OCTUBER 2009 | LEGAL REPORT #9
TAX PLANNING FOR EXECUTIVES

RODRÍGUEZ & CAVELIER proudly presents its tax planning services for executives. Approaching the year end executives should review their tax burdens and take appropriate measures to optimize tax benefits granted by fiscal regulations.

Taxation for Executives

According to the Colombian Tax Statute, income received by individuals is levied with the following taxation:

From	To	Taxable income		Basic Tax in COP	Basic Tax in $US	Percentage over any exceeding amount
		COP	US$*
0	25.901.670	25.901.670	12.951	0	0	19%
25.901.671	40.397.100	40.397.100	20.199	2.754.132	1.377	28%
40.397.101	97.428.300	97.428.300	48.714	18.725.244	9.363	33%
97.428.301	Or more	33% over any exceeding amount

*Amounts in dollars were calculated over a hypothetical currency Exchange rate of 2,000 pesos per dollar. Notwithstanding, please note that the official currency Exchange rate for October 26, 2009, is of 1,924.35 pesos per dollar.

Previous taxable income comprises any individuals' income, including but not limited to the executives´ labor income. Please find below some examples of items which can entail the reduction of labor income:

a. Contributions to Colombian pension funds.

b. Deposits in special bank accounts established for the acquisition of home.

c. Nourishment supplied to the employee or his/her family by means of paying it to third parties.

d. 25% of the gross value of the labor income is exempt.

e. Mandatory Colombian health contributions.

f. Loan interests for the acquisition of housing.

g. Education or voluntary health insurance.

h. In addition, other expenses paid for the benefit of employees might not be taxable for them and are deductible for employers, if such expenses are: a) connected with the economic activity of the employer, b) proportional to the economic activity which is being performed and c) necessary in order to carry out such activity. For example: Leasing expenses for cars used by some employees, gasoline payments, cell phone services, transportation expenses, corporate credit cards, and reimbursement of expenses, amongst others.

It is worth noting, that in order to apply the aforementioned benefits some limits and requirements may apply for each case.

Income tax for expatriates

Resident and non resident foreigners are taxable in Colombia only over their income of national source. Nonetheless, on the start of the fifth anniversary of residency in Colombia, foreigners are taxable over their income of national and foreign source.

Income received for services performed in Colombian territory by expatriates, is considered to be of national source, regardless of where payments are done.

Expatriates' taxable base may be substantially decreased with an appropriate and "tailor made" tax planning.