{"id":8978,"date":"2024-05-09T19:04:55","date_gmt":"2024-05-10T00:04:55","guid":{"rendered":"https:\/\/nexo.legal\/?p=8978"},"modified":"2025-07-15T17:28:57","modified_gmt":"2025-07-15T22:28:57","slug":"legal-obligations-for-business-in-colombia","status":"publish","type":"post","link":"https:\/\/nexo.legal\/es\/legal-obligations-for-business-in-colombia\/","title":{"rendered":"OBLIGACIONES LEGALES PARA EMPRESAS EN COLOMBIA"},"content":{"rendered":"\t\t
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NAVIGATING LEGAL OBLIGATIONS FOR COMPANIES AND DOING BUSINESS IN COLOMBIA \n<\/h1>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Colombia has become a highly attractive destination in the past few years for foreign investors looking to expand their business ventures.\u00a0<\/span><\/p>

Which isn\u2019t strange, considering the <\/span>business culture in Colombia, with <\/b>a stable and upcoming economy that offers numerous opportunities for growth and success.\u00a0<\/span><\/p>

Nevertheless, operating a business in a foreign country comes with its fair share of challenges.\u00a0<\/span><\/p>

For those looking to establish their presence in Colombia’s thriving business landscape, understanding the legal obligations is crucial.\u00a0<\/span><\/p>

In this specific article, we want to shed some light on the key legal, accounting and taxes requirements for businesses in Colombia, bearing in mind that each sector in which they will operate has their own very specific regulations that we will not cover in this article.<\/span><\/p>

Keep in mind that this is an informative guide, but as a legal firm, we highly recommend that every process of starting a business in Colombia is accompanied by legal experts (like us!), to avoid any further difficulties.\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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A general Overview of the business market in Colombia<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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There\u2019s a rising attractive <\/span>business culture in Colombia<\/b>, driven by several key factors.\u00a0<\/span><\/p>

Firstly, the country boasts robust economic growth and stability, with a GDP that strongly grew 36% in the last 12 years, hence positioning it as one of the fastest-growing economies in Latin America, which provides a solid foundation for businesses seeking long-term sustainability and profitability.<\/span><\/p>

Additionally, Colombia’s strategic geographic location and excellent connectivity serve as major advantages for international trade. Situated at the crossroads of North, Central, and South America, the country serves as a gateway to the region, facilitating access to a vast consumer market.<\/span><\/p>

With modern infrastructure, well-connected airports, ports, and highways, Colombia offers seamless logistics and efficient supply chains.<\/span><\/p>

Moreover, the government of Colombia has implemented favorable investment policies and incentives to attract foreign capital.\u00a0<\/span><\/p>

These include tax incentives, free trade zones, and streamlined bureaucratic processes, making it easier for businesses to establish operations and navigate the regulatory landscape.\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t

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Legal Obligations in Colombia<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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General Context<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Legal accounting and tax compliance play a crucial role when doing business in Colombia.\u00a0<\/span><\/p>

Whether you’re a multinational corporation exploring new markets, a small startup looking to expand internationally or even it is just yourself looking to expand your business landscape and bring it into Colombia, having a solid understanding of the legal landscape in Colombia is essential for success.\u00a0<\/span><\/p>

Let\u2019s start with the basics, stating that once your company is operating in the country, it is crucial to maintain accurate and transparent financial records while adhering to the regulations of taxes in Colombia set forth by the government.<\/span><\/p>

To ensure compliance, two key institutions oversee these aspects: the National Tax Authority (Direcci\u00f3n de Impuestos y Aduanas Nacionales or DIAN) and the Chambers of Commerce of each specific region.<\/span><\/p>

The National Tax Authority (DIAN) is responsible for enforcing tax regulations, collecting taxes in Colombia, and overseeing customs matters.\u00a0<\/span><\/p>

It establishes guidelines and regulations related to tax obligations, such as income tax, value-added tax (VAT), and other relevant taxes.\u00a0<\/span><\/p>

Businesses are required to file regular tax returns, report financial information accurately, and fulfill their tax payment obligations in a timely manner.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Labor Regime: Here\u2019s everything to consider when hiring employees <\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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In addition to understanding the foreign trade and customs regime, another crucial factor you will need to get familiar with and understand when establishing a business in Colombia is the labor regime in the country, especially when you plan to hire employees in your company.<\/span><\/p>

