Doing business in Colombia

How quickly can I set up a business?

Approximately two weeks from the filing of documentation in the Chamber of Commerce.

For the constitution of a company in our country, it is important to keep in mind that there are different phases, in which Kreston RM S.A. provides advice and support:

Phase 1: Preliminaries

1. Advice on choosing the corporate model
2. Consult homonymy company name chosen by the partners / shareholders
3. Preparation document of incorporation

Phase 2: Registration

1. Acquire and fill out forms before the Chamber of Commerce.
2. Process Pre – RUT- document with which you can choose to receive the NIT, which is the Tax Identification Number.
3. Pay Forms and registration fees (equivalent to 0.7% of the value of the subscribed capital at the time of incorporation).
4. File forms and related documentation in previous points.
5. Preparation letters of acceptance of appointed positions.

The related documentation will last under study and processing a maximum of 8 business days, after which the certificate of existence and legal representation of the company and the commercial registration will be issued with the respective NIT of the company.

6. In case of being requested by the registration entity, the submitted observations are remediated or corrected and the procedure for study is filed again.

Once the documents described above have been presented, the final result is the Commercial Registration, a document with which the company is born into legal life and this phase is concluded.

Phase 3: Beginning of Operations (other process)

1. Open a Bank account.
2. Get the Billing Resolution: moment from which the company can begin to invoice for the services provided.
3. Registration of foreign investment, a procedure that can only be carried out directly by the legal representative.
4. Obtain and register the legal books.
5. Preparation and delivery of share titles to each of the shareholders (if applicable).
6. Completion of the shareholders registry book or partner registry book.
7. Registration and opening of the Tax Information Registry – RIT.
8. Obtain digital signature of the legal representative.
9. Obtain RUT from the legal representative.

In the event that the legal representative is of foreign nationality, the visa and RUT management must becarried out in PHASE 1 – PRELIMINARIES mentioned above.                

What is the minimum investment needed?

There are currently no minimum capital requirements to start a company in Colombia.

Basically, it will depend on how much the entrepreneurs will need to execute their ideas, as well as the financial support they will receive.

How can I raise finance?

The first source of financing in general are the banks, so each financial institution has its own Savings and Investment programs for SMEs in Colombia.

However, it is important to note that in Colombia there is an entrepreneurship law that has created several programs to help not only with money but also with support to those who have business ideas.

Announcements to support entrepreneurship: There are currently a large number of national and international calls that seek to support entrepreneurship and innovation.

Among the most important calls we have: Destapa futuro, Ventures, Fondo Emprender, Innovadores de América, Convocatoria Innpulsa, etc.

Each call has its own approach and looks for a certain profile of ventures, then review the requirements of each one and identify those in which you can participate with your Project.

Business Angels (angel investors) are people with large sums of capital who seek projects with high potential to invest in them. They are usually willing to invest average amounts between USD $ 25,000 – USD $ 250,000 per company. They are investors who seek attractive financial returns, but who also enjoy their involvement in the investment activity in entrepreneurship.

In Colombia there is a network of angel investors that was created by the Bavaria Foundation.

Crowdfunding, or collective financing, is a way of financing innovative projects by taking advantage of the potential of the Internet.

There are different crowdfunding platforms in which various business and social projects are constantly published. Once a project is published and the financing goal is established, Internet users can start contributing their money with the aim of helping the project to be developed.

What are the legal requirements for setting up my business?

In Colombia there are the following existing corporate figures:

• Limited Liability Company
• Stock Corporation
• Collective Company
• Simple Limited Partnership
• Limited Partnership by Shares
• Simplified Stock Company (S.A.S)
• Branch of Foreign Company

The chosen form differs from the other with regard to paid capital and the responsibility of the partners in terms of business administration. Regarding compliance with local regulations and taxes, they do not differ.

Thus, it will depend on the partners or shareholders the legal structure that they agree on for the formation of their company.

Now, as regards legal requirements, basically you must be of legal age, regardless of whether you are a foreigner or Colombian and whether you are the sole shareholder or not.

What structure should I consider?

Currently, the figure contemplated in Law 1258 of 2008, considered the simplified joint stock company structure.

