One very important question that a foreigner has to ask himself when buying real estate in Colombia is whether to put the property in his personal name or in the name of the company (a Colombian SAS). I am asked this question all the time and for that reason I want to put some details into an article that may benefit the foreign (or local) investor and his
As with many legal matters there is no right or wrong answer but depending on the priorities of the investor, a Colombian SAS (similar to an American LLC) can provide you with some benefits that I will discuss further in this article:
You may not wish for your personal name to appear in public records and property titles are public records. Public records are very simple to retrieve for any property owner in Colombia. The shareholders of a SAS however are much harder to determine for those who may want to understand your business in Colombia whether those entities are local, international, personal
or government inquiries. This does not allow you to avoid legal responsibilities or avoid taxes but many investors prefer to keep their investment anonymous. For property owners
who have liability concerns about spouses or common law partners (current or future) a SAS can also serve to protect your assets.
One tax advantage to having a SAS applies when you decide to sell the property as there is a “retention” tax that does not apply to companies selling property but to individuals. The value of this tax is equal to 1% of the sale price and must be paid and remitted to the notary where you finalize the transaction. This alone is a reason why many wealthy Colombians, for example, choose to use a SAS holding company for their property.
Some investors plan to buy in Colombia in the near future but haven’t decided on the exact investment yet and need a visa in the meantime. In Colombia you can start a company (SAS) and have a 2 years grace period to finalize your investment. All the investments that you make with your SAS count towards your personal eligibility for visas/residence as long as your attorney
has accounted/registered those assets properly with the Colombian central bank.
4) More Taxes
Your SAS is a company and if you are investing time, money and effort into running your company then you may want to pay yourself and employees salaries and also deduct costs associated with running your business. For a SAS that produces taxable amounts of income, properly managing the tax benefits of the SAS can mean reducing your overall average tax rates in Colombia. This is no different than how my investor clients in Canada/USA/England operate their real estate holdings in their countries.
5) Personal separation of rental assets
Many Casacol investors are buying rental properties that will be occupied by 3rd parties. You should have 3rd party liability insurance on those assets in case a dramatic event takes place where the renter may want to sue you. In an extreme event the insurance may not cover you and you may be personally liable for certain damages. Separating yourself from the investment can be beneficial and in some specific cases investors will create a SAS for every property to limit any legal exposure to their other assets.
In short, a SAS is not for everyone, foreign or local investor. If a buyer intends on only owning 1 property in Colombia then it may not be worth the time and expense to starting and maintaining a SAS. However, for foreigners with urgent visa requirements, or larger investors with multiple properties or plans for multiple properties, putting them under the umbrella of a property managed SAS (legal/accounting) can ensure that you receive a great deal of flexibility when investing in Colombia and especially tax benefits.
6) Self Directed IRAs for US investors
This is a topic for your US accountant and your Colombian lawyer as every case is going to be slightly unique, but a Colombian SAS in the same name as your American LLC is a requisite to take advantages of the opportunities associated with self directed IRA retirement accounts.
I am happy to discuss my experience with foreigners, whether you are buying a home or investment property at any time. Please feel free to contact me at [email protected].
Thank you for reading,
Juan Jose Giraldo – [email protected]
Legal/Tax Director – Casacol SAS