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The Ultimate Guide To
Employment in Colombia

Employing in Colombia: What You Need to Know

The Colombian labour market is highly regulated and focuses on the protection of employment rights. There are numerous legislative requirements for employers to comply with, depending on the type of employee and contract that is of concern, and compliance with Colombian labour and employment regulations is often costly and time-consuming. Labour law regulates employment relationships such as individual labour law, collective labour law and integral social security.

Key Factors to Consider When Employing in Colombia

Regulations governing employment in Colombia

  • the Constitution
  • the Substantive Labour Code
  • the Social Security Regime
There are several important points pertaining to employment that must be taken into consideration by foreign investors and business owners who wish to set up their business operations in Colombia.
  • Regardless of the nationality of the parties to an employment contract, all employment contracts are governed by Columbian law.
  • Both national and foreign employees are legally bound to join and contribute to the Integral Social Security System
  • Columbian law stipulates payments that must be considered as part of the base salary (such as commissions and bonuses) regardless of the willingness of parties to an employment agreement.

Employee Entitlements

Information Explanation
Working on Sundays ?

If an employee works on Sundays, the employee must be paid at a surcharge of 75% of the hourly rate. If the employee works regularly on Sundays, the employee must receive one additional paid rest day per week.

Employee Protection and Anti-discrimination Rights ?

Law 1010 of January 23, 2006 defines, prevents and punishes all forms of labour harassments.

Time Off Work ?

Annual leave

Fifteen days of paid vacation per annum. Employee must enjoy 6 vacation days for each year of service. The remaining days maybe accumulated upto 2 years.

 

Maternity leave

Twelve weeks of maternity leave , which may begin 2 weeks before the date of the expected child birth.

 

Paternity leave

The husband or the permanent partner will get 4 days of paid paternity leave, when only the father/partner contributes to the Social Security System and 8 days when both the father and the mother contributes to the Social Security System.

 

In both cases, the father or the partner should have contributed 100 continuous weeks to the Social Security System.

 

Bereavement leave

 

Up to 5 working days.

Medical Leave ?

N/A

Employment Termination

Information Explanation
Resignation / End of Service Payment ?

Parties to an employment contract can terminate such contract by giving written notice.

Severance / Redundancy Pay ?

Severance pay shall be one month salary for each year of service or proportionately thereof, which has to be deposited in the severance fund on February 14 of the following year or paid directly to the employee at the termination of the contract ((Article 249, Labor Code modified by Article 21 of Law 1429 of 2010).

Termination of Employment ?

Parties to an employment contract can terminate such contract by giving written notice. Under a fixed term contract, the employer must provide the employee 30 days of notice.

Mass terminations require explicit authorization in writing by the Ministry of Labour.

Payroll

Payroll Colombia
Management Fee for Employer of Record Services / Monthly Payroll Costs

Please contact us for a quote

Notes

Shield GEO pays the employee on a monthly basis, typically on the last working day of the month although we can adapt to your preferred schedule. Income tax and social security (where applicable) are deducted at source and paid to the local tax authorities.

Currency ? Colombian Peso (COP)
 
Grossed income Tax Rate (%)
UVT 0-1090 0%
UVT 1090 - 1700 19%
UVT 1700 - 4100 28%
UVT 4100 - above 33%

*UVT-(Unidad de Valor Tributario or UVT). Value of each UVT is equal to 29,753 Pesos in fiscal year 2016

Tax Returns Supplied

Yes

Employers Social Security and statutory contributions

Employers are required to make the following contributions as a % of the employee’s salary.
• General pension system 12%
• General health social security system 8.5%
• General labour risks system: between 0.348%-8.7%

*The ceiling for calculating contributions that have to be paid by is minimum 25 minimum legal wages.

Employees Social Security and statutory contributions

Employees must contribute the following social security contributions as a % of their salary.
• General pension system 4%
• General health social security system 4%
• General labour risks system: between 0.348%-8.7%

*The ceiling for calculating contributions that have to be paid by is minimum 25 minimum legal wages.

Payroll and Tax in Colombia

There are specific rules in Colombia depending on whether your company employs residents or non-residents. The key concerns for a company that needs to comply with tax laws in Colombia are net taxable income, social security contribution, value added tax (VAT), corporate income tax, specific business tax (SBT), value added tax (VAT), and property tax. Moreover, international treaties to avoid double taxation, international social security agreements, free trade agreements and special tax regimes for specific industries or sectors can make an indirect impact on a company’s tax environment.

Information Explanation
Remote Payroll ?

A remote payroll in Colombia is where a foreign company, i.e. a non-resident company, payrolls a resident employee in Colombia.

Thus a non-resident company is permitted to process payroll for Colombia residents who are on its payroll. Another option for a non-resident company to payroll its employees in Colombia would be to use a fully outsourced service like a GEO or PEO which will employ and payroll the staff on their behalf.

Local Payroll Administration ?

