There is an old Wall Street line that sums up all financial planning: it does not matter how much money you make, it matters how much you keep after taxes. In international investing, that gap can be enormous.
The concept: tax efficiency
Tax efficiency is how much of your gross return actually reaches your pocket once taxes and withholdings are paid. Two investments advertising the same return can leave you with very different amounts depending on how they are structured and where you are taxed.
The tax trap of US REITs
Platforms such as Arrived Homes and large US funds use structures called REITs. For a US citizen they work very well: a simple 1099-DIV form arrives and that is that.
In plain words: a REIT is a fund that buys properties and trades like a stock: you buy a stake and the rental income is distributed to you. Example: instead of buying one apartment, you buy a stake in a fund that owns 300 apartments across the United States.
Where the limit is for a Latin American investor: if you invest from your own country, the US government applies high withholding on your dividends because you are a foreign person — up to 30% depending on the applicable treaty. And your capital gain on sale may fall into your country's ordinary income tax table: on a good salary, the marginal rate can climb to 35% or 39%.
In plain words: a withholding is tax taken out before the money reaches your account; the marginal rate is the percentage you pay on the last unit you earned, not on your whole income. Example: USD $100 in dividends is yours, 30% is withheld, and $70 arrives. And on a good salary, each additional peso can be taxed at 35%, even if the average across your whole return is far lower.
What Circular Urban adds: local structure
By investing in US properties through the infrastructure of Circular Urban — a Colombian company — you play by local rules.
When you sell shares in the SAS after holding them for more than two years, Colombia treats that profit as an occasional gain, taxed at a flat 15%, considerably lower than the marginal income tax rate. And there is an additional benefit for the small investor: if your shares represent less than 3% of the outstanding shares, the profit on sale may be treated as income that constitutes neither ordinary income nor an occasional gain.
In plain words: an occasional gain is Colombia's tax category for profits that do not come from your job or your regular business — selling a property or shares, receiving an inheritance; and income that is not constitutive of taxable income means the money is declared but not taxed. Example: you buy shares for COP $10 million and sell them three years later for $16 million. The $6 million profit is taxed at 15%, or $900,000 — against roughly $2 million if that profit had entered your ordinary income table.
One thing is worth stating precisely, because it changes how you should read the comparison: the US tax does not disappear. Income produced by a US property is taxed there at the entity level before it reaches you. What this structure changes is your treatment as an investor: you stop bearing withholding as a foreign person and you file in your own country, under rules you know.
These benefits are defined by Colombia's Tax Statute and are subject to conditions and to legislative change, so confirm them with your accountant before deciding. But they make a real difference between being taxed as a foreigner there and being taxed as a shareholder here.
Comparison table: foreign taxation vs. local efficiency
| Feature | Arrived / US REITs | Circular Urban (Colombian SAS vehicle) |
|---|---|---|
| Withholding for foreigners | High (up to 30% under IRS rules) | Low at the investor level (US tax is settled at the company level) |
| Tax on sale (gain) | Foreign ordinary income (usually high) | Flat occasional gain (15% after 2 years held) |
| Exemptions for retail investors | None structural | Possible exemption (holdings under 3%) |
| Accounting difficulty | High (dealing with another country's law) | Low (clear local tax certificates) |
What to review before investing abroad
Always ask for detail on three things: what withholding applies before the money reaches you, what tax certificate you will receive, and in which country you declare the gain on sale. With those three answers you can compare real returns rather than cover-page returns.
In plain words: a tax certificate is the document whoever paid you issues, stating how much they paid and how much they withheld, so you can carry it into your return. Example: without it, your accountant cannot prove tax was already withheld, and you end up paying twice on the same money.
What to weigh on our side
No tax benefit is permanent. The rates, the caps, and the exemption for holdings under 3% all depend on conditions being met and on the law not changing — and tax reform in Colombia is frequent. Choose an investment for the asset behind it, not for this year's tax treatment.
Related links
- Circular Urban investment projects
- Investing in the US from Latin America without the headaches
- The luxury mirage and the Airbnb rush
- Being the bank or being the owner: debt or appreciation
- Financial diagnostic: why do it before investing
This content is educational and is not financial, legal, or tax advice. The terms of each platform can change; check their current information before deciding and talk to your own advisor.
Published by
María Camila Becerra Cabrales