In this series, we look at some of the complexities to consider when expanding your business across borders, or if you’re looking at multinational investment. There are many general issues, and different countries have very different legislation, regulation, and tax regimes.

Here, we review some of the complexities to keep in mind when expanding or investing into Colombia.

Read ‘Complexities in New Markets: Colombia’ everywhere you go

Colombia is the 3rd largest economy in Latin America and is one of the most economically and politically stable countries in the region, making it one of the most attractive countries for foreign investment. The country’s GDP ran to some US$271 billion in 2020 (US$5,332 per capita) and broke its GDP record in 2021 with 10% growth.

Colombia has a thriving market economy based on oil, mining, agriculture and manufacturing, and its population of 51.6 million is highly skilled. With a literacy rate of 95%, the workforce is keen, willing, and under-utilised.

Bordered by the Caribbean Sea to the north and at the base of the Central American isthmus, Columbia’s 1.1 million square kilometres have the 2nd highest level of biodiversity in the world – and ranks 1st for orchid species, 2nd for bird, freshwater fish and amphibian species, and hosts the largest number of endemic species of butterflies. There are a diverse range of climate zones, as the land includes tropical rainforests, highlands, grasslands and deserts – and it is the only LATAM country with coasts on both Atlantic and Pacific oceans.

Further, November 2021 saw Colombia joining with Panama, Ecuador, and Costa Rica to merge their Pacific Marine Reserves into one single interconnected area to be known as the Eastern Tropical Pacific Marine Corridor (CMAR), creating a fishing-free corridor of some 500,000 square miles in one of the world’s most important marine-migratory routes.

Though rich in natural resources, Colombia has set ambitious renewable energy goals; pledging to reduce greenhouse gas emissions by 51% (from baseline), reduce black carbon emissions by 40% (based on 2014 levels and aiming to significantly improve air quality), and install 4,000 MW of new renewable electricity production facilities by 2030. Energy auctions began in 2019 and are set to continue, and the country’s private sector seems to be in full support. Most recently, Colombia has expressed commitments to geothermal, hydrogen and electric mobility, and introduced tax incentives for non-conventional renewable energies in 2020 (Decree 829).

Colombia is a signatory to 16 different international trade agreements and has access to more than 60 partner countries through these, including preferential access to the U.S., Europe and the Mercosur trade bloc. The country has 14 Double Taxation Treaties in place, including with Canada, Mexico, the UK and Spain, and became an official member of the OECD in 2020. It’s also a member of the UN, the WTO, the Pacific Alliance, the Andean Community and a NATO General Partner.

Colombia is a signatory to 16 different international trade agreements and has access to more than 60 partner countries through these, including preferential access to the U.S., Europe and the Mercosur trade bloc


Colombia’s industries include mining (coal, gold, emeralds), oil, textiles and clothing, agribusiness (cut flowers, bananas, sugarcane, and coffee), beverages, chemicals and petrochemicals, cement, construction, iron and steel products, and metalworking.

Many sectors show strong future potential, and Colombia has many extensive and ongoing infrastructure projects, including: logistics, equipment, water treatment and supply, power generation, pollution control technologies, railway construction, transportation and mass transit. COVID-19 has also reinforced the need for faster and better connectivity in the more remote areas. There is a secondary market for ongoing Colombian infrastructure projects where it is common to fund an equity stake in the project company.

Colombia’s renewable energy ambitions should also be included as a major opportunity.

There are opportunities in information/communication technology, eCommerce and app development, including fintech.  DataReportal’s publication shows that 98.1% of the population now has a mobile phone, and 97.5% of these are smartphones, being used to access the internet an average of 5hrs per day. The National Development Plan allows reduced requirements for granting temporary licenses for companies proposing innovative fintech solutions.

Tourism, particularly ecotourism, is on the rise and a vital part of the economy. Tourism is the second biggest source of foreign currency, and hit record numbers in 2019 (US$6.751 billion) and the outlooks for 2022 are very positive. 2019’s Economic Growth Law put incentives in place to boost the tourism market further, including preferential tax rates for hotels, ecotourism, theme parks, agritourism, and new waterfront facilities. Incentives are also in place for new ventures located in municipalities of less than 200,000 inhabitants (9% for 20 years – in place until 2029).


Foreign Direct Investment

Foreign direct investment was concentrated in the non-mining-energy sector in 2019; 69% of FDI was directed to this sector, 70.1% in 2020.

The total amount of FDI in 2021 showed a decrease (from US$14.5 million in 2019 to US$8.1 million), however there are strong signs of rebound. Between January and March 2021, Colombia registered 33 new investment projects representing US $1.595 billion, a growth of 66% compared to the first quarter of 2020.