In some cases, a company will register their business in Colombia under one of the forms available but prefer to have another company administer its payroll. This can be accomplished through a payroll provider. It is important to note that the company, as the Employer of Record, is still fully responsible for compliance with employment, immigration, tax and payroll regulations. But the payroll calculations, payments and filings can all be outsourced to the payroll provider.

Internal Payroll ?

Larger companies with a commitment to Colombia may wish to run their own local payroll for all employees, foreign and local.  In order to accomplish this, they will have to complete incorporation, register the business and then hire the necessary staff.  There will be a need for in country human resources personnel who have the background needed to manage a Thai payroll, and can fulfill all tax, withholding, and payroll requirements.

 

This approach carries significant cost and requires some knowledge of local employment and payroll regulations.  The company will need a local accounting firm and potentially legal counsel to ensure full compliance with Thai employment laws.

Fully Outsourced Payroll & Employment ?

Companies can outsource the employment and payroll of their staff in Colombia to a GEO, like Shield GEO. This is possible for both foreign workers and Colombia nationals. This is the easiest, fastest and safest way to payroll staff in Colombia.

Shield GEO manages all aspects of payroll for workers in Colombia, including taxes, withholding, social security payments and other statutory requirements. Shield GEO becomes the Employer of Record and employs the staff on behalf of the client.

Staff are paid monthly with tax and social security deducted at source and paid to local authorities. Shield GEO will invoice the client monthly in advance of the payroll date. The invoice consists of the Total Cost of Employment (Base salary + Employers Statutory Contributions + Additional statutory contributions) and a Management Fee. Shield GEO provides the employees with payslips.

Read more about outsourced payroll and employment through Shield GEO.

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Setting up payroll in Colombia

Information Explanation
Employee Information Required ?
  • Personal information (name, date of birth, postal address, place of relevant details)
  • Passport
  • Bank statements proving sufficient funds are available for the stay
  • Proof of health insurance coverage
Tax Registration Requirements ?

Individual taxation depends on:

*Source of income

*Nationality

*Whether or not the employee is a Colombian resident

As per Law 1607 of 2012, the residence is the physical permanence in Colombia continuously or discontinuous sly for more than 183 days for a period of 365 consecutive days.

 

Natural persons (local or foreign), domestic residents are subject to income tax in respect of their local source of income, and capital gains on both national and foreign source. Foreigners residing in Colombia are subject to income tax in respect of their local source of income and the foreign source of income from the first day of their continuous or discontinuous residency in Colombia. The filing date for individual income tax return is based on the last 2 digits of the individual’s tax identification number (NIT).

 

Tax resident employees must pay tax on their worldwide income based at progressive rates. The Colombian tax system is expressed in terms of  (unidad de valor tributario) (UVT). A new alternative individual income tax system has been introduced, IMAN and IMAS.

 

  • IMAN – Individuals with income less than UVT 1,548 are exempt from IMAN. If the individual annual taxable income is more than UVT 13,643 the tax rate is 27%. Tax return will be closed to any tax audit 2 years after it has been filed.
  • IMAS – For resident employees earning less than UVT 2,800 and a net worth below UVT 12,000, IMAS provides an optional method of calculating income tax. It calculates tax on a flat rate based on alternative sources of taxable income. It starts with UVT1.08(flat rate) when the tax payer receives an alternative taxable income of UVT1,548. Tax return will be closed to any tax audit 6 amonths after it has been filed.
  • Non residents are only subject to their Colombian source of income. The tax rates are the same as for residents. Non residents are subject to a flat income tax rate of 33%.
Social Security Registration ?

Register the employer and employee we itself with the Colpensiones or a private fund. The company must affiliate itself with the pension system and must submit a form that indicates employee affiliation to the pension system.

 

Article 3 of Decree 2390 of 2010 created a unified form to self-assess and pay social security and payroll contribution. The unified form can be submitted electronically but not in person to the Governmental Learning Service (Servicio Nacional de Aprendizaje, or SENA), the Colombian Family Institute (Instituto Colombiano de Bienestar Familiar, or ICBF) and the Family Compensation Fund (Caja de Compensación Familiar).

Documentation Required for New Employees ?
  • Employment contract
  • Social Security registration with Colpensiones or a private fund
  • Registration for public health coverage
  • Registration with a severance fund
  • Workers insurance (professional risk)

Payments

Information Explanation
Frequency of Salary Payment ?

Monthly

For casual employees weekly

Invoice / Payslips required ?

A payslip is required

Minimum Wage ?

689,455 Pesos per month

Immigration and Work Permits in Colombia

Colombia has a relatively open view to foreign employees and investors. Foreign employees have the same rights and obligations as Colombian employees. The migration policy promotes the entry of foreign employees with technical, professional and intellectual qualifications and experience who can contribute towards the development of economic, scientific, cultural or educational activities that can benefit Colombia. Likewise, the Colombian migration policy promotes the entry of foreign investors who can contribute capital in the incorporation of new companies that may generate new employment and increase exports.

Government entities responsible for immigration affairs are;

  • Ministry of Foreign Affairs and Consulates Abroad
  • Special Administrative Unit Migration Colombia
  • Professional Councils

Use your own ompany?

