Costs of Colombian Property Transactions: A Buyer’s and Seller’s Guide
Engaging in property transactions in Colombia, whether buying or selling colombian property, entails a range of associated costs that have been significantly influenced by recent legislative changes, particularly Law 2277 of 2022 (the tax reform) and the updated notary and registry fee schedules for 2023. Understanding these expenses is crucial for both buyers and sellers to accurately assess the financial implications and ensure the viability of their real estate endeavors. This guide provides a clear overview of the stamp tax, registration and notary fees, and the charity tax, all essential components to consider when transacting property in Colombia.
The Reintroduction of Stamp Tax: A New Cost Factor
The 2022 tax reform brought back the national stamp tax for property disposals formalized through public deeds. This tax, levied on public or private documents that create, extinguish, or modify obligations and involve the transfer of wealth, was previously phased out, reaching a 0% rate in 2010 following Law 111 of 2006. However, as of January 1, 2023, it has been reinstated, adding a new layer to the costs associated with property sales.
Article 77 of Law 2277 of 2022 amended Article 519 of the Tax Statute, establishing a tiered marginal rate for the stamp tax based on the property’s disposal value in Tax Unit Values (UVT):
- 0 to 20,000 UVT: 0% tax rate.
- Above 20,000 to 50,000 UVT: 1.5% applied to the value exceeding 20,000 UVT.
- Above 50,000 UVT: 3% applied to the value exceeding 50,000 UVT, plus a fixed amount of 450 UVT.
While the law itself doesn’t explicitly define who bears the burden of this tax, the National Tax and Customs Office (DIAN) clarified in a general concept (issued on February 24, 2023) that “disposal by any title” encompasses any transfer of property ownership, whether for payment or as a gift, including transfers within mercantile trusts. The DIAN also stated that the contributors of this tax are the parties involved in the document as grantors, drawers, acceptors, issuers, subscribers, or the beneficiary. Consequently, the economic responsibility for the stamp tax on property disposals exceeding 20,000 UVT is negotiable between the buyer and seller, allowing them to agree on the percentage each will assume.
Registration Fees: The Cost of Formalizing Ownership
In addition to the stamp tax, the registration of property titles at the Public Instruments Registry Offices incurs registration fees. These fees, updated by Resolution 00009 of January 6, 2023, issued by the Superintendence of Notary and Registry, are also tiered based on the value of the legal transaction:
- Up to COP$ 10,612,755: COP$ 44,100.
- Above COP$ 10,612,755 to COP$ 159,189,625: 7.55 per thousand of the transaction value.
- Above COP$ 159,189,625 to COP$ 275,928,655: 9.37 per thousand of the transaction value.
- Above COP$ 275,928,655 to COP$ 408,587,029: 10.44 per thousand of the transaction value.
- Above COP$ 408,587,029: 11.04 per thousand of the transaction value.
It’s important to note that for property sales at values lower than the cadastral appraisal (the official assessed value), registration fees are calculated based on the cadastral appraisal. Typically, the buyer assumes the entirety of these registration costs.
Notary Fees: The Expense of Formalizing the Public Deed
The preparation of the public deed at the notary’s office also involves notary fees. These fees, updated by Resolution 00387 of January 23, 2023, from the Superintendence of Notary and Registry, are structured as follows:
- For acts valued at or below COP$ 214,600: A fixed fee of COP$ 25,500.
- For acts valued above COP$ 214,600: A fee of 3 per thousand of the transaction value.
The standard practice in Colombia is for the buyer and seller to share the notary fees equally.
Charity Tax (Registration and Annotation Tax): A Departmental Levy
Finally, the registration and annotation tax, commonly known as the charity tax, is a departmental-level cost incurred when registering legal transactions involving properties. This tax is governed by Chapter XII of Law 223 of 1995, with Article 229 establishing that the taxable base for property sales is the value stated in the public deed, provided it is not lower than the cadastral appraisal (in which case the cadastral appraisal is used). The specific tax rates are determined by each department within a range set by Law 223 of 1995, between 0.5% and 1%. This tax is generally assumed entirely by the buyer.
In conclusion, it is paramount for individuals considering buying or selling property in Colombia to thoroughly understand and factor in these various costs. The reintroduction of the stamp tax, along with the updated registration and notary fees and the departmental charity tax, represent significant financial considerations that can influence the overall price of the property and the economic feasibility of the transaction for both parties. Proactive awareness and careful calculation of these expenses will contribute to more informed decision-making and a smoother real estate experience in Colombia.