Colombia also has a free trade zone regime, offering benefits from reduced income tax and customs fees, VAT exemptions, and smooth export processing. There are requirements to be met for both investment and local employment, but the regime also includes an option to be located anywhere, (not in a specific zone) for single companies investing in projects deemed to have significant social and economic impact.

Foreign companies can develop and finance infrastructure projects in Colombia, though local representative may be required to participate in government tenders and a local entity must be incorporated to implement the project. Legal advice is recommended before participating in tenders, as is strong due diligence and implementing strict controls over the use of project funds.

Doing business & establishing a company

In general, Colombia is not as regulated as other countries in the region; foreign investment is permitted in virtually all sectors. However, foreign investment must be registered and foreign exchange reporting requirements and procedures exist, along with a special exchange regime for foreign companies in the oil, gas or mining sectors to receive payments in foreign currency.

The Colombian Commerce Code states that a foreign organisation is considered to have developed a permanent activity in Colombia if it:

  • Opens within Colombian territory of commercial establishments or business offices
  • Participates as a contractor in the performance of works or rendering of services
  • Participates in any private savings managing activity
  • Carries out activities related to ‘the extractive industry’ (mining in any form)
  • Obtains or participates in a government concession
  • Runs a shareholder meeting, board of directors meeting, management or administration from Colombia.

This fairly exhaustive list means that there are not many ways to operate without launching a local entity – which can be done by a local third party on your behalf.

The most common types of corporations in Colombia are:

Type Requirements Stock/Shares Liability
Stock Corporations (S.A.) Must have a minimum of 5 shareholders, no upper limit. Each share represents one vote. Requires a Statutory Auditor. At least 50% subscribed at incorporation, and at least 1/3 of the value of the stock must be paid – remainder due within a year of incorporation. Limited to the value of the capital contribution (though liability in labour matters may affect shareholders)
Limited Liability Company (Ltda) Maximum 25 partners. Does not require a Statutory Auditor as long as revenues/assets remain below regulatory limits. Represented by quotas, which must be fully paid at the time of incorporation. Partners’ liability is limited to their contribution, except in fiscal and labour liabilities.
Simple Stock Companies (S.A.S) No upper or lower limits, but each capital share entitled to single (or multiple) vote, as per bylaws.
Does not require a Statutory Auditor as long as revenues/assets remain below regulatory limits
Represented by shares.
The share capital is divided into authorised, subscribed and paid capital.
The authorised capital should be paid within 2 years from the incorporation.
Shareholders are liable up to the sum of their contributions, and not liable for labour, tax or other obligations incurred.

It is possible to open a Branch of a foreign company – where, according to the Colombian Commercial Code, the home/parent office assumes the responsibility for the activities of a branch office operating in Colombia.

It is worth noting that, as the country is a civil law jurisdiction, Colombia is somewhat traditional in its bureaucracy, and require legalisation of documents and public deeds – meaning documents from abroad will need official translations and legal / consular apostilles, so be sure to factor this into your planning.

Tax & Accounting / Regulatory

Colombia’s tax regime is in flux; undergoing eight reforms in the last decade – including one in 2021 (September). Given this current state of flux, it is advisable to discuss your specific situation with tax advisor within Colombia.

On the plus side, Colombia has become more digitalised in recent years. Electronic invoicing has now been made mandatory for all companies, and sharing payroll information with the DIAN (Colombian Tax and Customs Authority) has been electronic since autumn 2021.

The DIAN has also been increasing the use of technology for a number of other processes. The process of electronic notification has been regulated, and Law 1255 included the possibility that the DIAN will establish electronic invoicing for income tax and complementary taxes, according to information obtained from third parties.

Colombian law requires account books to be kept in Pesos and submitted in Spanish using IFRS parameters. Submitted financial statements must include: financial position at the end of the fiscal year, income statement, changes in equity, and cash flows. In addition, every foreign investment made must be registered with the Central Bank and must be brought into the country in compliance with foreign investment and exchange laws.

The Commercial Code dictates that branches and stock companies must appoint a Statutory Auditor. Other legal entities only require a Statutory Auditor if gross income exceeds 3,000 minimum monthly legal wages (COP2,725,578,000 / c. US$699,132 in 2021), or if the total assets of the company are equal to or greater than 5,000 legal minimum wages (COP4,542,630,000 / c.US$1,111,296 in 2021).

