Colombian SAS Structure versus Foreign Branch Office

As Asia’s growth shows signs of slowing down, foreign investors and businesses look further afield to diversify their commercial portfolios. Latin America has stepped into the spotlight as a region projected to grow faster than Asia.

Colombia’s rising fame in Latin America and rest of world as an emerging power has investors excited. The myriad opportunities waiting for investors and businesses in the country have many looking at a Colombian expansion.

But where to start? We explore the benefits of two legal entities Colombia offers for foreign businesses setting up in the country. These are the Simplified Share Company (SAS) and Foreign Branch Office.

SAS Versus Foreign Branch in Colombia – Why invest in Colombia?

Colombia lifts poverty line

Around 58% of the population is employed, lifting 2.5 million people above the poverty line in the last few years alone.

Latin America houses some of the world’s fastest growing economies. Countries across the region at various stages of development are experiencing consistent positive growth. One such country is Colombia, whose rapid growth has seen its economy become the third largest in the continent.

In 2017, Colombia’s GDP reached US$309.2 billion. Around 58% of the population is employed, lifting 2.5 million people above the poverty line in the last few years alone. The government is eager to build on this success and draw investors onto its shores.

Emerging sectors and industries in Colombia offer great potential for those courageous enough to move early. Its recent decriminalization of cannabis (finalized in 2017), for example, has propelled the country into ‘leading world supplier’ status.

If you’re considering a move into Colombia’s market, you’ll need to decide on the best business structure for your operations.

SAS and Foreign Branch Office definitions

Firstly, it’s important to understand the difference between the two business structures.

The Simplified Share Company, with Spanish acronym SAS, is a business entity established by the Colombian government in 2008. It offers a simplified alternative to company formation, which makes it popular among foreign businesses. Crucially, this company structure doesn’t place personal liability on its shareholders. Forming a company under this structure also simplifies foreign business-owners’ ability to obtain a migrant visa. The SAS offers an unlimited number of shareholders and incorporation documents are kept private.

Alternatively, a Foreign Branch Office is an extension of the foreign parent company. Consequently, the parent company and branch are jointly liable for tax liabilities. Profits transferred from the branch to the parent company are treated as dividends.

We explore how the two entities compare in the following areas: incorporation process and waiting time, fiscal auditing requirements, and legal liabilities.

Company incorporation processes

Foreign Branch Office requirements

For a Foreign Branch Office, parent company documents must be apostilled, authenticated and translated into Spanish by an official translator.

For the SAS, you’ll need to provide information relating to the company shareholders, commercial objectives, company name, and legal representative/s. This will allow you to draft the company bylaws with the help of local provider.

The bylaws will be registered before the Chamber of Commerce and the National Tax Authority (DIAN). There are no requirements to apostille, certify and/or legalize documentation as part of the company incorporation process.

For the Foreign Branch Office, however, parent company documents must be apostilled, authenticated and translated into Spanish by an official translator. The local branch’s minutes must be registered before a Public Notary and then before the Chamber of Commerce. After this, your branch can obtain its local tax ID (known as a RUT).

Incorporation times

SAS incorporation time will take between 2 to 3 weeks once you have submitted all documentation before the relevant government authorities.

This is much speedier than that of the Foreign Branch Office process. Once all apostilled documentation is submitted, wait times can reach between 6 to 8 weeks.

Tax implications: external fiscal auditors

SAS companies must have an external fiscal auditor if their annual income equals more than 3000 minimum Colombian salaries. This is not applicable if the company will not receive income within the Colombian territory.

This is a key difference between the two business entities. For a Foreign Branch Office, an external fiscal auditor is required by law regardless of the company’s income. This can add to cost and compliance stress for lower income-earning branches, especially during the early stages of operations.

In terms of reporting, the SAS and Foreign Branch Office have the same requirements. Both company structures must file monthly and annual tax declarations with local and national tax authorities.

Legal liabilities

This limited risk scenario reduces personal liability of individuals, making SAS a safer bet for new starters in the market.

The SAS structure reduces personal liability of individuals, making it a safer bet for new starters in the market.

Simply speaking, legal liability in an SAS company is limited to the capital contributions of the shareholders. This limited risk scenario reduces personal liability of individuals, making SAS a safer bet for new starters in the market.

In a Foreign Branch Office, legal liability extends to the parent company. This can be problematic if the parent company doesn’t have local legal expertise in their expansion destination. For this reason, it’s highly recommended to work closely with legal experts who are clued up on Colombia’s statutory requirements.

SAS a popular choice

The Simplified Share Company is recommended for most foreign companies looking to incorporate a legal entity in Colombia. The company incorporation process is significantly less complicated (and thus quicker) and requires less documentation.

Additionally, branch offices required a fiscal auditor. You’ll need to contract this external auditor to review and sign off on corporate accounting and financial documentation, monthly and annually.

Need help getting started? Contact us

Colombia provides ample opportunities for foreign investment and entrepreneurial activity, as its growth unearths opportunities in financially attractive sectors. Colombia offers a safe and sustainable commercial environment, with low corporate tax, worldwide trade deals, and political stability.

Like any expansion operation, we recommend you seek local support to start your business in Colombia.

Biz Latin Hub offers local experience and a global perspective. Our team of local and expatriate professionals provide tailored business solutions to ensure the long-term success of your Colombian expansion.

Reach out to our team in Colombia here to find out how we can help you.

Learn more about our team and expert authors.

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