Firstly, Colombia is a Latin American country, located in the north region of South America; it has a great natural and cultural biodiversity.
It is currently one of the countries in Latin America that most encourages the investment of foreign capital in its territory, providing a series of incentives and free zones, which will be explained soon.
Before investing in Colombia, you must take into account a series of basic aspects of the economy of this country, such as:
- The currency used in Colombia is the Colombian peso, which has a value of US $ 0.00031.
- It has an annual inflation rate of 3.43% according to the Colombian economic portal El portafolio.
- It has a GDP (gross domestic product) of 2.3%, in figures are 71,095 million euros according to the economy portal Expansión.
These aspects are translated into crucial economic indicators to develop the financial structure of your business plan that you want to invest in Colombia.
However, Colombia is characterized by having a constant inflation index, which has not changed in a long time, the worrying is GDP. Since according to that figure, it proves to be one of the countries with greater social and economic inequality in Latin America, that is to say, there is a great gap between economically wealthy people and poor people.
On the other hand, its currency this year has been showing a devaluation with respect to the US dollar, based on this the Colombian government has decided to promote the development of foreign investments in their country.
- Viable investments in Colombian territory:
- Visas in Colombia
- Types of societies or companies in Colombia:
- Steps to open and set up a company in Colombia:
- Taxes that must be declared and paid in Colombia.
Viable investments in Colombian territory:
Firstly, the Colombian state to encourage and support foreign investment, has created an agency called Procolombia. Which together with the government, the Ministry of Commerce and Tourism of Colombia, and in partnership with the chambers of commerce of each city, encourage and push the growth of these investments.
According to Procolombia, the best industries to invest in Colombia are:
- Agroindustrial: that includes aquaculture, biofuels, cocoa, meats and dairy products.
- Manufacturing: textile, automotive, construction materials, plastic packaging and cosmetics.
- Services: hotels, tourism, information technologies, software, energy and private equity funds.
Through what mechanisms does the government of Colombia encourage foreign investment?
One of the mechanisms is the existence of free zones, which have been established throughout the Colombian territory. Which have the benefit that they charge only 20% for income tax and a series of tax exemptions.
There are three types of free zones in Colombia:
- Permanent free zones: they are located in the cities like Medellín, Bogotá, Cartagena, Bucaramanga, Ele and Cali. In those cities, you can open companies as foreigners if you meet certain investment, asset and employment requirements.
- The requirements are translated into minimum and maximum figures of these aspects, with which you can start your business with goods (assets) valued from 138.019 USD to 8.281.436 USD, you can start with an investment of 0 USD up to 3.174.445 USD and you have that hire from 7 employees to 50 direct employees.
- Special permanent free zones: these zones cover the entire national territory, in any part of the country only that this benefit is granted for the development of investments in industries with a high social and economic impact.
- The industries conducive to these investments are: dairy, services, ports, goods, agroindustrial and hydrocarbons. It should also be noted that you need a minimum investment of 1.380.193 USD and hire from 50 direct employees up to 500.
- Special economic zones of export: if you want to export your products from Colombia, you can do it from the cities of Cúcuta, Valledupar, Ipiales and Tumaco (border areas with Venezuela, Ecuador and Peru).
In addition, there are other investment incentives provided by the Colombian state such as:
- Financing and credits for investment.
- Exemption from some taxes.
- Special benefits for people who want to invest in the hotel sector, tourism, capital goods and promotion of scientific and technological development.
You can enlarge this information you can consult the Procolombia website.
Once described the benefits of investing in Colombia being a foreigner, now we are going with the legality and taxes that entail opening a company or company in Colombia.
Visas in Colombia
In the first place, being a foreigner, you need a visa to invest capital in Colombian territory, as well as to stay there. You can request it at the Ministry of Foreign Affairs or through the Colombian Consulates abroad.
These visas have different typologies both for the length of stay and the type of activity to be carried out in Colombia.
Here we show you the types of visas that exist in Colombia:
Based on the time of permanence:
- Visitor visa: valid for 2 years.