Labour / Payroll matters

Working hours are set eight hours per day / 48 hours per week and the week must include a mandatory rest day, but hours can be flexible and agreed between employer and employee. 10 hours per day is permitted, the additional hours being paid at the overtime rate, and overtime above 10 hours per week requires permission from the Ministry of Labour.

  • Day hours are between 06:00 am and 09:00pm – overtime fixed at +25% of normal rate
  • Night hours are between 09:00 pm and 06:00 am – overtime fixed at +75% of normal rate
    • In addition, night hours receive a standard 35% surcharge on the normal hourly day time rate.

Minimum wages are set annually. For 202, the monthly minimum wage in Colombia is COP1,000,000 (c. US$245)

Employees are entitled to 15 working days paid vacation per year of service, up to half of which can be taken in cash on the employee’s request. The legal obligation is that the employee must take at least six continuous working days of vacation per annum. In addition, employees can accumulate vacation days for a period of two years (ordinary employees) or four years (technical, specialised, management, or foreigners).

Maternity leave is set at 18 weeks and there are specific rules with regard to terminating the employment relationship with pregnant employees or those on maternity leave, which also applies to spouses, permanent companions or partners. In addition, employers with more than 50 female employees are to install lactation family rooms to assist new mothers. Paternity leave is 14 calendar days.

There is a 13th Salary requirement, constituting 30 days salary and paid in two instalments, on 30 June and 20 December each year.

Colombia also has specific financial requirements for; Social Security and Pension Regimes, Internal Labour Rules, transportation allowances, work garments, and a Labour Coexistence Committee, among others – and these rates vary depending on whether you employ locals or foreigners.

There are various visa types for foreign workers, depending on their intended undertakings in Colombia, though all foreign workers must be registered with Migración Colombia and the Ministry of Labour.


The Colombian banking sector consists of 25 domestic banks with around 5,700 branches, though e-banking and app-based banking has seen significant growth and many banks have their own digital offering. There are also many foreign banks available, all offering different services.

Opening a corporate account in Colombia can be frustrating, but is an essential step to obtaining a business licence. You should also be aware of the enhanced KYC/due diligence that will be performed on you, your directors and your business, which will add to the time and money you will outlay.

Step one is to obtain a pre-taxpayer ID from the DIAN, known as the pre-RUT (registro único tributario). You will also need a Colombian ID Card, the cédula.

While it is possible to open an account with only a foreign passport, it is only available at a few specific banks, and the process is lengthy, complicated and costly.

Our Bogotá Team is best placed to advise you on your specific bank requirements.


While it’s true that 2020 and 2021were complex years for Colombia due to the impact of the pandemic, the country should not be discounted as the opportunities it offers for 2022 and 2023 for business and investment remain.

Moreover, the skilled workforce (and low wage requirements), free zone availability, and the extensive variety of sectors supported make it an ideal location.

Our local experts in Bogotá are ready to help you with your Colombian expansion projects. Get in touch to see exactly how we can make your life easier.

Employers are required to pay social security contributions of 12.25% of the total remuneration of the employee, along with an education insurance tax (1.5% of salary)


International banks in Panama offer corporate accounts to both local and foreign companies and all are focused on confidentiality. It usually takes around 2 weeks to open an account.

Most do not require clients to open accounts in person, though signatories will require personal references (from lawyers, business consultants, etc.) as well as personal banking references and original commercial references.

There are several different types of banks:

  • General licence – the standard domestic retail full-service bank
  • International licence – offshore banks with can only accept deposits from overseas persons/organisations
  • Representative offices – can only perform representational activities
  • State-owned – two government-controlled deposit-taking institutions.


Panama provides challenges, but those are surpassed by great opportunities. And the benefits of its Canal, giving access to major shipping routes on both sides of the continent, cannot be denied.

Panama offers excellent incentives and opportunities for nearshoring U.S. operations, along with real estate, tourism and renewable energies.

Auxadi can help with every stage of your operations in the Republic of Panama. Get in touch with our team in Panama City to learn more on exactly how we can make your life easier.

Contact our team today to find out exactly how we can help you

Local Knowledge – International Coverage

Founded in 1979, Auxadi is a family-owned business working for multinational corporations, private equity funds and real estate funds. It’s the leading firm in international accounting, tax compliance and payroll services management connecting Europe and the Americas with the rest of the world, offering services in 50 countries. Its client list includes many of the top 100 PERE companies. Headquartered in Madrid, with offices in US and further 22 international subsidiaries, Auxadi serves 1,500+ SPVs across 50 jurisdictions.

All information contained in this publication is up to date on 2022. This content has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this chart without obtaining specific professional advice.No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this content, and, to the extent permitted by law, AUXADI does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this chart or for any decision based on it.