For a foreign company to sponsor employees in Colombia it must either set up a subsidiary or a branch in Colombia.

There are several steps involved in hiring foreign employees.

1. Obtain employment visa from the Colombian Consulate.

2. Receive approval from Ministry of Social Protection which certifies the compliance of the ratio between national and foreign employees, which is a requirement to obtain work visas in Colombia.

3. Obtain temporary permits and foreign ids from the Administrative Department of Security (DAS)

Any foreign national who obtains a work visa must appear before the DAS to register themselves on the immigration files and to obtain a foreign identity card (cédula de extranjería). When immigration authorities renew the work visa the foreigner must appear before the DAS 15 days from the date of entry or visa issuance to register and obtain the foreign identification card.

The following requirements must be satisfied.

  • Copy of the passport with personal details
  • Copy of the passport page where the last stamp of entry or departure of Colombia
  • If the applicant had a Colombian visa but it was issued without the OCR (lecture code), a copy of the last Colombian visa
  • If the visa process is handled by a third party, an official power of attorney
  • For individuals;
  • Incase of a corporate body the declaration of assets, certificate of existence, and legal representation (attach pages that contain identity, social object, legal representatives, capital or stock composition and functions of the legal representative) and summary page or the bank statement of each of the last 6 months that represent an average balance of more than 100 current legal minimum monthly salaries
  • Incase of an individual, attach the first page or the summary page of each bank statement of the last 6 months that represent an average account balance of more than 10 current legal monthly salaries and a copy of the Colombian ID
  • For groups
  • Incase of a corporate body the declaration of assets, certificate of existence, and legal representation (attach pages that contain identity, social object, legal representatives, capital or stock composition and functions of the legal representative) and summary page or the bank statement of each of the last 6 months that represent an average balance of more than 100 current legal minimum monthly salaries
  • Incase of an individual, attach the first page or the summary page of each bank statement of the last 6 months that represent an average account balance of more than 10 current legal monthly salaries and a copy of the Colombian ID
  • Fill out the online application through the following link:Formulario Visas or personally at the issuing office. In the event of artistic, sports and/or cultural groups, it may be filled out by the representative specifying the data of each of the members of the group.
  • A valid passport with an expiration date of more than 180 days and 2 blank pages
  • Produce the passport to the Colombian Consulate where the application was finished. If the applicant personally visits the visa office photographs can be taken on site.

If payments are made in Colombia, such payments must be made on the same day the receipt is generated. Failure to do so results in the need to request a new receipt (maximum 2 days after the initial request). Payments can be made either

Other documents required: Recent photograph 3X3 centimetres in colour on a white background

*The visa costs USD 245

If payments are made abroad such payments must be made on the same day the receipt is generated. Failure to do so results in the need to request a new receipt (maximum 2 days after the initial request). Payments can be made either

  • via PSE or
  • via methods approved by the local consulate

*The visa costs Euro 190 for Europeans and Cuban nationals and USD 245 for the rest of the world.

Visas can be applied online as well 

Use the Shieldgeo solution?

Once you get in touch with us, one of our consultants will take all the work off your hands, coordinate with our local partners to get all the required permits organised, provide the processing time, costs, document-checklist and keep you informed through the process. 

Need help employing staff in Colombia? Get in touch!

 

Types of visas in Colombia

Category Description of Visa
NE 1

Business visas are divided into 4 categories.
• NE 1
• NE 2
• NE 3
• NE 4

NE 1
This type of business visa is granted to foreigners who intend to enter Colombia to conduct trade and business, promote economic exchange, make investments and create business opportunities.
NE 1 is granted for a maximum of 3 years with multiple entries allowing a maximum of 180 days of stay for each entry into Colombia. Foreigners who have obtained this visa cannot be domiciled in Colombia and cannot engage in business activities that results in payment of wages.
Documents required:
• Copy of the first page of the applicant’s current passport where the personal data is displayed.
• Copy of the page of the applicant’s passport where the last stamp of entry or departure of Colombia is located.
• If the applicant had a Colombian visa but it was issued without the OCR (lecture code), please attach a copy of the last Colombian visa. In case if the visa includes the OCR, this requisite is not necessary.
• If the visa process will be finished by a third person, an official power of attorney must be presented.
• Official communication of the legal representative of the company as a public, private or mixed entity, legally established in Colombia that sponsors your visit
• Official communication of the legal representative of the commercial, industrial or service company legally established in Colombia that sponsors your visit.
• Invitation/presentation letter regarding the applicant for a Business Visa written by a Chamber of Commerce or official commercial or foreign investment promotion office from your country of origin/residence.
• Fill out the online application through the following link: Formulario Visas or personally at the issuing office. In the event of artistic, sports and/or cultural groups, it may be filled out by the representative specifying the data of each of the members of the group.

