Betterment Levy (Valorización) vs Value Capture (Plusvalía)

The betterment levy (valorización) concerns public works that benefit property. The value-capture charge (participación en plusvalía) concerns land-value increases from planning decisions. Both can attach to property. They differ from property tax (predial) and tax on your own gain from a sale.

What it is

What is the betterment levy, and why does it matter when you buy?

The betterment levy is a contribution on real property that benefits from a public work. It is a real lien on the property. The statute is Decreto 1604 de 1966. It renamed the old betterment tax (impuesto de valorización) as the betterment contribution (contribución de valorización) (art. 1). The national, departmental or municipal entity that executes the work establishes, distributes and collects it (art. 2). Article 12 makes it a lien on the property and has the entity communicate it to the registrar for inscription (Decreto 1604 de 1966).

Article 13 tells registrars not to register a deed on an affected property until one of two things happens. Either the entity asks to cancel the lien because it is fully paid, or it authorizes registration because the installments due are paid. Article 13 also requires the lien to appear on the certificate of title. That prohibition is addressed to registrars. The 1966 text speaks of a special registry book. We did not confirm how each registry office carries the charge today, so read the certificate itself.

For the national betterment levy, unpaid balances bear financing interest. Default bears the DIAN late-payment rate. Departments, districts and municipalities may use that same late-payment rate (Decreto 1604 de 1966, art. 11). For the national regime, Decreto 1394 de 1970 allows installments of not less than two and not more than five years (arts. 54 and 55). We did not confirm any current city schedule. In Bogotá, the Instituto de Desarrollo Urbano (IDU) offers the "Certificado de Estado de Cuenta para Trámite Notarial (paz y salvo)" online. It is an account statement for notarial procedures and serves as a clearance certificate (Bogotá).

What is the value-capture charge?

The value-capture charge is the public share of a land-value increase caused by an urban planning decision. It differs from tax on the seller’s own gain. The law also allows a separate route for public works in the relevant plans. That route requires that no betterment levy financed the work. Ley 388 de 1997, arts. 73 to 90, covers urban actions that regulate land use and raise development potential. Public entities have a right to share the resulting land-value increase (art. 73, Función Pública).

Article 74 lists the triggering events (hechos generadores):

Incorporating rural land into urban expansion land, or treating part of it as suburban.
Setting or changing the regime or zoning of land uses.
Authorizing greater building use by raising the occupancy index, construction index, or both.

The participation rate may range between 30% and 50% of the increased value per square meter (art. 79).

The rate may be any value within that range. In Bogotá, Decreto Distrital 790 de 2017, art. 9, reproduces Acuerdo 118 de 2003, art. 6: 50% from 1 January 2006 onward (Alcaldía de Bogotá). The Secretaría Distrital de Planeación issues an official letter (oficio) on whether the charge is in force or payable for a given lot (Bogotá).

How are they different from property tax and from tax on your own gain?

Property tax is a separate charge; see paying property tax as a foreign owner. The betterment levy follows a public work, and the value-capture charge follows a planning decision.

Tax on your own gain is a third thing. A gain on selling a fixed asset held for two years or more is subject to capital gains tax (ganancia ocasional) under the income tax. A gain on an asset held less than two years is ordinary income (Estatuto Tributario, art. 300). That is not the municipal value-capture charge. See selling Colombian property and repatriating the money.

Steps

How can you check before you buy?

Read the title certificate (certificado de tradición y libertad). A betterment-levy lien must appear there. An inscribed value-capture assessment would also appear there.
Ask your lawyer to request the betterment-levy clearance certificate from the entity that issued the charge. The IDU certificate in Bogotá is an example.
Ask the municipality whether a value-capture charge is in force or payable for the lot. In Bogotá, use the planning office’s official letter described above.

