Chapter 5: In This Chapter Introduction Foreign ownership Financing Commercial real estate Residential real estate Rental property Licensing and brokerage Government Legal system Taxes and fees Economy and business What you need to know Beyond the basics Key contacts 1

Map of Colombia 2 Source: CIA World Factbook

Introduction to Colombia Democratic republic divided into 32 departments and capital of Bogotá Rising economic star New stability and security Advancement in drug war 3

Colombia—The Rich Tapestry 4 Source: Wikipedia

Colombia—The Rich Tapestry 5 Source: Wikipedia

Colombia—The Rich Tapestry 6 Source: Wikipedia

Colombia—The Rich Tapestry 7 Source: U.S. Geological Survey; N. Banks

Foreign Ownership of Real Estate Freely allowed Some restrictions on public-domain beachfront property – Leasehold rights possible Sales proceeds can return to country of origin 8

Financing Mortgage market growing due to policies and low bank rates – Securitization market Difficult to obtain by foreigners 9

Commercial Real Estate Growth attributed to economy – Retail – Industrial Tourism – Some hotel development 10

Residential Real Estate Home prices stabilizing after rising at a heated pace – Increasing demand – Well-regulated mortgage market – Loans to developers, although land is in short supply Second-home market growing 11

Rental Property Neutral to pro-landlord Lease agreements Rents Deposits Evictions 12

Licensing and Brokerage No licensing Listings Transaction process Language of contracts Appraisals Transferring money with Form #4 13

Realtor.com/international 14

What You Should Know About Government Republic with executive, legislative, and judicial branches Pro-market policies to expand foreign investment and trade Engagement with FARC 15

Legal System Civil law system Courts at different levels and with different duties Lengthy proceedings due to process inefficiencies and number of courts actions Corruption an issue 16

Real Estate Taxes and Fees 17 Real Estate Taxes and Fees Tax or FeeAmountPaid by Registration Fee1.5%Buyer Stamp Tax1.5%Buyer Municipal Taxes1%Buyer Notary Fees0.3%Buyer Real Estate Transfer Charge 0.15% Buyer Seller Agent Fees3-5%Seller Property Tax (annual payable to state) % of valueOwner (Buyer) Source: Global Property Guide

Business and Income Taxes Individual income tax – Residents: 0-33% on worldwide income – Nonresidents: 33% on Colombia-sourced income Business income tax – Resident and nonresident companies with permanent establishments: 25% – Nonresident corporations with no branch or permanent establishment: 33% Withholding tax – Dividends: 25% unless certain conditions apply – Royalties paid to nonresidents: 33% – Interest: 33% if loan term does not exceed 12 months; 14% otherwise – Management fees: 10% Capital gains – Generally 10% Value-added tax – 0-16% Other taxes 18

Economy and Business Strong economic trends – Pro-market policies dating to the 1990s – Challenges include reliance on oil exports and inadequate infrastructure Major industries and exports Colombian coffee 19

Economic Drivers Global investment – Oil and mining – Manufacturing – Banking – Transport – Communication Medical tourism Free trade agreements Free trade zones 20 Sources: Guardian Media, Wikipedia, Proexport Colombia

What You Need to Know Substantial economic growth Few restrictions on foreign ownership Office, retail, and industrial sectors Home prices still rising but stabilizing No real estate agent licensing Pro-market government policies, sophisticated legal system Economic drivers 21

Beyond the Basics Appearance Greetings Business cards Meetings Communication Negotiations Hierarchy Dining Family Gift giving 22

Key Contacts US-Colombia International Chamber of Commerce Proexport Colombia U.S. Embassy Embassy of Colombia FEDELONJAS Marco Island Area Association of REALTORS® (Ambassador Association) 23