Colombia continues to grow as a popular destination to invest and conduct business. The region has various attractive business sectors to invest in, including tourism, IT, agriculture (with the ‘flavor of the month’ being the medicinal cannabis sector) and mining to name a few. Additionally, as Colombia’s middle class grows their disposable income increases; giving them greater purchasing power. This, in turn, creates a large consumer market. This growing market is one of the key attractions of foreign companies looking for additional sources of revenue.
For most companies, the formation of a Simplified Share Company – Sociedad por acciones simplificadas (SAS), is the best legal entity to choose when establishing operations in the region. This type of legal entity allows for 100% foreign ownership and can be incorporated with a single shareholder; being either a natural or legal person (i.e a company or an individual). This simplified corporate structure is attractive for business large and small and allows business to operate in most industries in Colombia, minus banking, finance or insurance.
All companies interested in doing business in Colombia should be aware of their corporate compliance requirements. Personalized support and advice from a local law firm can ensure that your business remains in good standing with local governmental authorities.
Corporate Statutory Requirements in Colombia
Once duly incorporated, all legal entities in Colombia, including the Simplified Share Company – The SAS, must meet some minimum statutory requirements. While not overly complex or difficult nor difficult to adhere too, it is important that all companies meet these requirements and ensure full corporate compliance while engaging in commercial activities in Colombia.
Appoint a Company Legal Representative
All companies in Colombia must appoint a company legal representative during the business registration process. The company legal representative is for all intents and purposes, the legal face of the company. The individual who undertakes this role must have a good understanding of what is required, in addition to the implications should the company break the law.
This role can be appointed to a local Colombian national or a foreigner citizen; however, if the person is foreign, they must have the legal right to live and reside in Colombia. This person cannot be a tourist.
What roles and responsibilities must company legal representative complete?
- Sign documents on behalf of the company
- Open corporate bank accounts
- Sign employment contracts
- Provide guidance on current in-country regulations
- Assist in renewals of registrations as needed
Should the company break the law in any way, for example, fraudulent tax declarations, the company legal representative will be individually responsible as the ‘legal face’ of the company. For this reason, it is not a role that should be taken lightly.
When the company legal representative is appointed or elected, the powers are typically given through a formally notarized document, within the company bylaws. Many foreign companies work with a local law firm who can assist with the provision of a company legal representative – giving them peace of mind knowing that their company is in safe hands while operating in Colombia.
Register a Fiscal Address in Colombia
During the business registration process, all companies must register a fiscal address for the company. In Colombia, this is the official registered office address and is obligatory for all incorporated companies. This address is used to receive correspondence and formal notices from governmental authorities, investors, financial institutes, shareholders and the general public.
File Monthly and Annual Tax Declarations
All companies in Colombia, regardless of their commercial activity, must file monthly and annual tax declarations. The authority that manages this is called the DIAN – Dirección de Impuestos y Aduanas Nacionales. Colombia. Regardless of your income, revenues or volume of invoices or transactions, the filing of monthly tax declarations is required. Failure to submit tax declarations on time, or according to the requirements of DIAN can result in penalties. The company legal representative is responsible for the correct filing of company tax declarations and will be the person responsible should there be errors.
Additionally, once a year, all companies must file their annual tax declaration.
Annual Renewal of the Company’s Commercial License
All companies in Colombia must be registered with the Colombian Chamber of Commerce – ‘Cámara de Comercio‘ (in the location where you have operations). This registration which will result in the obtainment of the company’s Merchant’s certificate will allow a company to engage in commercial activities. Each year, this license must be renewed to allow the company to continue operating.
With an infinite amount of business opportunities available in the region, it is not surprising that keen investors are looking towards Colombia as an attractive location to set-up business operations.
Before jumping in and beginning, it is vital to have a sound understanding of your corporate obligations and requirements in Colombia. While the opportunities are great, so are the risks for individuals and companies who do not comply with local Colombian law.
For this reason and more, working with a trusted local legal and accounting firm can ensure that your company remains compliant when operating in Colombia. Biz Latin Hub was established in 2014 to assist foreign companies to set-up their business in Colombia and enable their operations.
Reach out to Oliver, at [email protected] to see how team Biz Latin Hub can support your business in Colombia and Latin America.
Need some reasons why Colombia should be your next investment location? Check our short video below and discover why!