chapter 5: in this chapter introduction foreign ownership financing commercial real estate...

Chapter 5: In This Chapter

• Introduction• Foreign ownership• Financing• Commercial real

estate• Residential real

estate• Rental property• Licensing and

brokerage

• Government• Legal system• Taxes and fees• Economy and

business• What you need to

know• Beyond the basics• Key contacts

1

Map of Colombia

2

Source: CIA World Factbook

Introduction to Colombia

• Democratic republic divided into 32 departments and capital of Bogotá

• Rising economic star• New stability and security• Advancement in drug war

3

Colombia—The Rich Tapestry

4

Source: Wikipedia

Colombia—The Rich Tapestry

5 Source: Wikipedia

Colombia—The Rich Tapestry

6 Source: Wikipedia

Colombia—The Rich Tapestry

7 Source: U.S. Geological Survey; N. Banks

Foreign Ownership of Real Estate

• Freely allowed• Some restrictions on public-domain

beachfront property– Leasehold rights possible

• Sales proceeds can return to country of origin

8

Financing

• Mortgage market growing due to policies and low bank rates– Securitization market

• Difficult to obtain by foreigners

9

Commercial Real Estate

• Growth attributed to economy– Retail– Industrial

• Tourism– Some hotel development

10

Residential Real Estate

• Home prices stabilizing after rising at a heated pace– Increasing demand– Well-regulated mortgage market– Loans to developers, although land is in short

supply

• Second-home market growing

11

Rental Property

• Neutral to pro-landlord• Lease agreements• Rents• Deposits• Evictions

12

Licensing and Brokerage

• No licensing• Listings• Transaction process• Language of contracts• Appraisals• Transferring money with Form #4

13

Realtor.com/international

14

What You Should Know About Government

• Republic with executive, legislative, and judicial branches

• Pro-market policies to expand foreign investment and trade

• Engagement with FARC

15

Legal System

• Civil law system• Courts at different levels and with different

duties• Lengthy proceedings due to process

inefficiencies and number of courts actions• Corruption an issue

16

Real Estate Taxes and Fees

17

Real Estate Taxes and FeesTax or Fee Amount Paid by

Registration Fee 1.5% Buyer

Stamp Tax 1.5% Buyer

Municipal Taxes 1% Buyer

Notary Fees 0.3% Buyer

Real Estate Transfer Charge 0.15%0.15%

BuyerSeller

Agent Fees 3-5% Seller

Property Tax (annual payable to state) 0.1-1.6% of value Owner (Buyer)

Source: Global Property Guide

Business and Income Taxes

• Individual income tax– Residents: 0-33% on worldwide income– Nonresidents: 33% on Colombia-sourced income

• Business income tax– Resident and nonresident companies with permanent establishments: 25%– Nonresident corporations with no branch or permanent establishment: 33%

• Withholding tax– Dividends: 25% unless certain conditions apply– Royalties paid to nonresidents: 33%– Interest: 33% if loan term does not exceed 12 months; 14% otherwise– Management fees: 10%

• Capital gains– Generally 10%

• Value-added tax– 0-16%

• Other taxes18

Economy and Business

• Strong economic trends– Pro-market policies dating to the 1990s– Challenges include reliance on oil exports and

inadequate infrastructure

• Major industries and exports• Colombian coffee

19

Economic Drivers

• Global investment– Oil and mining– Manufacturing– Banking– Transport– Communication

• Medical tourism• Free trade agreements• Free trade zones

20Sources: Guardian Media, Wikipedia, Proexport Colombia

What You Need to Know

• Substantial economic growth• Few restrictions on foreign ownership• Office, retail, and industrial sectors• Home prices still rising but stabilizing• No real estate agent licensing• Pro-market government policies, sophisticated

legal system• Economic drivers

21

Beyond the Basics

• Appearance• Greetings• Business cards• Meetings• Communication

• Negotiations• Hierarchy• Dining• Family• Gift giving

22

Key Contacts

• US-Colombia International Chamber of Commerce

• Proexport Colombia• U.S. Embassy• Embassy of Colombia• FEDELONJAS • Marco Island Area Association of

REALTORS® (Ambassador Association) 23