Colombian labor laws, which are of public order, cannot be waived or negotiated, and their provisions apply to all employees.\u00a0<\/span><\/p>

Hence, employment contracts in Colombia, regardless of the parties’ nationality, are governed by Colombian law.<\/span><\/p>

The monthly legal minimum wage (MLMW) is determined annually through negotiations between the national government, employers, and employees. If no agreement is reached, the government unilaterally sets the minimum wage, which for the current year 2024, is of $1.300.000 COP or $327,04 USD, including the ordinary salary ($1.300.000 COP) and transportation aid, and in order to be eligible for it, the amount of earned salary must be less than two current legal minimum wages. ($162.000COP). <\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Understanding Work Hours and Overtime in Colombia<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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Keep in mind that this regular pay must be supplemented to accommodate, if applicable, for overtime pay or night work, and it works like this:\u00a0<\/span><\/p>

The standard work week consists of 47 hours, with a maximum of 8 hours per day. Employees are allowed up to 12 hours of overtime per week or 2 extra hours per day.\u00a0<\/span><\/p>

If the regular workday is less than 8 hours, employees can work extra hours, up to a maximum of 10 hours per day.\u00a0<\/span><\/p>

Additionally, if Saturday is not a working day, a 10-hour workday can be negotiated without it being considered overtime, between 6 a.m. and 10 p.m.<\/span><\/p>

The law also permits the compensation of overtime hours with time off during the week.<\/span><\/p>

These regulations ensure that employees are fairly compensated for their extra work and that employers adhere to labor standards, promoting a balanced work-life dynamic.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Legal Terms for Vacations in Colombia<\/i><\/b><\/span><\/h3>

In Colombia, the legal entitlement for vacation days corresponds to 15 business days for each year worked.\u00a0<\/span><\/p>

Therefore, Sundays and holidays are not counted towards this total. If an employee does not work on Saturdays, they are not considered workable days, and thus Saturdays, Sundays, and holidays are excluded from vacation calculations.\u00a0<\/span><\/p>

This ensures that employees receive their full entitlement of vacation days while adhering to labor regulations regarding time off.\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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Additional Payments<\/em><\/h3>

You will also need to consider paying in given cases and according to the exact type of job, a percentage of sales and commissions, salary-nature bonus such as the ones determined by the employee\u2019s individual performance, permanent travel expenses for employee\u2019s meals and lodging, and, any payment given as direct compensation of the services provided by the employee in general.<\/span><\/p>

Also, Both Colombian and foreign employees legally bound by an employment agreement must be affiliated with and contribute to the Integral Social Security System.\u00a0<\/span><\/p>

However, certain foreigners may be exempt from affiliating with the Pension Social Security System, subject to specific conditions.<\/span><\/p>

Certain payments, regardless of the parties intent, must be considered as salary, such as commissions or bonuses tied to individual goals.\u00a0<\/span><\/p>

And, non-salary benefits can be agreed upon as long as they meet regulatory requirements.\u00a0<\/span><\/p>

Other important aspects include labor contracts, apprenticeship arrangements, and statutory leaves, like maternity, paternity and shared parental leave.\u00a0<\/span><\/p>

We have designed a graphic in which you will be able to find a detailed list of all the obligations an employer must pay to an employee in Colombia.\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t

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Elements<\/th>Percentage<\/th>Value<\/th>\n<\/tr>\n<\/thead>\n
Minimum wage<\/td><\/td>$1,300,000 COP<\/td>\n<\/tr>\n
Transportation allowance<\/td><\/td>$162,000 COP<\/td>\n<\/tr>\n
Health<\/td>8,50%<\/td>$110,000 COP<\/td>\n<\/tr>\n
Pension<\/td>12%<\/td>$156,000 COP<\/td>\n<\/tr>\n
ARL<\/td>0,52%<\/td>$6,786 COP<\/td>\n<\/tr>\n
Social security contributions<\/td>9%<\/td>$117,000 COP<\/td>\n<\/tr>\n
Bonus<\/td>8,33%<\/td>$108,290 COP<\/td>\n<\/tr>\n
Severance pay<\/td>8,33%<\/td>$108,290 COP<\/td>\n<\/tr>\n
Interest on severance pay<\/td>1%<\/td>$13,000 COP<\/td>\n<\/tr>\n
Vacation<\/td>4,17%<\/td>$54,210 COP<\/td>\n<\/tr>\n
Approximate allocation<\/td>5%<\/td>$65,000 COP<\/td>\n<\/tr>\n
Total monthly cost<\/td><\/td>$2,200,576 COP<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t
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Employment Contracts<\/i><\/b><\/span><\/h3>

