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Tax Incentives for Solar Energy in Colombia: Law 1715 and What You Actually Get

John CryeSolar financing

Summary

Colombia's tax incentive framework for solar energy, anchored by Law 1715 of 2014 and its subsequent regulations, offers four benefits:

  1. A 50% income tax deduction on the total investment amount, which can be taken over up to 15 years
  2. Accelerated depreciation at up to 33.33% per year (vs. 20+ years standard)
  3. VAT exemption on equipment purchases
  4. Customs duty exemption on imported solar equipment

Together, these incentives can reduce the effective cost of a solar installation by 30-40%. Investors and businesses evaluating solar in Colombia need to know how to claim them in practice, and where the process gets complicated.

Law 1715 and the rules that followed

Law 1715 of 2014 set out Colombia's legal framework for integrating renewable energy. It created the net metering framework and the tax incentive structure, and it signaled that Colombia intended to diversify its energy matrix away from dependence on hydroelectric power.

Later rules added to it:

  • Decree 2143 of 2015 sets out the regulatory details for accessing the tax incentives
  • UPME Resolution 281 of 2015 sets the technical requirements for project certification
  • Law 2099 of 2021 (Energy Transition Law) extended and expanded the incentive framework. It lengthened the window for the income tax deduction from 5 years to up to 15, and raised the accelerated depreciation ceiling from 20% to 33.33% per year (Ley 2099 de 2021, Función Pública gestor normativo)
  • CREG Resolution 101 072 of 2025 created the energy communities framework, which allows collective solar projects

Incentive #1: 50% income tax deduction

What it is

Investors in solar energy projects can deduct up to 50% of the total investment value from their taxable income. It is a deduction, not a tax credit, so it reduces the base on which income tax is calculated instead of reducing the tax owed directly.

How it works

  • The deduction can be taken over a period of up to 15 years, starting the year after the investment enters operation. Law 2099 of 2021 extended this from the original 5 years (Ley 2099 de 2021, Función Pública gestor normativo)
  • The amount deducted in any year cannot exceed 50% of that year's taxable income
  • At Colombia's corporate income tax rate of 35%, a 50% deduction on a $100,000 investment translates to approximately $17,500 in actual tax savings
  • The deduction applies to the total investment, including equipment, installation, and associated infrastructure

Who qualifies

  • Colombian legal entities with positive taxable income
  • Individuals declaring under the ordinary income regime
  • The project must be certified by UPME (Mining and Energy Planning Unit) as a non-conventional renewable energy source

The limitation

You need taxable income to deduct against. For early-stage companies or SPVs that are not yet generating taxable profits in Colombia, the deduction has limited immediate value. The 15-year window gives a new project more time to grow into the deduction than the old 5-year window did, but the incentive still mainly rewards entities that owe Colombian tax.

Incentive #2: Accelerated depreciation

What it is

Solar energy assets can be depreciated at up to 33.33% per year, as a global annual rate, instead of over the standard 20+ year useful life typically applied to energy infrastructure. Law 2099 of 2021 raised the ceiling from 20% per year (Ley 2099 de 2021, Función Pública gestor normativo). At the full rate, an asset is fully depreciated in about 3 years.

Why it matters

Accelerated depreciation moves the tax shield into the early years. Instead of depreciating a $100,000 solar installation at $5,000/year over 20 years, you can depreciate it at up to about $33,300/year over 3 years. At a 35% tax rate, that's about $11,700/year in tax savings for 3 years versus $1,750/year for 20 years.

In a project finance model, this raises early-year cash flows considerably and can shorten the effective payback period by 1-2 years.

Stacking with the deduction

Accelerated depreciation stacks with the 50% income tax deduction. The deduction applies to 50% of the investment, and the remaining 50% can be depreciated at the accelerated rate of up to 33.33% per year. Depreciation puts its shield in roughly the first 3 years of project life, while the deduction can be spread over as many as 15.

Incentive #3: VAT exemption

What it is

Equipment and components used in solar energy projects are exempt from Colombia's 19% VAT (IVA). This applies to:

  • Solar panels and modules
  • Inverters
  • Mounting structures
  • Batteries and storage systems
  • Monitoring and control equipment
  • Associated wiring and electrical components

How to access it

The exemption requires prior certification from UPME. The process:

  1. Submit project documentation to UPME
  2. UPME certifies the equipment list as eligible for the renewable energy VAT exemption
  3. Present the certification to suppliers/importers at the point of purchase
  4. Suppliers issue invoices without VAT

Impact

On a typical residential installation costing 60 million COP before tax, the VAT exemption saves approximately 11.4 million COP (19%). Commercial installations save proportionally.