Cost
In Colombia: Study USD 50, Visa USD 370,
Abroad: Europe and Cuba –Study Euro 39, Visa Euro 286
Rest of the world –Study USD50, Visa USD 370

NE 2

This visa is granted to foreigners who enter Colombia as a business person in terms of Free trade agreements, International Partnerships, and under Pacific Alliance Agreements. This visa will be granted for 4 years with multiple entries with a maximum of 2 years of stay during each visit. These visa holders are able can be domiciled in Colombia and can engage in business activities that results in the payment of wages.
Documents required:
• Copy of the first page of the applicant’s current passport where the personal data is displayed.
• Copy of the page of the applicant’s passport where the last stamp of entry or departure of Colombia is located.
• If the applicant had a Colombian visa but it was issued without the OCR (lecture code), please attach a copy of the last Colombian visa. In case if the visa includes the OCR, this requisite is not necessary.
• If the visa process will be finished by a third person, an official power of attorney must be presented.
• Official communication of the legal representative of the commercial, industrial or service company legally established in Colombia that sponsors your visit.
• Fill out the online application through the following link: Formulario Visas or personally at the issuing office. In the event of artistic, sports and/or cultural groups, it may be filled out by the representative specifying the data of each of the members of the group.

Cost
In Colombia: Study USD50, Visa USD 220,
Europe and Cuba: Study- Euro39, Visa Euros 170
Rest of the world: Study USD 50, Visa USD 220

NE 4

This visa is granted to foreigners who intend to enter into Colombia as a foreigner or senior executive of a multi-national company with the intention of investing and generating business. NE 4 visa is granted for a maximum of 5 years with multiple entries and a 180 day stay allowed in each visit per year. The foreigner cannot establish domicile in Colombia and will not be able to pay wages based on business activities.
Documents required:
• Copy of the first page of the applicant’s current passport where the personal data is displayed.
• Copy of the page of the applicant’s passport where the last stamp of entry or departure of Colombia is located.
• If the applicant had a Colombian visa but it was issued without the OCR (lecture code), please attach a copy of the last Colombian visa. In case if the visa includes the OCR, this requisite is not necessary.
• If the visa process will be finished by a third person, an official power of attorney must be presented.
• Official communication from the legal representative of the multinational company where it clearly states that the applicant is the President or a High Official.
• Fill out the online application through the following link: Formulario Visas or personally at the issuing office. In the event of artistic, sports and/or cultural groups, it may be filled out by the representative specifying the data of each of the members of the group.

Cost
Colombia: Study USD50, Visa USD 270
Europe and Cuba: Study Euro 39, Visa Euro 208
Rest of the world-Study USD50, Visa USD 270.

TP 4 (Temporary work visa 4)

This visa is granted to foreigners who enter the country under an employment relationship or independent contract to provide services to an individual or a corporation domiciled in Colombia. The visa will be valid for the duration of the work performed and would be valid for a maximum of 3 years. TP 4 visa will be cancelled if the foreigner leaves Colombia for more than 180 consecutive days.

Costs
In Colombia: Study USD 50, Visa USD 245
Europe and Cuba: Study Euro 39, Visa Euro 190
Rest of the world: Study USD 50, Visa USD 245

TP 7 (Temporary work visa 7)

TP 7 is granted to the foreigner that intends to enter the country as a pensioner or an investor, partner or owner of a corporation, a property owner, to exercise independent activities or occupations not established in this decree. This visa is valid for one year with multiple entries.
• Copy of the first page of the current passport where the personal data is displayed.
• Copy of the page of the passport where the last stamp of entry or departure of Colombia is located.
• If the applicant had a Colombian visa but it was issued without the OCR (lecture code), please attach a copy of the last Colombian visa. In case the applicant had a visa that counts with the OCR, this requisite is not necessary.
• If the visa process will be finished by a third person, an official power of attorney must be presented.
• Attach the documents described in the first four bullets and certificate issued by competent authority, government, public or private company, foreign or colombian entity or diplomatic or consular mission from the country that the foreign national received the retirement funds accredited in Colombia which shows that the applicant receives a monthly stipend of no less than 3 current legal minimum monthly salaries, or
• Attach the documents described in the first 4 bullets and certificate where the rent is clearly stated issued by public entity, banks, financial corporations, social security institutions, insurance companies or any other private company, recognized by the respective government that pays or wires the rent; or the original of the contract that permits the proof of the rent. In both cases, the amount cannot be less than the equivalent to 15 current legal minimum monthly salaries, or
• Attach the documents described in the first 4 bullets and certificate of legal representation issued by a colombian Chamber of Commerce within the 3 months prior to the application of the visa, in which it states that the foreign national is a partner or owner of a company legally constituted and registered with a capital or assets registered and paid by the foreigner with a worth no less than 100 current legal minimum monthly salaries (attach the pages that show: legal identity, social object, legal representatives, capital or stock composition, functions of the legal representative), for an anonymous society a certificate of stock composition must be signed by the fiscal revisor, precising the worth of the stocks owned by the foreign national, which cannot be less than 100 current legal minimum monthly salaries, or
• Communication issued by the Departament of International Exchange of the Bank of the Republic in which the Foreign Direct Investment is registered in order for the foreigner to buy a property in his name, for an amount of more than 350 current legal minimum monthly salaries and the Certificate of Tradition and Liberty issued by the respective Office of Public Instruments, with an issue date of no more than a month in which the property ownership by the foreigner is shown. The value of the property cannot be less than the one stated in this paragraph, or
• Letter issued by the applicant indicating the activities he/she will develop in Colombia, accompanied by the Curriculum Vitae in which the work experience in the field is proven and with at least 2 certifications of work background as well as a bank statement of the last 6 months where the average balance is more than 15 current legal minimum monthly salaries.
• In the event the applicant is a beneficiary of an entrepreneurship program or activity sponsored by the Ministry of Commerce, Industry and Tourism a certificate issued by the Ministry should be presented. The said certificate must clearly state that the foreign national is a beneficiary of an entrepreneurship program or activity, public or private, recognized by the entity.
• Fill out the online application through the following link: Formulario Visas or personally at the issuing office.
TP 7 will be cancelled if the foreigner leaves Colombia for more than 180 consecutive days.
Cost
In Colombia: Study USD 50, Visa USD 205
Europe and Cuba: Study Euro 39, Visa Euro 159
Rest of the world: Study USD 50, Visa USD 205

