To be, or not to be: that is the question: Whether 'tis nobler in the mind to suffer The slings and arrows of outrageous fortune, Or to take arms against a sea of troubles, And by opposing end them?
Ay, there's the rub. What do you do ? Do you play the Colombian ''numbers'' game or do you declare the real value of the property that you are purchasing ? Most Colombians play the game, even politicians, so why shouldn't you - right ? Well, it is against the law and it is at least, tax avoidance, something that Steckenreiter Serna and Associates do not recommend.
What are your deciding factors ? Well it may be a property that you just have to have and the Colombian seller says, it is this price on the deed/escritura or no deal ! Both buyer and seller may decide they knowingly will break the law and put a lower than real value on the deed to save on notary costs, taxes and later property taxes.
If you, as a buyer, decide to do this, remember it may look good now, but when you come to sell, this may put you into a position of having to pay capital gains. We will discuss the ramifications of this in another article. Where will you save more money - on the notary charges and property taxes or tax on a large capital gain ?
One of the factors that you need to consider when you buy a property in Colombia is, what is the city's evaluation of the property ? In other words on what value are they taxing the property at. This should be lower than the price you are paying. This price is called the avaluo andif you are buying an apartment, there should be a value for the apartment, all parkings spaces and storage units.
Trying to fudge the deed value by putting it below the total price of the avaluo serves no purpose. The government requires the notaries to calculate all charges and taxes on the total evaluated price as a minimum.
Here is an example - rounding out the numbers. You find an apartment you like. The real price is 400.000.000 COP. The seller has owned the property for sometime and the escritura is at 200.000.000 p. The avaluos are 280.000.000 p for the apartment, 15.000.000 p for each parking space (total of 30.000.000 p) and 10.000.000 for the storage unit. The total avaluo price is 320.000.000.
The seller says, they want the escritura value at 250.000.000 because they don't want to pay any capital gains and they want to save on the notary prices. You may be told, ''look you can save on the notary costs and on your property taxes'' ..............buzzzzzzzzzzzzz............... wrong answer. The property taxes are based on that 320.000.000 p as will be the fees assessed by the notary.
It does you, as the buyer no good to have a value on your deed less than the total avaluo price. If the seller starts to hyperventilate, they need to speak with a good accountant or tax attorney. There are legal ways that their lower deed price can be adjusted upwards but that too is a topic for another article.
Property taxes in Medellin can range between 1.0% to 1.4%. Ask your agent what the predial (tax bill) is quarterly. If it is 300.000 p then you will be paying 1.200.000 p per year. Averaging out the the number the property is probably evaluated at close to 100.000.000. A tax rate of 1.2% on 100.000.000 would give you 1.200.000 per year.
In summary, if you choose to play the Colombian ''numbers'' game you need to know the evaluated price - avaluo. You should ask that before you make any offer. From there you can decide what will be your offer and hopefully, the purchase price and what you should do about the declared escritura value.
Steckenreiter Serna and Associates can assist you in purchasing your property and avoiding the ''slings and arrows of outrageous fortune.'' Just remember that not declaring the full value of the sale is contrary to the law.