Incentive #4: Customs duty exemption

What it is

Imported equipment for solar energy projects is exempt from customs duties (aranceles). Colombia imports most of its solar components, so this exemption directly reduces the landed cost of panels, inverters, and specialized equipment.

Coverage

The exemption covers equipment that cannot be sourced domestically, as certified by UPME. In practice that includes most solar-specific components, since Colombia does not manufacture solar panels, grid-tie inverters, or utility-scale battery systems.

Process

As with the VAT exemption, UPME certification is required before import. DIAN (Colombia's tax and customs authority) applies the customs exemption at the point of entry.

The UPME certification process

All four incentives require certification from UPME (Unidad de Planeacion Minero-Energetica), and most project developers underestimate how long it takes.

What UPME requires

  • Technical project description including system design, capacity, and expected generation
  • Equipment specifications and sourcing documentation
  • Environmental compliance documentation
  • Financial projections demonstrating the project's viability
  • Registration in the UPME renewable energy project registry

Timeline

UPME certification typically takes 30-90 days, depending on project complexity and how complete the documentation is. The process has been simplified in recent years but still takes careful preparation, and incomplete applications are a common cause of delays.

Common mistakes

  1. Submitting after the equipment is bought. VAT and customs exemptions must be certified before purchase or import, and they cannot be applied retroactively.
  2. Incomplete equipment lists. Every component claiming the exemption must be listed and justified individually.
  3. Missing environmental documentation. Even small installations need environmental compliance documentation for UPME certification.

Net metering: the revenue side

Net metering is not a tax incentive, but it affects the same economics. Colombia's net metering framework (regulated under CREG Resolution 030 of 2018 and subsequent updates) lets solar system owners sell excess generation back to the grid. Systems under 1 MW get bidirectional metering. Excess generation earns credits against future electricity consumption, generation and consumption are netted monthly, and remaining credits are settled annually.

The economics vary by operator and tariff category. For a well-sized system, the energy it exports is credited or sold under the net-billing rules instead of being lost.

How this changes the investment math

Consider a commercial solar installation in Colombia.

Without incentives:

  • System cost: $100,000 USD
  • Annual electricity savings: $18,000
  • Simple payback: 5.6 years

With the full incentive stack:

  • Effective system cost after VAT exemption: $84,000
  • Tax savings (50% deduction + accelerated depreciation): approximately $25,000, assuming the owner has enough taxable income to use both in the first few years (the deduction may be spread over up to 15 years, which would push some of the savings later)
  • Effective net cost: approximately $59,000
  • Annual electricity savings: $18,000 (unchanged)
  • Simple payback: 3.3 years

Focus on the payback timeline. The incentive stack cuts the simple payback on this illustrative system from 5.6 years to 3.3 years, which materially changes the risk profile: capital comes back faster on a 25-year asset, so more of the asset's life sits past breakeven. The figures above are an illustrative worked example of how the incentives interact, not a projection of returns for any specific project or investment.

What's changing

Energy communities (2025-2026)

CREG Resolution 101 072 allows collective solar projects through energy communities, which has tax implications. Aggregated community projects may qualify for larger total incentive pools, and the community's legal structure may let entities without existing tax liabilities benefit through the aggregate. The regulatory details are still being implemented.

Potential reforms

Colombia reforms its tax code periodically, and renewable energy incentives can be adjusted like anything else. The current incentive framework is established through 2030, but future administrations may change the terms. For long-dated investment decisions, that means today's incentives are known and quantified, but there is no guarantee they will last.

How Nuentero helps

Nuentero structures solar financing in Colombia with these incentives already built into the financial models. When we underwrite a solar loan portfolio, the tax incentives are part of the structure from the start, and the customer or investor doesn't have to work them out afterward.

Businesses can go through the tax incentive process on their own. The UPME certification, the timing rules (particularly for VAT and customs exemptions), and the interaction between the deduction and depreciation schedules are easier to get right with experienced structuring.

Nuentero is software for the full solar project lifecycle, from planning and underwriting through capitalization and execution, in Colombia and the United States. Contact john.crye@nuentero.com to talk through a project.

Disclaimer. This article is for general informational and educational purposes only. It is not investment, legal, tax, or financial advice, and it does not account for the circumstances of any particular person. Colombian tax law and incentive eligibility change over time and depend on facts specific to each taxpayer and project; the descriptions here are general and may not reflect current rules or your situation. Any worked example is illustrative of how the incentives interact and is not a projection, forecast, or guarantee of returns. Nothing here is an offer to sell or a solicitation of an offer to buy any security or interest in any fund. Readers should consult their own qualified tax, legal, and financial advisers before acting.