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Colombia continues to grow as a popular destination for investment and business. The region has various attractive business sectors, including tourism, IT, agriculture (with PEO/Recruitment services), 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 consumer market is another attractive opportunity for foreign companies looking for additional sources of revenue. Read on to learn more about corporate compliance in Colombia.
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In most cases, establishing a Simplified Share Company – Sociedad Por Acciones Simplificadas (SAS) – is the best choice of legal entity when establishing operations in the country. This type of legal entity allows for 100% foreign ownership and can be incorporated with a single shareholder; either a natural or legal person (i.e., a company or an individual).
This simplified corporate structure is attractive for businesses large and small and allows businesses 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 Compliance in Colombia
Once duly incorporated, all legal entities in Colombia, including the Simplified Share Company (SAS), must meet some minimum statutory requirements. They are not overly complex nor difficult to adhere to, but it is important that all companies meet the following 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 to serve during the company’s lifetime. The individual who undertakes this role must have a good understanding of what is required and the implications should the company break the law.
This role can be appointed to a local Colombian national or a foreign citizen. However, if the person is a foreign citizen, they must be registered before the Tax Authority.
Some responsibilities of the company legal representative:
- Sign documents on behalf of the company
- Submit tax declarations
- Open corporate bank accounts
- Sign employment contracts
- Provide guidance on current in-country regulations
- Complete registration before local authorities, as required
Should the company break the law in any way, for example, by submitting fraudulent tax declarations, the company legal representative will be held 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, their powers are typically given through a formally notarized document, within the company bylaws. To assist them in finding a company legal representative, many foreign companies work with a local law firm – giving them peace of mind with the knowledge that their company is in safe hands.
Register a Fiscal Address in Colombia
During the business registration process, companies must register a permanent 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. Regardless of your income, revenue, 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). By doing so, you will obtain a Merchant’s Certificate, necessary for engaging in commercial activities. The certificate must be renewed every year, to allow the company to continue operating.
Annual Shareholders Meeting
By law, in Colombia, at least one shareholders’ meeting must be held annually before March 31st of each year so financial statements for the previous fiscal period can be approved.
Ultimate Beneficial Owner Registration
Since 2021, the Colombian Tax Authority DIAN has introduced a new requirement on ultimate beneficial owner reporting. During the incorporation process, companies must report the ultimate beneficial owner on their portal. This only needs to be updated when the ownership or ultimate beneficial owner composition is changed.
Common Questions on Entity Legal Compliance in Colombia
Based on our extensive experience these are the common questions and doubts of our clients on corporate entity compliance in Colombia:
1. What are the common statutory appointments for a company in Colombia?
The following are the most common statutory appointments for Colombian legal entities:
– An appointed Legal Representative who will be personally liable, both legally and financially, for the good operation and standing of the company. This should be a local national or a foreigner with the right to live/work in the country.
2. Is a Registered Office Address needed for a legal entity in Colombia?
Yes, a registered local fiscal address is required for all entities in Colombia for the receipt of legal correspondence and governmental visits.
3. When must a General Shareholders’ Meeting be held in Colombia?
The Ordinary General Shareholders’ Meeting must be held within three months following the closure of the fiscal year and before the deadline of March 31st in Colombia.
4. When must companies submit a report of the controlling company to the Chamber of Commerce in Colombia?
Companies must submit this report one month after there has been a change in the shareholder and this change has been completed (contract of transfer of shares and registration in the corporate books). This report includes filing a letter before the Chamber of Commerce including the corporate information of the parent company.
5. When are the tax calendars published in Colombia and what is the deadline for declaring Annual Income Tax and Local Tax?
The tax authority publishes in January the tax calendars with the due date for taxes, which is determined by the last two digits of your tax ID number. The deadline for declaring Annual Income Tax is in March and the deadline for declaring Local Tax is in January.
Local Support for Corporate Compliance in Colombia
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, it is vital to have a sound understanding of your corporate obligations 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 in setting up their business in Colombia.
Given the favorable conditions in the country and its strong economic growth, Biz Latin Hub, through its company Colombian Business Services, offers experience and support on market entry in Colombia. Feel free to contact us now.
Learn more about our team and expert authors.
The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
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