When Americans buy and own property in Medellín, Colombia, they need to consider both Colombian and U.S. tax obligations. Here’s a detailed look at the tax implications:

Colombian Taxes:

1. Property Purchase Taxes:

• Transfer Tax (Impuesto de Registro): This tax is typically 1% of the property’s purchase price  .

• Notary Fees: Notary fees are generally 0.3% to 0.5% of the property value .

• Registration Fees: Registration fees are around 1% of the property’s purchase price .

• VAT on New Properties: There is a 19% VAT on new properties, but this usually applies to commercial properties rather than residential .

2. Annual Property Taxes (Impuesto Predial):

• Property taxes in Colombia are relatively low, typically around 0.3% to 1% of the cadastral value of the property. The cadastral value is often lower than the market value  .

3. Rental Income Tax:

• If you rent out your property, rental income is subject to Colombian income tax. The tax rate can range from 0% to 33%, depending on the income level .

4. Capital Gains Tax:

• When you sell the property, you may be subject to capital gains tax, which is generally 10% of the profit. If you hold the property for less than two years, the tax rate can be higher .

U.S. Taxes:

1. Global Income Reporting:

• As a U.S. citizen, you are required to report global income to the IRS, including rental income from properties abroad. This income is taxed at your ordinary income tax rate  

2. Foreign Tax Credit:

• The U.S. allows a foreign tax credit to offset income taxes paid to foreign governments. If you pay taxes on rental income or capital gains in Colombia, you can generally claim a credit for those taxes on your U.S. tax return .

3. Reporting Requirements:

• FBAR (Foreign Bank Account Report): If you have foreign financial accounts, including those used for property transactions, exceeding $10,000 at any time during the year, you must file an FBAR.

• FATCA (Foreign Account Tax Compliance Act): If the value of your foreign assets exceeds certain thresholds, you may need to file Form 8938 with your tax return 

Example Calculation for Annual Taxes on a Property in Medellín:

• Property Value: COP 600,000,000 (approximately USD 165,000)

• Annual Property Tax (1%): COP 6,000,000 (approximately USD 1,650)

• Rental Income: COP 2,000,000 per month (approximately USD 550)

• Annual Rental Income: COP 24,000,000 (approximately USD 6,600)

• Colombian Income Tax on Rental Income (at 10%): COP 2,400,000 (approximately USD 660)

• U.S. Income Tax: Depends on your tax bracket, but you can claim a foreign tax credit for taxes paid in Colombia.

By understanding and planning for these tax obligations, American investors can navigate the complexities of buying and owning property in Medellín more effectively. It is advisable to consult with tax professionals in both the U.S. and Colombia to ensure compliance and optimize tax benefits.