Doing Business in Colombia: Tips for a Smoother Experience
Enjoy a smooth entry into the exciting Colombian market by familiarizing yourself with key aspects of doing business that impact foreign inventors. The following tips will help you avoid setbacks and boost your success.
Learn the different business structures
If you’re considering doing business in Colombia, the first question is whether to invest in an existing operation, start a company within the country, or open a foreign branch.
Once you answer this question, you can decide which business structure is right for your operation. The primary business structures in Colombia are S.R.L (A Limited Liability Corporation), S.A (A Public Limited Company), and S.A.S (a Simplified Joint Stock Company).
Familiarize yourself with company registration procedures
Whether you start a foreign branch or a local company in Colombia, you must register your operation with the Central Bank and Chamber of Commerce. You’ll also need to acquire a taxpayer (NIT) identification.
Business registration proceedings vary slightly based on the company model, but in general, you should expect to provide local authorities with:
- Your identification
- A company name (that you’ve checked for availability)
- The company bylaws
- The business’s financial information
- Information on any legal representatives or other authorized local agents of the company
- Information on the employees you’ve hired (depending on the business type)
If you’ll run an on-site business in Colombia, you’ll also need to figure in time for your visa process. Anyone performing business activities in the country needs a work visa, which also permits the person and their family to live in Colombia legally while executing said work. While visas require coordination and paperwork, they’re ultimately a perk for investors, as they provide a legal route to mid- and long-term residency in the country.
Understand compliance requirements
Colombia has strict compliance requirements aimed to prevent money laundering and other illicit activities. Business owners and investors should be clear on both AML (Anti-Money-Laundering) and KYC (Know Your Customer) compliance in order to avoid sanctions, fines, and other setbacks.
At a high level, AML compliance implies performing customer due diligence, training employees to recognize the signs of money laundering, and performing risk assessments to determine how the business might be exposed to illicit actors. Tight record keeping is also a must, as is reporting any suspicious activity to the country’s financial authorities (UIAF) immediately.
KYC compliance relies heavily on customer vetting. Businesses should investigate their clients’ funding sources and expenses before deciding to work together. Companies should also keep tabs on existing clients, with an eye for illicit dealings.
Know the local labor laws
Colombia has a series of labor laws intended to protect employees and promote their wellness. A local legal expert can provide in-depth information tailored to your operation, but the following Colombian labor laws should be on any investor’s radar.
- Contract types and the respective kinds of work/hiring they cover
- Workplace composition regulations
- Minimum wage (S.M.L.M.V) rules and those related to transportation, grocery, and other stipends
- The social security framework and other benefits companies may be required to provide
- The legal working hours, including overtime guidelines
- Vacation, parental leave, and bereavement periods
Prepare for your tax obligations
Businesses in Colombia are required to pay corporate income tax of 35 percent. This amount can be higher in certain industries, like the financial and extraction sectors. Colombia also charges municipal taxes.
Investors should also be aware of other taxation types, like on dividends, sales tax (which companies generally collect directly from the consumer), customs duties, excise tax, capital gains tax, property tax, and transaction tax.
Consider how you’ll move funds
All foreign investors, regardless of whether they run a local business or a foreign branch, need a Colombian bank account. During your business registration process, you’ll have to provide the account information to the local authorities, and you may also need to demonstrate a certain amount of liquid funding in the account. Having a Colombian account will also help you operate your company agilely, paying local product and service providers or employees with ease.
You should also consider how you’ll move funds from Colombia back to your home country (profit repatriation). You’ll need to project your local tax obligations on earnings, considering any double-taxation requirements with your home country. You’ll also want to familiarize yourself on the proceedings for transferring funds out of Colombia, as the country has some capital flight restrictions.
Work with professionals on-site
It’s wise to bring local professionals—like legal representatives, auditors, and financial experts—on board. They have nuanced knowledge of compliance, financial movements, and labor laws and can protect your business from costly errors.
What’s more, you can work from a distance as needed if you have local actors who are authorized to make decisions, perform governmental proceedings, and sign documentation on behalf of your business.
Practice local business etiquette
Follow local social cues to form solid relationships with clients and employees and facilitate government interactions. For example:
- Learn the language. Unless you have a local company representative, you’ll need Spanish language skills to perform your business registration, banking procedures, and client interactions. And even if you do have a representative, showing a commitment to learning the local language demonstrates respect. While you might not be able to pick up Spanish overnight, you can use translation apps to help conversations flow as you hone your skills.
- Dress for success. Colombia has a formal dress culture for business professionals, as this type of clothing denotes propriety and accomplishment.
- Prepare to be late, and arrive early. Traffic in major Colombian cities can be hectic, and Colombian business people value punctuality. Prepare your routes to meetings beforehand, and build in extra time.
Do business like a local with expert support
Set your business up for success with expert advising. Streamline registration, regulatory concerns, and transactions by entering the Colombian market informed.
Let the professionals at LaGrande Global help you make the most of your Colombian investments.