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.
Regulations governing employment in Colombia
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.
| 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 |
| 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. |
Compliance with local employment requirements is just one of the issues foreign companies face when employing staff in Colombia. For companies which intend to employ their staff directly through their incorporated Hungarian entity, professional legal advice is recommended. Shield GEO provides an alternative path for companies to outsource the employment of their staff in Colombia.
As a Global Employer Organization (GEO), Shield GEO acts as the Employer of Record and ensures the employment is compliant with host country regulations regarding employment. In addition Shield GEO will handle payroll processing, tax and immigration. Using Shield GEO is the fastest and most cost effective way to deploy local and foreign workers into Colombia.
The Shield GEO solution is an attractive alternative where
| 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) |
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| Tax Returns Supplied | Yes |
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| Employers Social Security and statutory contributions |
Employers are required to make the following contributions as a % of the employee’s salary. *The ceiling for calculating contributions that have to be paid by is minimum 25 minimum legal wages. |
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| Employees Social Security and statutory contributions |
Employees must contribute the following social security contributions as a % of their salary. *The ceiling for calculating contributions that have to be paid by is minimum 25 minimum legal wages. |
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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. |
| Information | Explanation |
|---|---|
| Employee Information Required ? |
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| 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.
|
| 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 ? |
|
| 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 |
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;
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.
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
Please contact us for a quote.
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
Cost varies for European, Cuban, and other nationals. Please contact us for a quote.
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!
| Category | Description of Visa |
|---|---|
| NE 1 | Business visas are divided into 4 categories. NE 1 Cost varies for European, Cuban, and other nationals. Please contact us for a quote. |
| 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. Cost varies for European, Cuban, and other nationals. Please contact us for a quote. |
| 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. Cost varies for European, Cuban, and other nationals. Please contact us for a quote. |
| 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. Cost varies for European, Cuban, and other nationals. Please contact us for a quote. |
| 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. Cost varies for European, Cuban, and other nationals. Please contact us for a quote. |
| 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. Cost varies for European, Cuban, and other nationals. Please contact us for a quote. |
| 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. Cost varies for European, Cuban, and other nationals. Please contact us for a quote. |
When setting up a company you may want to consider these 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.
There are numerous rules and regulations that govern Columbian business organizations.
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.
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.
Incorporation process
To incorporate a company in Columbia the following documents should be prepared.
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.
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.
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.
Pre requisites to obtain a final id number (RUT) from the tax agency (DIAN)
*Pre tax ID (RUT)
*Bank account certificate
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.
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.
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.
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.
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.
Types of business established in Columbia
There are 5 types of legal entities that can be established in Columbia. Such entities vary by:
Corporations (S.A. by its acronym in Spanish) and Simplified Stock Corporations (S.A.S. by its acronym in Spanish) belong to this type.
Limited liability companies belong to this type of corporate entities.
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.
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;
SAS has a simple structure due to the following reasons
*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
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
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
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 Limited Liability Company will be under the supervision of the Companies Superintendence;
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
A limited partnership involves;
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
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.
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
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 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.
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