UBO in Colombia: how to stay compliant

Colombia is an exciting and dynamic economy that has been attracting more and more Foreign Direct Investment (FDI) in recent years. However, a few problems persist in the country, especially persistent corruption. To combat this, the government has brought in legislation to check Ultimate Beneficiary Owner status, known as UBO in Colombia.

As a relatively new law, many companies remain unaware of their commitments to identifying a UBO in Colombia. The key local administration for this is through the RUB, a registry you must join. If you’re considering company formation in Colombia, you will need to take these regulations into account.

That means it makes sense to partner with a local specialist such as Biz Latin Hub. We have a local office that can handle compliancy with the regulations for UBO in Colombia, as well as another 17 countries across Latin America and the Caribbean.

Who is defined as a UBO in Colombia?

The regulations on identifying UBO in Colombia came into full effect on the 31st of July 2023. This was after an initial decree in late 2021 (resolution 164) that updated the regulations surrounding registry of UBO in Colombia. Originally, it applied only to foreign companies with half their interest in the country, now it applies to all businesses.

An ultimate beneficiary owner (UBO) in Colombia is the individual or group of individuals who:

• A: owns 5% or more of the capital of the Colombian entity or the voting rights of the local entity and the parent company.
• B: exercises control over the entity in Colombia.

The term control is defined as being able to take decisions in meetings of shareholders; the ability to appoint or dismiss members of the board.

While some of these definitions are clear, others are a little harder to identify. If in doubt, contact a local lawyer to make sure that you are receiving the best possible advice for your situation. As the definitions are broad, there is room for some interpretation of the law.

Why is UBO registry important?

The laws were brought in to help fight against endemic corruption issues and the influence of organized crime. UBO checks are becoming increasingly standard globally and in Latin America and the Caribbean especially. This is of particular importance for international businesses who may also be doing business in other territories.

Money laundering from illegal gangs is often disguised by routing cash flows through complex bureaucratic systems, for example. Another area of interest for the government is confirming that anyone who has been barred from company ownership is not in fact exercising control over a business.

Colombia has certain standards to uphold for the Financial Action Task Force (FATF), who recently upgraded Colombia’s compliancy in their 2023 report. Identifying who may be a UBO in Colombia is a central plank of that strategy. As the country has a lot of trade with the United States, companies will particularly want to avoid triggering the Patriot Act. However, this is also true of the UK Bribery Act, FCPA and others.

By following well-established international norms, Colombia offers a sense of investor confidence for foreign firms or individuals that may want to operate in the country. With clear proof that you are not connected to illegal organizations, you can rest assured that your Colombian operations will not imperil other areas of your global business.

How can you stay compliant in Colombia?

You must present full and up to date fiscal information to DIAN, the local tax agency. This should go in the RUB, or Registry of Ultimate Beneficiaries. Failure to do this means a fine of one monthly minimum salary (approx. USD$320) per day past the deadline to do so.

This is best done with a competent and well regarded local lawyer, specifically someone with solid and fully up-to-date information on the most recent implementation of the law. It will help if this person is familiar with Colombian bureaucratic standards.

This is especially true of companies that operate in a range of territories, particularly if they have multiple tax responsibilities. Large companies with complex bureaucracy across regions may find it difficult to identify a UBO in Colombia.

You will need to make sure that you keep up to date records for anyone that could be considered a UBO in Colombia. This includes, but may not be limited to, the following:

1. Copy of ID and personal information
2. Country of tax residency
3. RUT (local tax identification number)
4. Involvement with and relationship to the entity and/or any other entities in Colombia

FAQs on UBO in Colombia

These are the questions we most often field from our clients on issues connected to UBO in Colombia.

Can a foreigner own a business in Colombia?

Yes, 100% ownership is permitted under Colombian law.

What documents are necessary for a UBO in Colombia?

You will need to make sure that you keep up to date records for anyone that could be considered a UBO in Colombia. This includes, but may not be limited to, the following: Copy of ID and personal information Country of tax residency RUT (local tax identification number) Involvement with and relationship to the entity and/or any other entities in Colombia

Who may be considered a UBO in Colombia?

An ultimate beneficiary owner (UBO) in Colombia is the individual or group of individuals who: A: owns 5% or more of the capital of the Colombian entity or the voting rights of the local entity and the parent company. B: exercises control over the entity in Colombia.

Why does Colombia monitor UBOs?

To avoid international non-compliance with issues such as money laundering, to fulfil its obligations under FATF and to provide investor confidence

What is the penalty for not declaring a UBO in Colombia?

There is a fine of one monthly minimum salary (approx. USD$320) per day past the deadline for reporting.

Biz Latin Hub can keep you compliant with UBO in Colombia

Identifying UBO in Colombia can be complex and requires due diligence to ensure the success of market entrants. Biz Latin Hub can ensure your company is fully compliant with local regulations and can operate with minimal delay.

We offer a range of market entry and back-office services to support your commercial success in Colombia. The Biz Latin Hub team is built of well-experienced, bilingual, and knowledgeable accountants and lawyers striving to offer premium service.

Our team of local and expatriate professionals offers responsive, tailored legal and accounting solutions in Colombia where procedures tend to be lengthy and complex. If you want to set up a company, then Biz Latin Hub can be your professional partner.

Reach out to our team of local experts for advice and comprehensive market services.

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