2020: the year of tourism in Colombia

Tourism is certainly considered the new oil. According to Migration Colombia, the entry of non-resident foreigners to Colombia increased from 4 million in 2018 to 4.5 million in 2019 and is expected to reach 4.9 million in 2020, which would be equivalent to an 8.9% increase compared to the immediately preceding year. The Government's goal is that, by 2022, the number of non-resident foreign visitors will equal 6 million, which would imply an increase of 50% compared to 2018. Likewise, the most important association of tour operators in the United States (USTOA), during the annual conference of the North American tourism guild, recommended Colombia as the main destination for tourism travel in 2020.

The boom of the tourism industry, in addition to the country's own attributes that are of interest to any tourist in the world, is due to the fiscal policy that has encouraged the sector. This policy began in the first government of Álvaro Uribe Vélez (Law 788 of 2002, arts. 18.3 and 18.4) with the establishment of a 30-year tax exemption for hotel services rendered in hotels that have been remodeled or built within the 15 years following such date. As a result of that tax policy, more than 52,373 hotel rooms were made available to the market (La República, 29/03/2019). This policy was partially truncated by subsequent governments with the establishment of the CREE (a tax nominally different from income tax but which, ultimately taxed the same generating fact), and which now, in the Government of Iván Duque, is the object of a Re-potentiation with a view to energizing the tourism industry in Colombia.

Four specific aspects, contained in the last two tax reforms (Law 1943/2018 and 2010/2019) have contributed to this sector of the economy being held as one of the most promising in the coming years: (i) the establishment of a preferential rental rate (for 10 or 20 years) for hotels built or remodeled in certain municipalities; (ii) the establishment of a preferential rate for eco-tourism parks, agro-tourism and new nautical docks; (iii) the incorporation of the tourism industry in the Special Social Economic Zones -ZESE-; and (iv) the incorporation of sports, recreation and leisure activities as activities belonging to the orange economy.

The first aspect, which was established in Law 1943/2018 and reiterated in Law 2010/2019, establishes that services rendered in new hotels that are built remodeled or expanded in municipalities with up to two hundred thousand inhabitants certified by the competent authority as of December 31, 2016, will have a rental rate of 9% for 20 years. As of January 1, 2019, services rendered in new hotels that are built within the following 4 years, in municipalities with more than 200,000 inhabitants certified by the competent authority as of December 31, 2018, will have such rate for the term of 10 years. The same benefit will apply to those who remodel or expand hotels, with the fulfillment of certain conditions.

The second aspect is the consecration of a preferential rental rate of 9%, as from January 1, 2019, and for a term of 20 years, for new theme park projects, new ecotourism and agrotourism park projects and new nautical docks, which are built in municipalities of up to 200,000 inhabitants. The same benefit will have these projects when they are made in municipalities with more than 200,000 inhabitants, or when they are remodeled or expanded, but the benefit, in such case, will be for 10 years.

The third aspect, introduced to the tax legislation by Article 147 of Law 2010/2019, extends the benefits established for companies incorporated in the ZESE (0% income for the first 5 years and 50% of the income rate for the following 5 years) to companies that develop tourism businesses. Although this must be regulated, it is excellent news because it means that tourism businesses in La Guajira, Norte de Santander, Arauca, Armenia and Quibdó will have the possibility of having a preferential income tax rate for 10 years. Such tax benefit will undoubtedly guarantee the construction and adaptation of tourism infrastructure in these areas of the country that have been severely affected by multiple phenomena and have a high unemployment rate.

The fourth aspect, introduced to the tax legislation by Article 91 of Law 2010/2019, extends the benefits of the orange economy (7 years of exempt income) to activities related to sports, recreation, and leisure activities. This will make many companies engaged in promoting sporting events such as cycling routes around the country, triathlon circuits, ecotourism, Trek King, landscaping, bird watching, among many others that are directly or indirectly related to tourism, eligible for this tax benefit.

This tax policy will invigorate and elevate the tourism sector to a world class one, thus generating more investment, formal employment, and economic growth in the regions where it is implemented.