TP 12 (Temporary work visa 12)

This visa is granted to the foreigner that intends to enter Colombia to assist or participate with or without an employment contract in academic, scientific, artistic, cultural and sports events; to conduct interviews with public or private entities , business training, or business contracts.
TP 12 is granted for a period of 90 days.
Requirements:
• Copy of the first page of the current passport where personal data is displayed.
• Copy of the page of the passport where the last stamp of entry or departure of Colombia is located.
• If you’ve had a Colombian visa but it was issued without the OCR (lecture code), please attach a copy of your last Colombian visa. In case you’ve had a visa that counts with the OCR, this requisite is not necessary.
• If the visa process will be finished by a third person, an official power of attorney must be presented.
• Copy or electronic information of the departure tickets
• Attach the documents described in the first five bullets and letter of invitation from the person or institution that invited you and will be responsible of your stay and departure from Colombia and where the activity you seek to carry out is clearly described. In the event that the person who invites is an individual the bank statements where it shows that the account balance for the past 3 months has exceed 5 current minimum legal salaries, or
• Attach the documents described in the first five bullets and certificate from the institution, public or private, that carries out personnel selection, business coaching or journalist activities, that states that the applicant is currently in a selection process, is a part of the coaching program or that he/she will carry out a journalist activity.
• Fill out the online application through the following link: Formulario Visas or personally at the issuing office. In the event of artistic, sports and/or cultural groups, it may be filled out by the representative specifying the data of each of the members of the group.
Costs
In Colombia: Study USD 50, Visa USD 105
Europe and Cuba: Study Euro 39, Visa Euro 82
Rest of the world: Study USD 50, Visa USD 105

TP 13 (Temporary work visa 13)

This visa will be granted to foreigners who intend to enter Colombia to provide specialized technical assistance with or without an employment contract to public or private companies. This visa is valid for a period of 180 days eligible for multiple entries. This visa will be cancelled if the foreigner is leaves Colombia for more than 180 consecutive days.
• Copy of the first page of the current passport where the personal data is displayed.
• Copy of the page of the passport where the last stamp of entry or departure of Colombia is located.
• If the applicant had a Colombian visa but it was issued without the OCR (lecture code), please attach a copy of your last Colombian visa. In case you’ve had a visa that counts with the OCR, this requisite is not necessary.
• If the visa process will be finished by a third person, an official power of attorney must be presented.
• Copy or electronic information of the departure tickets.
• Attach the documents described in the first five bullets and a) letter of responsibility from a private or public institution where it justifies the urgency of the required technical service and b) certificate of existence and legal representation (attach the pages that contain: identity, social object, legal representatives, capital or stock composition and function of the legal representative) of the institution, except when it corresponds to a public entity.
• Fill out the online application through the following link: Formulario Visas or personally at the issuing office. In the event of artistic, sports and/or cultural groups, it may be filled out by the representative specifying the data of each of the members of the group.
Costs
In Colombia: Study USD 50, Visa USD 105
Europe and Cuba: Study Euro 39, Visa Euro 82
Rest of the world: Study USD 50, Visa USD 105

Setting up a company in Colombia

When setting up a company you may want to consider these factors:

  1. Business factors

    Colombian Commercial law is flexible. To carry out business in Columbia foreign investors do not need a local partner or investor. The entire equity of a corporate entity can be foreign owned and there are no restrictions to subsequent repatriation, other than in a few cases.

  2. Regulatory framework

    There are numerous rules and regulations that govern Columbian business organizations.

