WHAT YOU NEED TO KNOW ABOUT THE NEW FINANCING LAW IN THE REAL ESTATE SECTOR

This law introduces several important aspects that directly impact the real estate sector. On this occasion, we will focus on one of the main effects that must be considered when buying or selling a property in Medellín and nationwide.

Among the most relevant points, the law establishes that:

The amount declared in the public deed must correspond to the real value of the transaction.

The public deed is executed under sworn declaration.

If the real value of the transaction is not declared, the related expenses will be calculated at four times the declared amount, and the irregularity will be reported to the DIAN (Colombian Tax Authority).

Below, we will specifically address the impact on property deeds in relation to Consumption Tax and Withholding Tax.

Consumption Tax

Several conditions apply to this tax:

It applies only to transactions exceeding 26,800 UVT (Tax Value Unit).

The tax rate is 2%.

The seller is responsible for declaring this tax.

It applies to both new and used properties, with no exceptions.

It must also be applied to the assignment of fiduciary rights.

It is collected through the withholding-at-source mechanism.

It is not deductible nor considered a deductible expense.

It is included as part of the property’s sale price.

Withholding Tax

The following scenarios determine when withholding tax applies:

When both the seller and buyer are natural persons, a 1% withholding tax applies. This process is carried out at the notary’s office.

When the seller is a natural person and the buyer is a legal entity, a 1% withholding tax applies.