Tax Savings: Effective Reduction of Income Tax in Colombia

Did you know that you have a series of benefits designed to reduce your income tax as a natural person in Colombia? If you are a taxpayer and income tax declarant, it is essential to know the opportunities that DIAN offers to optimize your finances and reduce your tax burden.

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The key to maximizing these benefits lies in understanding how they work and how to apply them strategically in your tax return. In this article, we will reveal the most effective strategies to reduce your income tax legally and safely.

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Take Advantage of Discounts and Deductions

‍DIAN gives you the opportunity to access direct discounts on your income tax. Additionally, you can deduct certain expenses from your taxable base, which will decrease the value on which your tax is calculated.

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If you or your accountant take advantage of these benefits, you will see a considerable decrease in the tax to be paid. On the other hand, if you cannot apply for them in the income tax filed in 2023, they will surely give you a clue to start executing plans so that you can take advantage of them in the next taxable period...

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These expenses include additional payments to the health system, such as prepaid medicine and complementary plans, as well as health policies. In addition, personal expenses such as your own or dependents' studies, mortgage interest, and donations to non-profit entities can also be deducted.

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Exempt Income and Tax Credits

‍Explore the options of exempt income, which are income that is not taxed and can include benefits such as food and housing. In addition, tax credits are a powerful tool to directly reduce the tax to be paid. These credits are related to educational expenses, dependent care, and other specific expenses that can be subtracted directly from your tax.

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Save for the Long Term

‍Additionally, consider contributing to pension funds authorized by law and AFC savings accounts, which are savings accounts designed for the acquisition of housing, and are offered by all banking entities. These contributions not only allow you to ensure your financial future but also reduce your taxable base, thus decreasing the income tax to be paid.

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1% Deduction on Purchases

‍An additional advantage is the deduction of 1% of the total of your purchases. This means that you can subtract a percentage of your expenses on purchases of goods such as vehicles, appliances, clothing, and others, directly from your income tax. That is, if you bought a vehicle, appliances, even clothing, groceries, or went on vacation trips, and all these purchases, for example, add up to $300,000,000, you can deduct $3,000,000 from your tax return.

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It is important that all these purchases are supported by electronic invoices to take advantage of this benefit.

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Plan and Take Advantage

‍Keep in mind that each benefit has a limit, so it is crucial to be informed and carefully plan your expenses and contributions to maximize savings on your income tax. Do not miss the opportunity to consult the official DIAN calendar to know the dates of your income tax return.

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In summary, in Colombia, there are several legal strategies to reduce your income tax as a natural person. Take advantage of the discounts, deductions, and tax benefits available to optimize your taxes and ensure a stronger financial future.

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In the following link, you can verify the official dates for your income tax declaration in the section "INCOME TAX FOR NATURAL PERSONS" official calendar of the tax and customs administration DIAN.

https://www.dian.gov.co/Calendarios/Calendario_Tributario_2023.pdf

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Luisa Maria Penha

https://www.linkedin.com/in/luisa-maria-penha-tascon-607b1a1b0/

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