AFC Accounts: Another Way to Save to Buy a Home

More and more people are getting closer to fulfilling the dream of owning their own home, as banks now offer more opportunities and financial benefits to invest in real estate. Among the available options are housing leasing, mortgage loans, and government subsidies. But… did you know that AFC accounts are another way to save to buy a home?

Here we tell you more about this innovative savings method.

AFC accounts, known as Savings and Housing Development Accounts (Ahorro y Fomento a la Construcción), aim to promote long-term savings and encourage the purchase of apartments for sale in Medellín. The funds can also be used to pay mortgage loans, they generate interest, have no maintenance fees, and facilitate the purchase of new or used properties. Additionally, this alternative offers tax benefits.

What tax benefits do AFC accounts offer?

According to Article 126-4 of the Colombian Tax Statute, this type of savings is not part of the taxpayer’s withholding tax base and is considered non-taxable income or capital gains. For this reason, in the income tax return, these contributions are treated as tax-exempt income.

It is important to note that eligible accounts have a limit of up to 30% of income and a maximum of 3,800 UVT per year, which for 2022 equals COP $144,415,000.

How can you open an AFC account?

You can go to a financial institution supervised by the Colombian Financial Superintendence. The only requirements are being of legal age and presenting a copy of your identification document. No minimum amount is required to open the account.

If you are an employee, you must authorize your employer to deduct the amount to be deposited into the account from your payroll. If you are self-employed, you can make deposits directly.

What are the conditions of AFC accounts?

• If you withdraw the savings for a purpose other than purchasing a property (such as an apartment for sale in Envigado or any other area of the country), the bank will apply the corresponding withholding tax.
• If you intend to use the money for another purpose, you must comply with the minimum holding period, which is ten (10) years.
• If five (5) years have passed since the account was opened and the money has not been used, you may withdraw the full amount.