Avoiding Tax Issues as a Programmer: A Guide for Colombian Contractors
Don't be misled, your tax liability does not depend on the geographic location of the bank where you opened your account to receive your income!
Let's first talk about tax liability, if you are a Colombian resident, you will have to respond to the DIAN for everything you own in the world, if you are not a Colombian resident, you will only be responsible for what you own in Colombia. In other words, as long as you are Colombian, you will be responsible for the Income Tax.
How do we know if we are residents or not? These conditions are framed in Article 10 of the Tax Statute, there you can expand in detail each of them, however, next, we tell you some of the main ones and that are closer to common interest.
When are you considered a Resident?
You are a resident if:
- You are Colombian and during the taxable year:
- Your dependent children or spouse are tax residents (that is, they meet the above point)
- 50% of your income is from a national source
- 50% of your assets are managed in the country
- 50% of your assets are understood to be owned in the country
- You have been requested by Diana to prove your residency abroad and have not yet done so
- You have tax residency in a jurisdiction classified as a tax haven
You are not a resident if
- You stay less than 183 days continuously or discontinuously
- You meet one of the above (A-F) literals but meet one of the following conditions:
- 50% or more of your annual income is from a source outside the country
- 50% or more of your assets are located outside the country.
In any case, if after reading the conditions of Article 10, you identify that you are not a tax resident, you must prove this status to the DIAN tax administration according to the procedure in force at that time, and only then will you be responsible only for the income obtained within Colombia, otherwise you will continue to be responsible for what you receive throughout the world.
How does it impact your finances?
Now, looking from a second perspective and addressing the topic from a financial context, you must keep in mind that today, all financial transactions are monitored from a very robust system which allows for constant cross-referencing of information, not only by the tax administration but also by different sectors of the market, which facilitates the study of people's borrowing capacity and therefore simplifies the process of granting loans, opening credit lines, generating credit cards, granting mortgage loans, car loans, among others, and therefore increases control and monitoring of those same transactions.
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Banks are the main issuers of financial information to the tax authorities. Without a doubt, there are tools and various multilateral agreements among institutions and between countries, which even allow for cross-referencing information with foreign entities to validate data, such tools are at the service of people who take advantage of the utility of such information for commercial purposes at the same time that the administration uses it to consolidate tax information.
Regarding the relationship between Colombia and the United States, we have been given the false idea of an isolation of financial information between the two countries, we have been sold the theory that, if our money enters, remains or is spent in a bank outside of the country, it will not be taxed by the Colombian tax authorities. This is a mistake, the location of the bank where you open your account has no bearing on your tax liability, whether you are a resident or not.
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