- Migrant Visa: has a duration of up to 3 years.
- Residence visa: it has an indefinite validity. However, the initial period of validity will be 5 years.
Based on the activity to be carried out in Colombia:
- Business or call (NE): this is the one that must be transacted to invest as a foreigner.
- Temporary or visa (TP): is to exercise a temporary activity in Colombia, such as studies or research.
- Resident or called visa (RE): oriented to people who want to settle in Colombia.
Below I present the types of business visas to process to make investments in Colombia:
- Business Visa (NE-1): it will be given to foreigners who want to enter Colombia with the objective of carrying out both commercial and business management, promoting economic exchange, making investments and creating a company. The duration of this visa is three (3) years.
Business Visa (NE-2): it will be given to the
foreigner who wishes to enter the Colombian country, temporarily, as
a business person, within the framework of current international
instruments such as the VGR, TLC, Alianza del Pacifico, among
With the purpose of initiating business management activities, business promotion, investments, establish commercial presence of a company, promote trade in cross-border goods and services, among other activities established in the instruments.
The validity of this visa is four (4) years.
Business Visa (NE-4): will be granted to the
foreigner who requires to enter Colombia, as president or senior
manager of a multinational company to make investments and establish
a headquarters or branch of said company in the country.
This visa is valid for five (5) years.
However, it must be taken into account that except for the NE-2 visa, under these visas, the foreigner will not be able to establish his domicile in Colombia, and the activities developed will not be able to generate the payment of salaries in Colombia. Which is an aspect that makes it difficult to enjoy the benefits granted by the free zones mentioned above.
We need to consult more with the migration agencies on this, here is the Migration Colombia link.
Types of societies or companies in Colombia:
Before making any investment to set up a company in Colombia, you must be clear about the types of companies that exist there, which are:
- Limited Liability Company.
- Anonymous society.
- Sociedad en Comandita – & Cía.
- Sociedad en Comandita Simple – S. en C.
- Sociedad en Comandita por Acciones – S.C.A.
- Collective society
- Simplified Stock Company.
It is worth noting that foreign investors tend to invest in three types of companies:
- Limited Liability Company: in this classification of companies, the capital is divided in equal parts among the shareholders and as it is limited liability. The owners only have responsibility for the amount contributed individually to the company, without putting their capital or personal or personal assets at risk.
- Anonymous Society: this type of company is the most suitable for medium and large companies, which must be constituted by a minimum of five (5) partners and there are no limits as far as the number of partners is concerned.
- In the Public Limited Companies the shares are freely negotiated and the partners will only be responsible for the capital contributions made individually. This company legally has to be constituted through public deed before a notary.
- Simplified Share Company: these companies can be constituted by a minimum of one (1) person, without a maximum limit of partners, and is constituted through a private document, which must be registered in the Mercantile Register of the Chamber of Commerce. Commerce of the city where the company will be established. Its capital is divided into freely negotiated shares, commonly family businesses.
Registration of investments in Colombia
Since we have clear each of the types of companies that can be opened in Colombia being a foreign. We must bear in mind that every foreigner must legally register the monetary amount for investment purposes, either to set up a company or to set up a branch of his company in the Colombian country.
This investment must be registered as “Foreign Investment” before the Central Bank of Colombia.
The registration must be done according to the procedures established by said bank, contemplated in Decree 119 of 2017.
In which case the capital is in foreign currency, a procedure called channeling has to be done through an intermediary of the banking market or compensation account, and in turn the declaration of the change has to be made by international investments, through form n ° 4 that the bank provides.
Steps to open and set up a company in Colombia:
Before describing the steps necessary to open your company in Colombia, you have to take into account three key concepts, which are:
– DIAN or Directorate of National Taxes and Customs: it is the office of collection of taxes in Colombian territory, both for individuals and companies, it is attached to the Ministry of Finance and Public Credit.
– RUT or Unique Tax Registry: is where the data of the taxpayers in Colombia are identified and stored.
