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Existing law in Colombia allows the foreign citizens to invest in Colombian real estate. The new law, Decree 241, has made the procurement procedures much simpler. The foreign investment in real estate is permitted without limitation. The old constitutional provision that empowered the Colombian government to confiscate foreign-owned property without providing any compensation has been repealed.
Procedure to buy property in Colombia
In order to purchase real estate in Colombia, the buyer and the seller have to enter into a purchase/sale contract. The contract has to be contained in a public deed and registered in the real estate records office in Colombia - Departamento de Bienes Raíces. The contract must include the name of the buyer and the seller, their respective I.D. numbers, the property's boundaries, the sale price, method of payment and all other general information such as property's real estate number and commission plan, if a broker is used.
The buyer can sign either directly or through a third party representative. In the case of direct signature, the purchase/sale contract is realized through a preliminary public deed (minuta) that is later finalized by the notary for registration. In case the third party is involved, the buyer must provide a special power of attorney to his or her notary, who must have a proof of certifiable Colombian identification to sign the contract on the buyer's behalf. The power of attorney needs to be signed by the buyer before a public notary unless made abroad in which case the Colombian Consul in the country where the document is made must legalize the signature. A power of attorney that is signed abroad is considered valid if legalized by the Ministry of Foreign Affairs.
Before purchasing property, it is essential to verify that the property offered for sale actually belongs to the person selling it and that it is not subject to any liens or other financial attachments. For this, the seller needs to provide the property's ownership history and a no-lien certificate - certificado de tradición y libertad that should date back not more than one month. Requests for the ownership history and no-lien certificate of the property can be made at the local public instrument records office - Catastro in the area where the property is located. Included with the request should be the property's real estate registration number, the owner's address or I.D. and evidence that the certificate issuance has been paid.
The clearances of all the taxes can be ensured by obtaining an account statement of the property from the treasury office - Oficina de Información Fiscal of the city or district where the property is located.
Documentations required for purchase/sale public deed
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Power of attorney issued by the buyer, if applicable
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Value-gain payment certificate levied by all municipalities & evidence of payment
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Property tax payment certificate or photocopy of the latest tax return statement with evidence of payment
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If the property is subject to a condominium regime, a payment certificate certifying that all maintenance and other fees are up to date (The seller may submit a notarized copy of the public deed that contains the condominium or association rules governing the property)
Mode of payments
The Colombian government requires foreigners to use "clean, non-laundered money". Investors must deposit funds into the seller's account by completing the Central Bank's Form No. 4. The cash transfer is not subject to any taxes since it is a foreign investment. However, the buyer within 60 days must register (using Form 11) the foreign investment with the Central Bank and attach the property's ownership history and no-lien certificate. This registration is mandatory if the buyer wants to exercise his foreign exchange rights, such as remitting the money abroad when he or she resells the property.
The payment of the agreed sale price has to be made to the seller in full. If the property has liens, then an initial down payment of 20-30% of the sale price is made to commit the seller to clearing the liens and other encumbrances such as unpaid taxes and unpaid municipal utilities.
The prevailing interest rates in Colombia vary between 20-25% annually for real estate loans. These loans are short-term loans and are primarily given to Colombian nationals. Foreign buyers should engage a local broker with ample experience. The buyer has to pay a commission of around 3% of the property value to the broker.
Taxes and other charges applicable during the process of acquiring real estate in Colombia as well as certificates dealing with the history of the property, detailed title enquiry and two certificates from the municipality, the Paz y Salvo Predial (which indicates that all municipal taxes on the property have been paid) and the Paz y Salvo de Valorización (which indicates that all taxes related to the increases in the value of the property due to improvements to the property or area have been paid) are generally borne by the buyer.
The notary office where the public deed is registered charges notary fees equivalent to 2.7 per each thousand of the sales price (normally the buyer pays 50% and the seller the other 50%).
If the seller is an individual, then 1% of the sales price is deducted as withholding tax (this tax corresponds to the seller). It is deducted at the source with the objective that the income does not leave the country with out being taxed.
Registration of the purchase/sale public deeds with the Public Instrument Records Office (Catastro) carries a payment of the corresponding registration tax (equivalent to 1% of the sales price), as well as the registration fee (equivalent to 0.5% of the sales price).
GOWEALTHY.COM © 2008
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Source: www.crossbordermortgages.com
