Company registration in Colombia

Colombia is a standout business hub as it offers invaluable opportunities to entrepreneurs globally- thanks to its robust government, ever-rising growth potential, and stable political environment. As the top economy in Latin America, Colombia offers a solid roadmap to businesses seeking global trade. The inculcation of the revised trade policies has filled the most gaps hindering international trade. Henceforth, the decision to do business in Colombia in the status quo cannot go wrong.

Legalizing an entity is the first thing that you must do before you go full throttle with your business endeavors. Just like other democratic nations, Colombia has a definitive system for registering businesses. Let’s take a dive into the legal implications concerning the business establishment and other requirements. 

Why Choose Colombia for Business Endeavors?

Before we unfold the legal requirements for registering a brand new venture, let’s take a closer look at the following reflecting the business potential of Colombia:

Economic Strength and Stability

Being the 4th largest economy in the region, Colombia truly shines in terms of stability and growth rate. In 2021, the country registered a GDP of 10.6%, followed by 7.5% in 2022, showing its growth potential and economic prowess.

Large and Dynamic Domestic Market

With over 52 million inhabitants, Colombia has a massive market size, which is among the top 3 in Latin America. The youth population is proactively serving diverse industries, contributing significantly to the nation’s growth.

Sustainable Economic Development:

Colombia has tangible plans for economic development and it aims for a 51% reduction in harmful gas emissions by 2030, boosting environmental sustainability.

Strategic Geographic Location:

Positioned in the continent's center, Colombia adheres to virtually limitless export potential, allowing more nations to join forces for international trade. The two time zones facilitate ideal opportunities for service exports.

Business Competitiveness

With a focus on hypergrowth and innovation, Colombia has underpinned a robust business network fostering inclusivity and a reliable supply chain. Presently, around 1,110 startups across 26 different sectors help boost the business competitiveness.

Diverse Investment Opportunities

Colombia seeks heavy investments in sectors like energy transition, agri-food production, manufacturing, and technology to meet future growth objectives. Agri-food production is on a high note owing to Colombia's leadership in the energy transition.

Government Support and Incentives

An initiative like the Single Investment Window was launched to boost international trade through seamless FDIs. The incentive policies unveiled by the country facilitate a trade-friendly environment for global entrepreneurs.

Global Trade Access

The free trade agreements with neighbouring nations make Colombia a prime regional hub. This cohesive endeavor represents 31% of the world's GDP and underpins a massive market comprising 1 billion inhabitants.

Competitive Costs

Colombia fosters a competitive pricing environment concerning workforce, raw materials, and other resources, reinforcing an ideal proposition for entities belonging to the manufacturing sector.

Company Structures Available in Colombia for Registration

The following structures are available for doing business in Colombia. To determine which structure offers the best fit, analyze each one based on your business goals, compliance threshold, taxes, and so on.

Simplified Shares Company (Sociedad por Acciones Simplificadas, or SAS):

The SAS is a widely popular structure in Latin America owing to its unmatched flexibility and controlled liability. It fosters operational flexibility and averts bureaucratic hurdles, making it an ideal choice for diverse businesses regardless of nationality.

Corporation (Sociedad Anónima, or SA):

SA is typically suited to larger organizations listed on the stock exchange. The number of shareholders for such an organization can be as many as possible, allowing for increased capital accommodation. The SA compliances can be too many and difficult to address as compared to other structures.

Branch:

A branch falls under the control of a foreign company and lacks an independent legal identity. The parent company outlines the activities to be performed at the branch office. Any liability incurred by such an entity shall be addressed by the controlling entity.

Document for registering a company in Colombia

• Sole Taxpayer Registry (RUT).
• Incorporation Deed.
• Accounting books.
• Employer registration.
• Tax registration
• Local permits, if required
• Agent’s ID and address proof (for foreign applicant)
• Foreign parent company certificate (for setting up branch office)
• Share capital details

Company Registration in Colombia: A Step-by-Step Guide

The following section outlines the procedural steps for registering a company in Colombia:

Step 1: Choose a Company Name

The company name selection is the first step in this process. You can visit RUES, the business registrar, to serve this purpose. Keep in mind that the selected name should be trademark-free and non-offensive.

Step 2: Select a Legal Structure

In the next step, a legal structure selection comes into play. It is vital to choose the structure that aligns with your business objective and operational requirements. Depending on the structure, documentation may vary.

Note: As per the Chambers of Commerce, entities nowadays are increasingly leveraging S.A.S. as the most preferred business model. This is because it offers the flexibility of (Societas Europea) in Europe and a limited Liability Company (LLC) in the United States.

Step 3: Draft the Company Bylaws

Company bylaws serve as foundational documents, which outline key information about the organization, its members, and its management. In general, the company bylaws entail information like the company’s name, duration of services, purpose, address, shares, share capital, etc.

Step 4: Register the Company with the Chamber of Commerce

The Chamber of Commerce regulates the establishment of all entities in Colombia. To secure CoC’s permit, an application must be submitted along with dossiers like company bylaws, shareholder information, and documents. It typically takes around 24 hours for the authority to grant the approval, upon which the entity can become operational.

Step 5: Obtain the Tax Identification Number (NIT)

The last step in this process is securing NIT, which stands for tax identification number. The National Directorate of Taxes and Customs (DIAN) regulates the tax-related affairs in the country, including the issuance of NIT. The NIT serves as a source identifier which helps authorities keep a constant tab on accounting endeavors.

Analyzing Tax Implications in Colombia

National companies falling under the national law attract taxes on global income. Foreign non-residents are subjected to taxes on their Coloumbian-source income only.

The present rate concerning CIT has been capped at 35%. An additional 5 percent surcharge shall be applied to entities belonging to the insurance and stock domain with taxable income greater than or equal to USD 1,100,000. A permanent surcharge applies to entities involved with crude oil operation and coal extraction with taxable income greater than or equal to USD 471,000.

The surtax rate can vary 5-10% and is subjected to the prevailing year-averaged market price amounting to 65% or more of the average price pans out over the previous 120 months. Hydroelectric power companies with taxable income higher than or equal to USD 282,000 encounter a 3% temporary surcharge.

As far as taxes on capital gains are concerned, it has been set at 15%, which is a 5% rise compared to the previous year. Global income reaped by non-resident entities via branch offices and permanent establishments will attract a tax rate of 35% or 15%, depending on the nature of income.

Adviso Support: A Trusted partner for your Global Endevours

Ensuring adherence to the local laws or dealing with other legal implications can be taxing for new entrepreneurs. Teaming up with a trusted partner like Adviso will put you in a commanding position and help you fulfill business objectives no matter the location or boundaries.

With additonal focus on customer experience, Adviso belives in delivering value to the clients no matter the requirement. This helps us build a long lasting relationship with you.