– NIT or Tax Identification Number: it is a unique code, generally of alphanumeric character, used in order to be able to identify any natural or legal person.
Once described these basic tax concepts in Colombia, I present the steps to follow to open your business in that country:
- Formalization of the company’s bylaws in a printed document and written by a Colombian lawyer, and it must be presented through a public deed (notary) before the commissioner.
- In the case of SAS (Society for Simplified Actions), the bylaws can be made through a private document, without being presented before a notary.
- Filling the format No. 1648 (Pre-RUT form) through the DIAN portal.
- Register in the Chamber of Commerce of the city where the company will be installed, the person issuing the certificate of existence and legal representation of a provisional nature of the company, with the explanatory note (The NIT is only valid to request the opening of the Bank account).
- Open the bank account of the company in any bank in Colombia.
- Formalize the RUT before the DIAN agency.
- Provide a photocopy of the RUT certificate to the Chamber of Commerce. Thus in twenty-four (24) hours the certificate of existence and definitive legal representation is issued.
- To activate the bank account. The certificate of existence and final legal representation in the bank must be presented.
Procedure to open a branch of a foreign company in Colombia
First let me tell you, this is a very long and cumbersome process, it requires patience and a lot of organization at a legal and financial level.
The procedure is not impossible, but it is more difficult than setting up a new company in Colombia.
Process of opening a branch in Colombia:
- Collect and organize a series of legal, accounting and financial documents, both for the company and its partners to set up a foreign company branch.
- Perform the protocolization of the branch before the public deed (notary) in the presence of a notary.
- Obtain letters of acceptance of branch charges.
- Carry out the Single Tax Registry (RUT).
- Register the books, minutes, legal and accounting of the company, before the Chamber of Commerce of the city where the branch will be installed.
- Open a bank account in any financial institution in Colombia.
- Register the foreign investment before the Bank of the Republic of Colombia.
If you want to know more, you can visit this link Procedure to open foreign branches in Colombia.
Taxes that must be declared and paid in Colombia.
We have already arrived at the last part of this article, but that does not diminish its importance, since to comply with taxes is the duty of every person or company whether foreign or not in Colombia.
In this country there are national and regional taxes. National taxes are applied to all persons and companies resident in the country, whether foreign capital or not, and taxes of a regional nature are determined and applied by each department (province or state) or city according to the parameters set by the legislation.
Types of national taxes:
- Income tax and occasional gain: it is a national nature and taxes the profits derived from the ordinary activities of the company. The occasional income tax is complementary to the income tax and taxes the profits caused by activities not included in ordinary operations. The income tax rate is 33% and the occasional gain rate is 10%.
- Value Added Tax (VAT): it is considered an indirect tax of national character; this taxes the provision of services, sales and import of goods. Their aliquots correspond to 0%, 5% and 19%, depending on the case.
- Consumption tax: it is an indirect national tax, aimed at vehicles, telecommunications, food and beverages. The rates are 4%, 8% and 16% depending on the case.
- Tax on financial transactions: it is applied to banking operations such as withdrawing funds from checking or savings accounts and issuing management checks. Your rate is 0.4% for each transaction.
- Industry and Commerce Tax: is a tax that is applied to industrial, commercial and service activities carried out within the jurisdiction of a municipality or district, is of a regional nature. The aliquots are 0.2% and 1.4% of the company’s income and will depend on the district where the company is located.
- Property Tax: is a tax of a regional nature that annually taxes the right of property, benefit or possession of an immovable property located in Colombia. Rates vary between 0.3% to 3.3% depending on the municipality.
Finally we can highlight that Colombia is a country that bets on the future based on foreign investments. Only the issue of visas for foreigners is a bit complicated due to its limitations.
In short, it is necessary to be advised by the competent organisms of Colombia through its different portals and consulates, in order to achieve an adequate investment in this country, since this article is roughly a general guide for this.
I hope it has been very useful for you.
Atte .: Mariajosé.
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