Set Up Business in Colombia
Colombia Expansion Guide
Global Upside helps companies set up, hire, and operate in Colombia. Set up a legal entity quickly and easily with our solutions for branch, subsidiary, and rep office. Looking for an alternative to permanent establishment? Hire and pay employees in Colombia without a legal entity by using our PEO & employer of record services. Once your business is set up, our teams can support with recruitment and staffing, human resources, employee benefits, payroll, accounting, and tax.
Capital City
Bogota
Currency
Colombian Pesos (COL$)
Language
Spanish
Government
Presidential Republic
Country Overview
Colombia has seen an acceleration in its economic growth in recent years, mostly driven by strong private consumption and stronger finances. Once the domestic restriction actions come to ease, the low-interest rate facilitated by the central bank is expected to augment the private consumption growth.
- Colombia ranks as the 42nd largest economy in the world in terms of nominal GDP.
- Colombia ranks as the 3rd largest economy in South America.
- Colombia is the world’s 67th best country for business.
- Colombia is a large exporter of nuts, grains, and tropical fruits.
Options for setting up a legal entity in Colombia include:
General Partnership (Sociedad Colectiva)
General Partnership (Sociedad Colectiva) is a form of establishment that requires at least 2 investors who have supplementary personal liability. The investors can administer overall responsibilities or hire a manager.
Limited Partnership (Sociedad en Comandita Simple y por Acciones)
Limited Partnership (Sociedad en Comandita Simple y por Acciones) is a kind of establishment that has two categories of partners – at least one limited and managing partners. In the case of a shared limited partnership, there need to be at least five partners. The limited partners have limited obligations, meanwhile, the managing partners have personal obligations.
Limited Liability Company (Sociedad de responsabilidad limitada)
Limited liability company (Sociedad de responsabilidad limitada) can have 2 to 25 partners whose liabilities are equivalent to their amount of share.
Corporation (Sociedad Anónima)
Corporation (Sociedad Anónima) must have a minimum of 5 investors and they have no personal liabilities. The board of directors elected by the investors comprises the managing body.
Simplified Stock Company (Sociedad por Acciones Simplificada)
Simplified Stock Company (Sociedad por Acciones Simplificada) is a form of a legal entity set up that needs a minimum of 1 investor who will have no personal liabilities.
It takes approximately one to two months to establish a legal entity set up in Colombia, depending on the kind of establishment required.
In Colombia, the sources of labor and employment law are varied and include –
- core labor principles and obligations are established by the constitution
- laws applicable to employment agreements, collective bargaining agreements, employment benefits, wage and hour, and vacation and sick time are governed by the Substantive Labor Code
- the guidelines and decisions are issued by the Constitutional Court, labor courts, and the Ministry of Labor.
The employment agreements here, are known as Contrato de Trabajo which can either be written or oral, however, a written bond is preferred.
Mentioned below are the terms to be included in Colombia’s employment contract:
- Name and address of both the employer and employee
- Time and place of the signatures
- Job location
- Job title and description
- Salary and Payroll Cycle
- Contract duration
- Probationary period
- Termination
The payroll cycle, in Colombia, is bi-weekly or monthly. That said, employees who are paid on a bi-weekly basis are paid on the 15th of the month. As for the employees who are paid monthly, their salaries are paid on the last working day.
In Colombia, the employees are enabled with a 13th-month salary which is paid in 2 installments – the first half in June and the second half in December.
Companies need to be in total compliance with International Financial Reporting Standards (IFRS), also known as Normas Internacionales de Información Financiera (NIFF).
Corporate Tax
The corporate tax rate in Colombia is 32%.
Value Added Tax (VAT)
The standard VAT rate here is 19%.
Colombia identifies two major laws for personal data protection under Articles 15 and 20 of the Constitution – i) the right to privacy and ii) the right to data modification. Furthermore, individual data processing is administered by two legal laws and numerous decrees that set out data protection liabilities. The laws state that all employees have the right to control and update their data and information.
Anti-Bribery & Anti-Corruption Law
The Colombian Criminal Code is implemented for any public official and private individual who is involved in corrupt practices with public officers. The Anti-Bribery Statute was approved by the Colombian Congress in July 2011, with an effort to emphasize the prohibition, examination, and forfeiture methods against public and private corruption.
Bribery for Public Officials
For individuals:
i) Imprisonment for 6 to 12 years.
ii) A monetary fine of USD 13,000 to around USD 30,000.
iii) Removal from holding a position in the organization for 6 to 12 years.
For legal entities
i) A monetary fine of USD 40 million.
ii) Prohibition from commercial activities.
Bribery for Private Officials
For individuals:
i) Imprisonment for 4 to 8 years.
ii) A monetary fine USD 200,000.
A legal entity or organization could be liable for remunerating the damages caused by the crime.