Once you have decided to hire employees in your company, the most important part when initiating are the employment contracts.\u00a0<\/span><\/p>

  • Contractual Modalities in Colombia<\/b><\/li><\/ul>

    In the Colombian labor market, there are various contractual modalities that regulate the relationship between employers and employees.\u00a0<\/span><\/p>

    Below are some of the main modalities and their characteristics for you to keep in mind:<\/span><\/p>

    1. Fixed-Term Contract for Less than One Year:<\/span><\/li><\/ol>
      • Renewable contract for three terms equal to or less than the initially agreed period.<\/span><\/li>
      • After the third renewal, the minimum duration of the contract cannot be less than one year.<\/span><\/li>
      • Must be settled in accordance with Article 28 of Law 789 of 2002.<\/span><\/li><\/ul>
        1. Indefinite-Term Contract:<\/span><\/li><\/ol>
          • The duration of the contract is not predetermined.<\/span><\/li>
          • Must be settled in accordance with the provisions of Article 28 of Law 789 of 2002.<\/span><\/li><\/ul>
            1. Work or Labor Contract:<\/span><\/li><\/ol>
              • Entered for the performance of a specific task or the execution of a particular work.<\/span><\/li>
              • The contract ends once the task or work is completed (e.g., adjunct professors, workers on specific projects).<\/span><\/li>
              • Settlement of the contract is carried out as agreed upon.<\/span><\/li><\/ul>
                1. Apprenticeship Contract:<\/span><\/li><\/ol>
                  • Aimed at the training of interns.<\/span><\/li>
                  • During the training phase, 50% of the salary is paid, while during the practical phase, between 75% and 100% is paid.<\/span><\/li>
                  • If the apprentice is a university student, they must be paid at least the legal minimum wage.<\/span><\/li><\/ul>

                    These contractual modalities provide flexibility for employers and employees to adapt their labor relations to the specific needs of each situation. It is essential for both employers and employees to be aware of their rights and obligations based on the type of contract established.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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                    Trial Period<\/em><\/h3>

                    The trial period in employment contracts serves as a pivotal stage for employers and employees alike, providing an opportunity for mutual assessment and adjustment.\u00a0<\/span><\/p>

                    Lasting a maximum of 2 months, or up to 1\/5 of the contract’s duration for shorter-term contracts, this period enables the entrepreneur to evaluate the suitability of new hires without assuming significant risks.\u00a0<\/span><\/p>

                    It offers employees a chance to showcase their skills and adaptability while acclimating to the role and company culture.\u00a0<\/span><\/p>

                    By understanding the parameters and benefits of the trial period, both parties can navigate the initial stages of employment with clarity and confidence, laying a solid foundation for a successful working relationship.<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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                    Tax Regime<\/h2>\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t
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                    The next important topic for you to keep in mind when starting your own business in Colombia, is regarding the tax system in the country.\u00a0<\/span><\/p>

                    We discuss this topic in-depth in our article regarding the <\/span>tax and accounting obligations for businesses in colombia<\/i><\/b>. So you definitely want to go there and check it out first for a complete and global guide.\u00a0<\/span><\/p>

                    Embarking on business ventures in Colombia brings a mix of excitement and challenges, that\u2019s why we are here to help.\u00a0<\/span><\/p>

                    At Nexo Business Group, our legal team is dedicated to providing tailored support, whether you’re tackling corporate, labor, commercial, or intellectual property matters. From assessments to meetings, we streamline the legal side of your business operations, ensuring compliance and ethical conduct.\u00a0<\/span><\/p>

                    Get in contact to start today!\u00a0<\/span><\/p>\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t<\/section>\n\t\t\t\t

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