The Simplified Stock Company (SAS) is a capital company constituted by one or more natural or legal persons that, after registration in the commercial register, becomes a legal person other than its shareholder or shareholders, and in which partners will only be liable up to the amount of their contributions.

The SAS gives entrepreneurs the possibility to choose the corporate rules that best suit their interests, which reaffirms that it is a flexible regulation that can be adjusted to the requirements of entrepreneurs. The payment of contributions can be deferred for up to a maximum period of two years and no initial minimum fee or percentage is required.

The simplified stock company (SAS) is the most popular type of company in Colombia, due to the flexibilities it offers compared to other types of companies such as:

• Be constituted by means of a private document, signed by a notary public.
• To be formed by one or more shareholders
• Its shares are freely negotiable
• It is managed through a shareholders’ meeting

Regarding the limitations of the SAS, the liability is limited for the shareholders, therefore, as regards financial activities, the law does not allow the constitution of a SAS, and another type of company will have to be used.

For the constitution of the S.A.S the following procedures are necessary:

• Preparation of the statutes of the company to be established.
• Preparation of documents to be sent by a foreign company.
• Filling out forms and registration before the chamber of commerce.
• Preparation of letters of acceptance of appointments.
• Formalise the Single Tax Registry.
• Process of authorization resolution to invoice.
• Registration and opening Industry and Commerce.
• Obtain and register the shareholders’ registration book, the General Shareholders’ Meeting minute book, the Board of Directors’ minute book (in the event that said administrative body is created).
• Preparation and delivery of share titles to each of the shareholders.
• Completion of the shareholders’ registry book.
• Commercial registration.
• Document registration.
• Registration forms.
• Opening and activation of Bank account

What advice can you give me in regards to payroll and taxation requirements?

Location will depend on the activity that the corporate type is going to carry out, thus things, basically anywhere in Colombia a company can be created.

Payroll and HR requirements: requirements are broad and extensive.

Compliance that a company is obligated to carry out in terms of labour obligations:

1.Register the company with the Social Security System Entities (EPS- Public Health Insurance, AFP-Pension and Severance Fund Administrators, ARL- Labour Risk Administrators),

• Register the company in the Family Welfare Fund,
• Open a bank account,
• Sign employment contracts,
• Implement COVID 19 biosafety guidelines and accredit them to the local mayor’s office.

Summary of the most common Social Benefits payable by the employer:

• Legal Service Bonus
• Vacation Days/Holidays
• Severance
• Interests on Severance
• Payments to the social security benefits and parafiscals in employment contracts
• Work garments
• Transportation allowance
• Medical leave payment

Taxes

It will depend on the economic activity but those that are usually required by the Tax and Customs Authority (DIAN) are:

• Income tax. Colombian-sourced income and foreign-sourced income
• Self-withholding on income tax
• Capital gain tax
• Equity tax
• Value Added Tax (VAT)
• Consumption national tax
• Registration tax
• Industry and commerce tax
• Property tax
• Transfer Pricing.

The reports will also depend on the economic activity to establish who will be the entity that will monitor and control the company, usually reports must be issued to the Superintendency of Companies regarding financial statements, management report, report of good practices.

Is there anything else that I should know?

1. There are some economic activities that, due to their characteristics, could vary in terms of requirements and authorizations in consideration of the surveillance and control entities.
2. Permanent activities in Colombia:

According to the Article 474 of the Colombian Commerce Code, if a foreign organisation performs any of the following activities within a business scheme, such organisation is considered to develop a permanent activity in Colombia:

1. Opening within Colombia territory of commercial establishments or business offices.
2. Participating as contractor in the performance of works or rendering of services.
3. Participating in any private savings managing activity.
4. Carrying out activities related to the extractive industry.
5. Obtaining or participating in a government concession.
6. The running of its shareholders’ meetings, boards of directors, management or administration.

When comply with any of the 6 points mentioned above, the entity must be formally established in Colombia a branch or a subsidiary.

1. According to article 203 of the Colombian Commercial Code, it is mandatory to appoint a Statutory Auditor in branches and stock companies. The other legal entities only require the appoint of a statutory auditor if their gross income exceeds three thousand (3,000) minimum monthly legal wages and/or their assets exceed five thousand (5,000) minimum monthly legal wages.