring SAS shares to heirs is far simpler than transferring real estate directly — no deed, no notary, no Colombian probate process that can take a year or more.
- Portability of ownership. If you want to sell a portion of your investment to another investor, you sell SAS shares instead of restructuring the property itself.
- Better standing with banks and tenants. Some institutional tenants and Colombian banks prefer dealing with a local entity rather than a foreign individual.
- Efficiency for reinvestment. Profits retained inside the SAS to buy more properties are not subject to a second layer of tax until they are distributed as dividends.
Arguments against: the costs and drawbacks
- Formation costs. Setting up the SAS, registering with the Chamber of Commerce, obtaining the RUT, and legal fees typically add up to COP 3 to 6 million (USD 750–1,500).
- Ongoing accounting and tax compliance. A SAS must keep formal books, file monthly tax returns (VAT, withholding, ICA), file annual income tax, and renew its Chamber of Commerce registration. Budget COP 8 to 15 million per year (USD 2,000–3,750) in accounting and compliance fees.
- Industry and Commerce Tax (ICA). Rental income through a SAS is subject to ICA (a local tax), typically a few tenths of a percentage point on revenue. Non-residents who own the property directly do not pay ICA on residential rentals in the same way.
- Dividend tax. When the SAS distributes profits to the foreign shareholder, those dividends are subject to withholding. The rate is 20% for non-residents (or lower under an applicable double tax treaty), on top of the 35% corporate rate. This double layer can erode the benefit.
- Wealth tax considerations. As mentioned above, the temporary 2026 wealth tax targets legal entities. Most SAS that only hold properties do not reach the threshold, but it is a moving target.
- More administrative friction. Bank accounts, contracts, utility transfers — everything is done in the name of the company, with additional documentation required at every step.
So, when does a SAS make sense?
There is no universal answer, but based on what we have seen across hundreds of foreign investor transactions, this rule of thumb is useful:
In summary: For most foreign buyers acquiring a single apartment in Medellín for personal use or passive rental income, buying in your personal name is simpler and more tax-efficient. The SAS becomes the right choice when the investment grows in scale, when the use is more operational than passive, or when estate planning is a priority.
7. Registering The Investment: a Step You Cannot Skip
One issue that is often overlooked but is critical for any foreign investor is registering the investment with Colombia’s Central Bank (Banco de la República). Under Colombia’s foreign exchange regime, when you bring foreign currency into the country to buy real estate, the operation must be properly channeled through the regulated foreign exchange market and registered as foreign investment.
Why it matters:
- It is required by law. Failing to register the investment exposes the investor to fines from the Central Bank that can range from 30% to 200% of the unregistered amount.
- It is the basis for repatriating capital. When you eventually sell and want to move your money out of Colombia, the registered investment is what legally allows you to convert pesos back into dollars and transfer them abroad without restrictions.
- It is the basis for the investor visa. If you are applying for the M-type foreign investor visa, the registration is the document that proves your qualifying investment.
- It is the basis for repatriating earnings and dividends. The same logic applies when taking profits out of the country in the future.
Registration is done through your Colombian bank or through a brokerage firm such as Alianza Valores or Acciones y Valores. Your real estate attorney and the firm handling the fund transfer will guide you through this process, but make sure it actually happens. We have seen cases of foreigners who bought property years ago and today cannot easily repatriate the proceeds of a sale because the original investment was never properly registered.
8. Other Costs And Taxes You Should Know About
Notary and registration costs (at purchase)
When buying, expect between 2% and 4% of the purchase price in closing costs (notary and registration fees), typically split between buyer and seller. The main components are notary fees, the registration tax (0.67% to 1% depending on the department), and, in Antioquia, the beneficencia tax (1% of the sale value). For a detailed breakdown, see our article on Notary Costs.
Special tax on high-value properties
There is a special 2% tax on the sale of properties valued above 26,800 UVT (approximately COP 1.4 billion or USD 350,000 in 2026), excluding social-interest housing (VIS/VIP) and rural agricultural land. This affects high-end transactions in El Poblado, Envigado, and similar areas, and it is paid by the buyer.
IVA on short-term rentals
Long-term residential rentals are excluded from IVA. However, short-term rentals provided as lodging services (Airbnb-type operations registered as such) can fall under the 19% IVA regime, depending on how the activity is structured. This is another reason short-term rental operators often set up a SAS — to properly handle IVA and operational tax obligations.
9. Double Tax Treaties
Colombia has signed double tax treaties with several countries, which can significantly affect how rental income, capital gains, and dividends generated in Colombia are taxed in your home country. Treaties are currently in force with: Canada, Chile, South Korea, Spain, France, India, Ireland, Italy, Japan, Mexico, Portugal, the United Kingdom, Czech Republic, Switzerland, and the Andean Community countries (Bolivia, Ecuador, Peru). Notably, the United States does not currently have a comprehensive double tax treaty with Colombia.
If your home country has a treaty with Colombia, you can normally take a tax credit in your home country for taxes paid in Colombia, avoiding being taxed twice on the same income. If your country has no treaty (as is the case for U.S. investors), you should still be able to take a foreign tax credit under your country’s domestic rules, but the mechanics are slightly different. This is a conversation you should have with an accountant in your home country, not just with your Colombian advisor.
10. Practical Checklist Before Buying
Pulling all of the above together, here is what we recommend every foreign buyer think through before signing the Promesa de Compraventa:
- Define your tax residency. Will you be a Colombian tax resident? Make this decision consciously and keep track of your days.
- Estimate your wealth tax exposure. Add up your assets in Colombia (or worldwide if you become a resident). Are you close to the 72,000 UVT threshold (approximately USD 940,000)?
- Run the rental tax numbers. Estimate annual income, deductible expenses, and the resulting effective rate. Decide whether you will need to file a Colombian return.
- Plan your holding horizon. If there is any chance of selling within two years, the tax cost rises substantially. Plan around the two-year rule.
- Decide on the ownership structure. In your personal name or through a SAS? Use the rule of thumb above and consult a tax advisor for borderline cases.
- Register your investment. Make sure the foreign exchange registration with the Central Bank is done at the time of purchase, not later.
- Document everything. Every invoice, every transfer, every improvement. Your future tax basis depends on that paper trail.
- Build your local team. A good real estate attorney, a good accountant for annual filings, and a property management company. The combined cost is usually a small fraction of the tax savings and headaches avoided.
Final Thoughts
Investing in real estate in Medellín remains one of the most attractive opportunities in Latin America. The market moves in favor of the dollar, the city continues to grow, and the legal framework — once understood — is reasonably foreigner-friendly. But Colombian tax regulations are not something you want to learn the hard way after closing on a property.
The tax considerations reviewed here are not meant to discourage anyone. On the contrary: the more carefully you plan the tax side of your investment, the better your real returns will be. A foreigner who buys in their personal name, holds the property for at least two years, keeps proper records, files a Colombian return to deduct legitimate expenses, and registers the investment with the Central Bank, is going to be fine. A foreigner who skips these steps and tries to sort them out later will spend more time and money fixing the mess than it would have cost to do it right the first time.
At Medellín Advisors, we have walked through this process with hundreds of foreign buyers. We work with a network of Colombian tax attorneys, accountants, and foreign exchange specialists who handle the technical side, while we coordinate the bigger picture. If you are thinking about investing in Medellín and would like to talk through the tax side of your specific situation, get in touch.
Still feeling lost? Questions, comments?. Contact me today and I will be happy to discuss any of these issues further with you.