    • Code of Commerce
    • Law 22 of 1995
    • Law 1014 of 2006
    • Law 1258 of 2008
    • Regulatory Circular DCIN 83 issued by the Colombian central Bank
    • Law 1429 of 2010
    • Decree 19 of 2012
    • Law 1607 of 2012
    • External Circular 001 of 2007 of the Superintendency of Companies
    • Act 1429 of 2010, Law of first time employment (LIFE)
    • Colombian Central Bank
  3. Foreign exchange control

    Foreign currency that’s to be allocated to a foreign branch in Colombia must be registered as a foreign investment before the Colombian Central bank. Form No. 4 Exchange Declaration for international investments must be filed. Additional foreign investments channeled from the main office (foreign direct investment) must be registered with the Colombian Central Bank.

    If the branch is not obligated to submit financial statements before the Superintendency of Companies, it must update on a yearly basis to the Colombian Central Bank the foreign direct investment registration by filing Form No. 15 “Equity conciliation for companies and branches – general regime” by 30th of June on an annual basis.

There are several types of business forms available for foreign companies in Colombia. Each of these business forms has unique advantages and disadvantages, as well as differing scope of approved business activities, registration requirements and minimum capital requirements. Both foreigners as well as Columbian nationals can establish a business in Colombia. Moreover, there are no restrictions on a business organization registered in Colombia to be exclusively owned by foreign nationals. The only restriction that applies to foreign business owners is that if they do not have a residence in Colombia, an agent of service for process must be appointed in the due process.

When setting up a company in Colombia you have the following options. These legal vehicles are distinguished as follows.

Capital based entities

Entities in which the capital is prevailing element of the vehicle. Corporations (S.A) and Simplified Stock Corporations (S.A.S) belong to this category.

Person based entities

Personal qualities of the Partners are an essential element of the entity. Limited Liability companies belong to this category.

Branch of a Foreign Company

Branches do not constitute a new legal vehicle and acts as a part of a foreign main company.

There are 5 types of legal vehicles that can be established in Colombia.

  • SAS (Sociedad por Acciones Simplificada or a Simplified Joint Stock Company)
  • Corporations (Sociedad Anonima)
  • Limited Liability Company (sociedad de responsabilidad limitada)
  • Limited Partnership (Sociedad en Comandita)
  • Branch of a Foreign Company

This article provides a general guideline for foreign businesses that seek to enter Colombia for business purposes. In particular, it looks at common pathways to establish a business presence in Colombia. In addition, various economic, tax, and regulatory factors are provided throughout as a source of useful information to assist those who seek to establish a business presence in Colombia. The guide also looks at some immigration requirements such as obtaining appropriate visa status.

Incorporating in Colombia

Incorporation process

To incorporate a company in Columbia the following documents should be prepared.

  • Power of attorney that entitles your lawyers in Columbia to incorporate the legal vehicle (Newco)
  • If the foreign shareholders are companies, a written minute describing the decision of such company to incorporate a legal vehicle in Columbia is needed. If this document is not signed in Columbia and the language is different from Spanish it must be duly translated into Spanish. The following information regarding the Newco should be included.
    • Name of the corporate entity
    • Address in Columbia
    • List of activities that the Newco will perform
    • Assigned Equity
    • Number of shares among across which the equity will be divided
    • Determination whether a Board of Directors will be instituted
  • Copy of the passport of the legal representatives as well as the letters of acceptance for their positions
  • Goodwill standing certificate that proves the existence of the company that will act as the shareholder of the Newco as well as its Articles of Incorporation.

 

The afore mentioned documents will enable the local lawyers to finalise the Articles of Incorporation which can be raised to a public deed depending on the type of business entity.

  • Register with the Registry of Commerce to obtain a pre tax payer ID (pre RUT)

New companies are exempted from paying certain fees during the first year of operation as per Law 1429 of 2010 and decree 545 of 2011. Law 1258 of 2009 introduced SAS (Sociedad por Acciones Simplificada). A SAS can be incorporated through a private document (or by an Attorney) that is submitted to the Chamber of Commerce. A public deed is not required. However, if the procedure involves the transfer of property, it’s mandatory to set up the company through a public deed (Notary public). Applicants can register these procedures on www.dian.gov.co

Costs involved include the following:

0.7% of capital registration tax

COP (Columbian Pesos) 34,000 fixed fee

COP 4,000 for the registration form

COP 4,000 for the certificate of existence and legal representative (required to open a bank account)

COP 5,500 per book (Libro de Actas de Asamblea and Libro de Registro de Accionistas)

COP 20,600 (COP 10,300 registration per book)

These procedures can take up to 3 days.

  • Open a bank account with a pre tax payer id (pre RUT) and deposit nominal capital

To open a bank account the owner must submit the following documents to the bank.

*Certificate of existence and legal representation

*TIN document

*Photocopy of the certificate of citizenship of the legal representative

A minimum deposit of COP 500,000 is required depending on the bank. A savings account maybe opened in minutes. However, it may take up to 3 days to open a checking account.

