U.S. citizens living in Colombia: taxes, the 183-day rule, FEIE and foreign tax credit

A Medellín example: U.S. employer, Colombian workplace

Assume a U.S. citizen moves to Medellín, works remotely for a U.S. company, receives salary in a U.S. bank account and owns shares in a Colombian SAS. Citizenship, physical presence, income source, payroll compliance and company ownership each trigger a different analysis. No single fact resolves them all.

The IRS states that U.S. citizens and resident aliens abroad are generally subject to U.S. tax on worldwide income. Colombia, meanwhile, taxes resident individuals on Colombian- and foreign-source income under Article 9 of its Tax Code. The same salary can therefore enter both domestic systems, while exclusions or credits may reduce double taxation if their conditions are met.

Step one: determine Colombian tax residence

Article 10 of Colombia’s Tax Code treats an individual as resident after more than 183 calendar days—continuous or discontinuous, counting entry and exit days—during any consecutive 365-day period. If that period spans more than one tax year, the statute treats the person as resident from the second tax year. A calendar-year count alone can therefore miss the result.

Article 10 contains additional tests for Colombian nationals involving family, income, asset administration, asset location and proof of foreign residence, together with statutory exceptions. A dual U.S.–Colombian citizen or returning Colombian should not stop after counting days. Immigration status and tax residence are also different legal questions.

Under Article 9, a Colombian resident individual is subject to income tax on national- and foreign-source income, while a nonresident is generally taxed only on Colombian-source income. Residence does not decide how each item is classified or whether a filing threshold is met; those questions follow separately.

Step two: source the income item by item

For U.S. purposes, the IRS says the place where personal services are performed generally determines the source, regardless of where the contract was made, payment was received or the payer resides. Work physically performed in Colombia for a U.S. employer is therefore not converted into U.S.-source service income merely because salary enters a U.S. account. Workdays in both countries may require allocation.

Colombian Article 24 includes services performed within Colombian territory among Colombian-source income. Special rules exist for particular services and payments, so a broad slogan cannot replace classification. Payroll, social-security, employer-registration or corporate-presence consequences also require separate specialist review.

FEIE for tax year 2026

For tax year 2026, the IRS confirms a maximum Foreign Earned Income Exclusion of USD 132,900 per qualifying person. It is a maximum, not an automatic deduction. The taxpayer must have foreign earned income, a tax home in a foreign country and satisfy either the physical presence test or the bona fide residence test, then make the election through the applicable U.S. filing.

The physical presence test generally requires 330 full days in foreign countries during any consecutive 12-month period that overlaps the tax year. The bona fide residence test requires a facts-and-circumstances residence in a foreign country for an uninterrupted period that includes an entire tax year. Merely spending a year abroad does not automatically establish bona fide residence.

FEIE applies to qualifying earned income from personal services. Dividends, interest, capital gains, pensions and rents do not become foreign earned income simply because the individual lives in Colombia. The exclusion also does not remove the obligation to file a return when filing is otherwise required.

Foreign tax credits: coordinate both systems

The U.S. foreign tax credit may be available for qualifying foreign income taxes when the same income is subject to U.S. tax. The IRS expressly states that a credit cannot be taken for foreign tax attributable to income excluded under FEIE or the foreign housing exclusion. The allocation between excluded and non-excluded income is therefore essential.

Colombian Tax Code Article 254 allows Colombian resident individuals who receive foreign-source income taxed abroad to credit the foreign income tax on that same income, limited to the Colombian tax attributable to it and subject to the statutory conditions. This is not a promise that every foreign withholding or payment is creditable.

The practical schedule should show, by item, gross income, source under each country’s rules, tax paid, available exclusion, credit limitation and supporting documents. Currency conversion and timing differences can affect the result even when both systems offer relief.

No U.S.–Colombia comprehensive income tax treaty

As of this article’s publication, Colombia does not appear on the IRS list of U.S. comprehensive income-tax treaty jurisdictions. The absence of such a treaty means there is no general treaty tie-breaker or treaty allocation framework for this pair. Domestic exclusions and foreign tax credits remain relevant; absence of a treaty does not mean every item is inevitably taxed twice.

The United States and Colombia do have a FATCA intergovernmental agreement. FATCA is an information-reporting and exchange framework for financial accounts; it is not a comprehensive income-tax treaty and does not allocate taxing rights over salary, dividends or business profits. A tax-information relationship must not be described as a residence treaty.

Foreign accounts and companies: reporting is a separate track

FinCEN generally requires an FBAR from a U.S. person with a financial interest in or signature authority over foreign financial accounts when their aggregate value exceeds USD 10,000 at any time during the calendar year. The test is aggregate and uses account values, not taxable income. FBAR is filed with FinCEN, not as an income-tax calculation.

Form 8938 may also apply when specified foreign financial assets exceed the relevant threshold. Its thresholds vary with filing status and whether the taxpayer lives abroad. Reporting on one form does not automatically remove every other obligation.

A Colombian SAS or other non-U.S. corporation requires its own U.S. classification and ownership analysis. The IRS describes Form 5471 as an information return for certain U.S. persons who are officers, directors or shareholders of certain foreign corporations. Filing categories use ownership, control, acquisition and other tests, including attribution rules; holding shares does not support a one-line conclusion. Other entity regimes may also be relevant and require qualified U.S. international-tax advice.

The correct order of work

1. 01

   Build a presence calendar

   Reconcile Colombian entry and exit days and the U.S. physical-presence period.

2. 02

   Determine status in each country

   Test U.S. citizenship or residence and every applicable Colombian residence condition.

3. 03

   Inventory income and assets

   Separate salary, services, dividends, interest, rent, gains, accounts and entity interests.

4. 04

   Source and classify

   Apply each country’s rules to each item; do not use the bank account as a shortcut.

5. 05

   Model relief

   Compare FEIE and credit outcomes without crediting tax on excluded income.

6. 06

   Map reporting

   Test income returns, FBAR, Form 8938, Form 5471 and Colombian information obligations independently.

7. 07

   Review the company structure

   Analyse management location, payroll, ownership and cash flows separately from the individual return.

Nordwyn’s role in cross-border structuring

Nordwyn Capital supports entrepreneurs, shareholders and investors with the economic design of cross-border activities. That includes comparing company, ownership and holding alternatives, modelling their cash and governance consequences, identifying avoidable tax friction and coordinating the questions that qualified tax and legal specialists must resolve.

Nordwyn does not prepare a personal tax determination through an article and does not replace U.S. or Colombian tax counsel. The objective is to evaluate structures before implementation, keep personal and corporate consequences distinct and make specialist advice decision-ready.