Colombian-Source Income Under the Corporate Income Tax

Essay details

Please note! This essay has been submitted by a student.

The Colombian tax framework establishes taxes at departmental and municipal range. It is however, highly volatile with inconsistent tax reform. Figure 3 shows the fluctuation of the corporate tax rate in Colombia in the past decade. All foreign non-resident entities are required to pay taxes for their Colombian-source income under the Corporate Income Tax (CIT) scheme.

To ensure fair, explicit and legal foreign trades in Colombia, relevant tax laws have been enacted by the Colombian Tax and Customs National Authority (DIAN) (Team Colombia, 2019). In December 2018, it passed a bill of Tax Reform Law 1943 to provide a more favourable perspective for the business environment (Colombia: 2018 Tax Reform Act, 2018). This Tax Reform aims to reduce CIT of 33% to 30% by 2022, the CIT is expected to be at 30% (Colombia: 2018 Tax Reform Act, 2018). 

Essay due? We'll write it for you!

Any subject

Min. 3-hour delivery

Pay if satisfied

Get your price

Additionally, DIAN applied valued-added tax (VAT) rules to foreign companies for providing services to residents in Colombia (Americas Tax Center, 2018). Fortunately, there is a tax incentive on VAT, where businesses could recover the full amount of VAT paid for the acquisition, import or building of a non-current asset, that comes along with the Tax Reform Law made last year (Colombia: 2018 Tax Reform Act, 2018). Should Qian Hu expand to Colombia, it would benefit greatly from this tax incentive while it imports its relevant technologies and equipment to set up breeding farms in Colombia.

In the Global Competitiveness Report 2018, Colombia ranked 83th out of 140 economies in terms of infrastructure and is rated to have very poor quality of roads (The Global Competitiveness Report 2018, 2018). For example, the Andes Mountains is known for unsafe roads to commuters, and also obstructs the connectivity of the cities to both internal and external markets (Sales, 2013). Since Qian Hu majors in importing and exporting of ornamental fish and accessories, the poor infrastructures may cause difficulties for Qian Hu in facilitating the movement of goods and access to various locations.

Fortunately, Colombia is expected to be making improvements to its infrastructure through the Fourth Generation (4G) investment program to provide better maritime transport (Rogers, 2017). The government is focusing on expanding its roadways in line with the goal of doubling its inland and maritime trades (Rogers, 2017). However, this project will likely be completed in 2035 (Colombia thinks big with $70 billion infrastructure program, 2016). Should Qian Hu enter Colombia now, it would incur huge transportation expenses and potential losses due to delays or damage in delivery.

In Colombia, regardless of nationality, all employees are treated fairly with the same duties and labour rights (Five key aspects of Colombian labor law, n.d.). Under Colombian Labour Law, employees are limited to work 48 hours a week and 8 hours per day. They are also entitled to have at least one paid day off every six days (Employment, 2019). In the event of overtime, no employees are to be required to exceed two hours of its normal working hours and will be paid at 1.25 times the ordinary hourly rate (Employment, 2019). Additionally, special permit from the Ministry of Labour must be prescribed for employers to work overtime. Most importantly, as of 2018, a minimum monthly wage of $781,242 Colombian Pesos applies in Colombia (Spencer, 2018). Qian Hu would thus need to keep in mind these labour legislation to ensure a fair social security system in the workforce (Bermudez, 2017).

In the event that Qian Hu is bringing some of its employees to Colombia, Qian Hu needs to keep in mind that foreign workers in Colombia are required to hold a valid work visa, which costs US$276 – US$430 (Doing business in Colombia, 2017), and a work permit to conduct business activities (Bermudez, 2017).

In the Global Competitiveness Report from 2017 and 2018, it is anticipated that Colombia would become one of the most competitive countries in Latin America by 2032 (Schwab, 2018). However, currently, Colombia is ranked 60th out of 63 economies in 2018 in labour talent (Wade, 2018). This is due to a decline of labour pool talent; as the skilled Colombians goes abroad for better opportunities, the ones with lower education level and skills got left behind in Colombia. Only 16% of young adults in Colombia are expected to graduate with a higher degree at some point in their lifetime, against an OECD average of 38% (Education at a Glance 2016, 2016). 

These skilled labour are high in demand; this is especially so when the Colombian employees recognise them as the “ideal” candidate for positions (Compartir, 2008). Should Qian Hu expand into Colombia, it would need to join in the competition and may need to offer higher salaries for these skilled labour. However, Qian Hu may consider bringing a portion of its employees from elsewhere to Colombia if it deems that it is more practical to do so. 

Get quality help now

Prof Saney

Verified writer

Proficient in: Americas, Political Economy, Management

4.9 (316 reviews)
“He was able to complete the assignment following all directions in an elaborate manner in a short period of time. ”

+75 relevant experts are online

More Colombia Related Essays

banner clock
Clock is ticking and inspiration doesn't come?
We`ll do boring work for you. No plagiarism guarantee. Deadline from 3 hours.

We use cookies to offer you the best experience. By continuing, we’ll assume you agree with our Cookies policy.