  • Obtain a final tax payer id number

Pre requisites to obtain a final id number (RUT) from the tax agency (DIAN)

*Pre tax ID (RUT)

*Bank account certificate

  • Register company with the Family Compensation Fund (Caja de Compensación Familiar), the Governmental Learning Service (Servicio Nacional de Aprendizaje, SENA) and the Colombian Family Institute (Instituto Colombiano de Bienestar Familiar, ICBF)

A unified system to self assess and pay social security and payroll contribution was introduced under the Article 3 of Decree 2390 of 2010. This form can be submitted electronically but not in person. The term to pay contributions to the Family Compensation Fund expires within the first thirteen business days of each month based on the last number of the NIT (tax identification number). It takes upto 5 days to complete this process.

  • Register employees for health coverage (public)

Employees must be registered for health coverage by submitting a form that indicates the affiliation of its employees to the national health system (Plan Obligatorio de Salud, POS) be it through a public entity or a private promoter of health(EPS). This entire process should take upto 1 day.

  • Register employer and employees for pension with Colpensiones or one of the private funds
    • Affiliate the company with the pension system
    • Submit a form that indicates employee affiliation to the pension system
    • Each employee has the ability to choose between a private or public pension fund
  • Register the company with the Administrator of Professional risks (APR)

Company must submit a form a listing its affiliation and its employees to an administrator of labour risks (ALP), private or public (Instituto de Seguros Sociales, ISS)which covers workplace injury and professional illness.  The employer chooses the ARP to which it affiliates all employees and then pays monthly contributions. Prior to affiliating employees, some administrators request that the employees attend a short course.

  • Register employees with a severance fund

The company must present a form that indicates employee affiliation to a severance fund. Consequently the company is obligated to complete the respective submission to the severance fund requested by the employee. The employer must deposit the employees’ severance payment annually prior to February 15th. This process should take upto one day.

  • Newco’s equity should be paid and a registration of the foreign investment must be performed before the Columbian Central bank in order to abide by the Columbian Foreign Exchange laws.

Trade registry fees

The Chamber of Commerce pays a registration fee that varies between USD 17 – 873 depending on the Newco’s equity plus an approximate of 0.7% of the Newco’s equity.

As per Act 1429 of 2010 Law of First Time Employment (LFE), companies incorporated prior to 31st December 2014 with less than 50 workers and equity lower than USD 1.7 million shall pay progressive fees for the Merchants Registry before the Chamber of Commerce and its renewals as follows.

  • A 100% discount on the total fee established for the Merchants Registry for the first year of activities
  • A 75% discount for the second year of activities
  • A 50% discount for the third year of activities
  • From 4th year onwards the company must pay full renewal fee
  • For the renewal of the merchant’s Registry during the fourth year of activities the full fee must be paid

Types of business established in Columbia

There are 5 types of legal entities that can be established in Columbia.  Such entities vary by:

  • Capital based entities

Corporations (S.A. by its acronym in Spanish) and Simplified Stock Corporations (S.A.S. by its acronym in Spanish) belong to this type.

  • Person based entities

Limited liability companies belong to this type of corporate entities.

  • Branch of a foreign company

When a foreign company performs permanent activities in Columbia it’s obliged to incorporate a branch which is a local representation of the foreign company.

Simplified Shares Corporation (SAS)

A SAS (Sociedad por Acciones Simplificada or a Simplified Joint Stock Company) can be incorporated with just one shareholder. A SAS gives rise to a new legal entity completely independent of its shareholders. The liability of shareholders of a SAS is limited to the amount of equity contributed. Different kinds of shares with dividends entitlements can be created, for instance shares with fixed dividends.

It’s compulsory to have a financial auditor if;

  • Stipulated by the Articles of Incorporation or
  • When assets are higher than 5000 times the minimum legal wages or
  • Revenues are higher than 3000 times the minimum legal wages

 

SAS has a simple structure due to the following reasons

  • Does not need a Board of Directors unless otherwise expressed in its Articles of Incorporation
  • All the representative and management duties can be carried out by the legal representative appointed by the shareholder assembly
  • Shareholder assembly could directly implement decisions such as approving the financial statements, the dividend distributions, and all the corporate accounts.
  • SAS can be incorporated through a private document

 

*The deadline for the payment of shares subscribed cannot exceed 2 years.

 

Investment capital requirements: No minimum or maximum share capital

 

Management: Not required to have a Board of Directors. The only mandatory requirement is that it appoints a legal representative and a shareholders’ assembly. No restriction on the nationality or residency of its managers

 

Registration fee: Must renew registration on an annual basis. Varies between USD17-873 per year

Corporations (Sociedad Anonima)

A corporation can be incorporated with a minimum of 5 shareholders. Each shareholder is liable for the amount of capital contribution represented by negotiable shares.

The capital stock of a corporation is divided into authorized share capital, subscribed share capital and paid up capital. Atleast 50% of its authorized share capital must be subscribed and 33% of its subscribed share capital must be paid up at the time of the company’s incorporation. The outstanding amount must be paid within one year following the subscription.