The free one-page due-diligence checklist is a starting point for the documents. The Colombia Owner Kit has a buy checklist. It lists the property-tax and betterment-levy clearance certificates. The kit’s red-flags guide annotates a fictitious title-certificate line on the betterment levy. Its sell-and-exit roadmap includes settling any betterment levy before a sale.

Costs

Who pays, and what can the promise contract say?

The sources reviewed do not say who pays these charges in a private sale. The allocation is a matter for the contract. Registration can depend on a betterment-levy lien being paid or authorized. Settle this point before closing. The promise contract (promesa de compraventa) is where parties allocate such items, as the closing costs guide shows for other charges. Ask your lawyer to write down who settles any betterment levy or value-capture charge and how a balance is handled at closing.

Documents

Questions for your lawyer, the municipality and your certified public accountant

Your Colombian lawyer: Does the title certificate show any betterment-levy lien or value-capture inscription, and is there a clearance certificate from the issuing entity?
Your Colombian lawyer: How should the promise contract allocate any unpaid betterment levy or value-capture charge, and what happens at closing if a balance remains?
The municipality or the issuing entity: Is any betterment levy or value-capture charge in force or payable for this property?
Your Colombian certified public accountant: How would capital gains tax apply when I sell, and does the two-year rule affect me?
Your licensed home-country tax professional: Could these charges matter for my reporting on a future sale?

This guide is educational, not legal or tax advice. Rules and city procedures change; confirm them for your property with your lawyer and the local entity.

Deadlines

When does the value-capture charge have to be paid?

Article 83 was rewritten by Decreto Ley 019 de 2012, art. 181. Under it, the charge is payable by the owner or possessor only in two steps. The value-capture effect must have an assessment and an inscription on the property’s registry record (folio de matrícula). After that, one of these events must occur:

A request for an urbanization or building license.
An effective change of use.
An ownership transfer, for triggering events 1 and 3 of art. 74.
Acquisition of titles representing additional building rights.

The Corte Constitucional declared that article partially constitutional in Sentencia C-249 de 2019.

Article 81 adds two rules. Once the liquidation is final, inscription on each folio is ordered. Registering a transfer requires a certificate from the administration. The certificate states that the value-capture charge has been paid. How articles 81 and 83 apply to a specific property is a question for your Colombian lawyer.

Educational information, not legal or tax advice.

Official sources

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The risk: A registrar cannot register a deed on property with a betterment-levy lien until the entity asks to cancel it as fully paid or authorizes registration because the installments due are paid (Decreto 1604 de 1966, art. 13).
One step now: Confirm that your lawyer has the seller's betterment-levy clearance certificate from the entity that issued the charge and has compared it with the title certificate before you sign.
In the kit: The kit’s red-flags guide annotates a fictitious certificate line by line and tells you which entries to raise with your lawyer. See what’s included

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Frequently asked questions

What is the betterment levy in Colombia?

It is a contribution on real property that benefits from a public work. The national, departmental or municipal entity that executes the work sets and collects it. It is a real lien on the property under Decreto 1604 de 1966.

Is the value-capture charge the same as the tax on my gain when I sell?

No. The value-capture charge is a municipal share of land-value increases caused by planning decisions. The gain on selling a fixed asset held two years or more is subject to capital gains tax under the income tax.

How do I check for these charges before buying?

Read the title certificate. Confirm that your Colombian lawyer has a betterment-levy clearance certificate from the issuing entity. Confirm also that the lawyer has asked the municipality whether any value-capture charge is in force or payable for the lot. Your lawyer can also confirm how this applies to your property.

Who pays the betterment levy or the value-capture charge in a purchase?

The sources we reviewed do not say how the charges are divided between buyer and seller in a private sale. Ask your lawyer to state in the promise contract who settles any balance.

Not sure which topics to raise? Take the quiz. The Colombia Owner Kit (US$79, instant download) turns this guide into a checklist, a calendar entry and a question list: see what’s included. Or start with the free sample: Chapter 4, the due-diligence checklist.