No to Valorization !
What is a Valorization Tax ? Driving around El Poblado in Medellin you will see numerous orange signs that say ''No al cobro de valorization !'' What does this all mean ? What the heck is a Valorization Tax ? The Law 388 of 1997, ''The Contribution for Valorization'' - la CONTRIBUCIÓN POR VALORIZACIÓN, is an urban action of the State that deals with infrastructure projects that contribute to the increased value of a property. Theoretically it the ''State'' government decides that building a new 4 lane road in front of your apartment, will increase its value, then the state can levy you a charge, that will contribute to their costs of constructing this new project. This ''value added'' tax provides a bit of a conundrum to buyers and sellers in a real estate deal. Obviously the sellers do not want to pay it and neither do the buyers. The buyers feel that it is a tax assessed on the current owners and the owners feel that ''this project'' is contributing to the future value of the property. Something that they will not be privy to enjoy - physically or financially. The logical route would seem to split the tax 50/50 but in actual fact it is the buyer's responsibility to pay the tax from the moment they receive the property. Unlike the property tax or predial which is billed quarterly but must be paid in full to the end of the year (the seller must produce a Paz y Salvo - proving this), the Valorization Tax is billed month to month.Therefore a seller must only produce a Paz y Salvo to the end of the month in which they are selling the property. If the sale occurs early on in the assessment of the tax, then the buyer would assume the lion's share of the tax. If the sale comes towards the completion of the tax, then the seller will have paid the majority and hopefully will have had some advantage for the supposed increased value of their property. Splitting 50/50 seems to be the most just and fair fair of approaching the tax.