 

Features of a Corporation

 

  • A corporation may issue shares or convertible bonds if it needs to be capitalized
  • Shares maybe sold at any time without restrictions. However, restrictions may apply if the Articles of Incorporation provides for a special procedure or provides pre-emptive rights in favour of existing shareholders. If the shares are registered in the stock market, then such shares can be freely traded.
  • Shareholders liability is limited to the capital they contribute
  • It’s compulsory to have a statutory auditor.
  • The corporation will be dissolved when one shareholder owns 95% or more of the contributed shares.
  • Transfer of shares is unrestricted. However, in non public companies. However, in non public companies the by laws may provide a pre-emptive right in favour of the other shareholders and/or the corporation.

 

Investment capital requirements: No minimum capital required. Atleast 1/3 of the value of each stock must be paid at the time of incorporation.

Management: Board of Directors made up of atleast 3 principal members and 3 alternates who do not need to be shareholders, but must be appointed by the shareholders.

Registration fee: Varies between USD 17-873 per year

Limited Liability Company (sociedad de responsabilidad limitada)

A Limited Liability Company must be incorporated with a minimum of 2 partners and maximum of 25 partners. The Partners are liable for their capital contributions. A Limited Liability Company does not issue shares but parts of the interest or quotas. However for tax and labour liabilities, partners are jointly and severally liable. At incorporation capital of the company must be fully paid.

This entity is governed by a Board of partners. Such partners have voting rights based on the capital quotas that they own.  Capital of Limited liability companies can be allocated to other partners or other third parties after approval by the Board of partners. Amendments to capital quota assignment can only be carried out by an amendment to the Articles of Incorporation which must be legalized by a public deed and registered with the Chamber of Commerce. Shares of Limited Liability Companies cannot be traded in the stock market.

 

It’s mandatory to have a statutory auditor if one of these conditions is satisfied;

  • The Articles of Incorporation require so
  • Assets are higher than 5,000 times the minimum legal wages
  • Revenues are higher than 3,000 times the minimum legal wages

 

The Limited Liability Company will be under the supervision of the Companies Superintendence;

  • If the supervision does not correspond to any other Superintendence
  • Assets or revenues are higher than 30,000 times the minimum legal wage.

 

Investment capital requirements: No restriction on capital concentration as long as there are 2 quota holders at all times. No minimum capital required. Capital must be paid at the time of incorporation.

Management:  Not mandatory to have a Board of Directors. All decisions can be taken directly by the Partners and the General Manager when they have been granted such authority.

Registration fee: Varies between USD 17-873 per year

Limited Partnership (Sociedad en Comandita)

A limited partnership involves;

  • One or more managing partners who are jointly and severally liable for the entity’s operations and
  • Silent partners who limit their liabilities to their respective capital contributions

The capital is contributed by silent partners and managing partners (holding unlimited liability). Limited Partnerships can be either simple limited partnerships and shares partnerships.  A simple limited partnership’s equity capital is divided into partnership quotas while shares of a partnership can be divided into shares.

 

Investment capital requirements: No minimum capital required.

Management: Atleast 2 partners are required, a general partner and a silent one.

Registration fee: Varies between USD 17-873 per year

 

 

Branch of a foreign company

Foreign companies with permanent activities in Columbia (offices or commercial establishments) must set up a branch office. From a legal point of view, a branch is not considered an independent legal entity.

The following documents must be registered at a notary’s office at the location of its main office.

 

  • Articles of Incorporation of the head office
  • A minute issued by the head office governing body authorizing the incorporation new office in Columbia
  • Documents providing evidence of the company’s head office and legal status of its representatives abroad

 

A new legal entity is not created when incorporating a branch. Any decisions that can impact operations in Columbia must be made by the foreign Headquarters. The appointment of a statutory auditor is compulsory.

 

Investment capital requirements: No minimum capital required. Capital must be paid at the time of incorporation.

Management:  Carried out by the parent company

Registration fee: Varies between USD 17- 873

 

Outsourcing Employment Through a GEO Employer of Record Service

Whether to incorporate in Colombia, and what sort of entity to setup are just two of the many choices companies must make when expanding into a new market.

If the company intends to have staff in Colombia they must also decide whether they will administer that employment internally or use a Global Employment Organization to handle payroll and Employer of Record responsibilities.  A GEO Employer of Record solution is an attractive alternative where

  • the company is looking to setup an office quickly
  • the company wants to work within a defined budget
  • the company wants to limit its initial commitment in Colombia
  • the company needs help with tax, employment, immigration and payroll compliance in Colombia

The complexity of employment regulations in Colombia makes the use of a GEO advisable coupled with local legal counsel to ensure full compliance with employment laws, for example the drafting of local contracts for workers.

Shield GEO provides a comprehensive service in Colombia allowing companies to deploy their staff quickly with reasonable, clearly stated costs and timeframes. The company contracts directly with Shield to employ and payroll their staff on their behalf in Colombia.

Shield GEO then becomes the Employer of Record. Shield GEO assumes the legal responsibility for these employees, sponsoring them on work permits, complying with local employment law and running their monthly payroll. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Colombia. Read more about outsourced employment through Shield GEO.

  • Colombia Employer of Record Overview

Colombia Employer of Record Overview

  • Colombia Employer of Record Overview

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