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.