FT Benefits

Benefits Free Trade Zone Regulations – Free Trade Zones in Colombia

When located in a free trade zone in Colombia, you obtain:

• Customs Extraterritoriality
• Preferential access to markets.
• Industrial users may have access to offices of government or administrative bodies outside the area declared as a free trade zone.
• Import without VAT, nor tariff of Real Fixed Productive Assets (RFPA); these are the tangible assets of an organization, necessary to carry out its commercial activity.
• Consumables used in the development of the provision of the service, are not cleared from customs.
• Industrial and commercial users will be able to keep the necessary goods in their facilities for the development of their activities, indefinitely.
• Partial clearance of merchandise, with the new reform also parts and pieces can be customs cleared to meet after-sales guarantees.
• Use of the customs transit mode for the transfer from ports and border crossings to a free trade zone in Colombia.
• Products entering a  Free Trade Zone in Colombia can be transformed to obtain the Colombian origin as part of the chain of production of the same and re-export it to a country with which Colombia has a free trade agreement, trade agreements are strengthened, allowing the creation of industrial complementation cluster.
• Simplified customs processes.
• Outputs of raw materials or products in process to Colombia for partial processing. Possibility of carrying out technical tests or part of the industrial process of goods or services outside the free trade zone, up to a term of nine months. Additionally, the temporary release of goods is allowed for a maximum term of six months, for repair, revision, maintenance, analysis or certification processes. For qualified users after the date of entry into force of Title II of Decree 2147 of 2018 (March 8, 2018), the partial processing mentioned above may not exceed 40% of the total production cost of the goods or services in the tax year.
• Destruction of goods due to deterioration, total damage or absolute demerit.

Tax and customs benefits of Free Trade Zones in Colombia

• Customs duties are not accrued or paid (VAT and TARIFFS), of goods that are introduced from abroad; likewise, raw materials, inputs and finished goods that are sold from the national customs territory to industrial users of the Free Trade Zone.
• Any company incorporated in the country carrying out activities of production, logistics, transport, telecommunications, scientific and technological research, health in general, tourism, consultancy services, marketing, storage or conservation of goods can benefit from the free trade zone regulations.
• With the new tax reform, the rate of income tax currently in effect for industrial and commercial users in free zones increases from January 1, 2017 at a full 20% rate for industrial users and free trade zone operators, compared to a general rate of 33% applicable for legal persons and commercial users.
• It is considered as a final export, with the right to tax benefits established in the applicable regulations, the introduction to free trade zone from the NCT (National Customs Territory), of any raw materials, parts, inputs and finished goods national or in free circulation, necessary for the development of the corporate purpose of the industrial user. Likewise, it is considered as export, the sale and delivery to other countries of goods produced, transformed or stored by industrial and commercial users.
• For purposes of customs duties in the importation of goods from the free trade zone to the NCT, the goods of countries with which Colombia has existing trade agreements, which have been incorporated into the finished product, remain with the status of origin.
• Industrial users may have access to offices of government or administrative bodies outside the area declared as a free trade zone.
• Exemption from sales tax, with the right to a bi-monthly refund, for raw materials, parts, supplies and finished goods sold from the national customs territory (NCT) to industrial users of goods or services of the free trade zone or between them, provided that they are necessary for the development of the business purpose of said users. It also applies to sales among industrial users.
• Possibility of selling to the Colombian national territory 100% of the production of goods or services produced in the Free Trade Zone in Colombia with the respective tariff and VAT payment.

The free trade zones in Colombia seek to encourage investment with exemptions and deductions related to income tax, such as:

• The rate of income and complementary tax for legal entities that are users in the free trade zone will be 20%.
• Income taxpayers making investments or donations, directly or indirectly, in projects classified as research and technological development, will be entitled to deduct said investments from their net income in the taxable period in which they are made. Additionally, said investments may deduct 25% of the value invested in said projects in the taxable period in which the investment was made.
• The affiliates or branches, subsidiaries or agencies in Colombia of foreign companies may deduct the amounts that have been paid or recognized directly or indirectly to their head offices or offices abroad, as administrative or management expenses, different from royalties and the exploitation or acquisition of any kind of intangible, whether from a national or foreign origin, will be subject to a withholding tax rate as established in Article 408 of the Colombian Tax Code.
• In 200%, the wages paid to workers with disabilities are deductible as long as the employer is clear for the payment of government contributions (ICBF, SENA, Family Allowance).
• 100% of industry and commerce, bans and boards and property taxes are deductible, as long as they have been paid during the year or taxable period, and as long as they have a direct relationship with the economic activity of the taxpayer.