If you’ve been planning on traveling to Colombia, now’s the time to book a flight, at least for particularly cost-conscious tourists looking to take advantage of a new tax incentive.
In April, the Colombian government passed a new decree that eliminates the value-added tax or IVA for foreign citizens purchasing certain travel services like hotels or guided tours.
“With this measure, the tourism sector has another important tool to keep winning in competitiveness,” said then-Minister of Commerce, Industry and Tourism Cecilia Álvarez-Correa in a statement last month.
More than 400,000 foreign tourists arrived in Colombia during the first two months of 2016. These are the principal countries of origin ranked by number of travelers.
*Source Migración Colombia
But taking advantage of the new deal will require some effort.
For starters, the measure applies only to services with a value, including tax, totaling more than $280,000 pesos or ten “tax value units.” The amount of tax returned can’t exceed 100 tax value units, or about $2.8 million pesos.
To put that in perspective, the average price for a night in a Colombian hotel stood at roughly $217,000 pesos in 2015, according to data from Cotelco, the Colombian Tourism and Hotel Association.
And the tax won’t just get dropped from the bill. Instead, tourists will have to keep track of qualifying purchases and provide documentation at a National Department of Taxes and Customs (DIAN) office before leaving the country.
Visitors will also need to fill out a form, present a passport and provide a photocopy of a valid tourism visa. At that point, officials will return the IVA owed under the new decree by crediting a credit card, minus any applicable fees charged by the card company.
“When a tourist gets home, the money will be sent to their credit card,” explained a Ministry of Commerce Industry and Tourism representative. “Although obviously it’s optional to take advantage of it.”
But Colombia’s Association of Travel and Tourism Agencies (ANATO) is optimistic that the decree will boost the sector.
“This is an opportunity to draw more visitors from around the world; to ‘win over’ the traveler by offering unique experiences, quality and economic incentives,” said Paula Cortés Calle, president of ANATO.
“It puts the country on the same level as other world destinations that have this incentive for tourists.”
Of course, Colombia’s tourism industry has been growing steadily for years without any significant tax incentives.
In March, hotel occupancy rates nationwide were just above 56%, according to Cotelco. That’s a roughly 6% increase over the same period last year, and it’s not an isolated jump based on statistics from previous months.
According to the Migración Colombia, the country’s customs and immigration agency, foreign arrivals in Colombia jumped more than 15% year over year in the first two months of 2016, the most recent period for which data are available.
More than 400,000 foreign visitors entered the country between January and February. Roughly one-in-five arrived from the United States, followed by Venezuela, Brazil and Argentina.