WHY YOU SHOULD CONSIDER COLOMBIA AS YOUR NEXT BUSINESS HUB
Colombia’s economy is one of the biggest pros when considering Colombia as your next destination or even your next home. The Colombian economy grew 10.6% in 2021, experiencing an economic boom in the past few years because of its abundant natural resources, growth in technology, construction, mining, shipbuilding and tourism.
Colombia’s economic output advanced 10.8% year on year in the final quarter of 2021 and the most substantial growth rates were seen in entertainment, arts and recreational activities. As to Colombia’s business environment, there is definitely a huge market for every interest and a lot to explore. Colombian consumers tend to have middle-class consumption habits, they are influenced by fashion trends, brands and promotions, but there is also a strong influence of traditions on consumption habits, including the new trend of healthy habits as well.
Healthy and ethnic food categories are especially fast-growing, and organic food products are a new trend, as Colombian consumers are more concerned about ecological issues, this, without mentioning the vast arrival of foreigners to the country, making it even more diverse, interest wise. So, while reading this there’s a huge chance some kind of great business idea sparked up in your mind, there’s no doubt that business opportunities and panorama in Colombia are highly encouraging.
The next step then, comes with all of the questions and procedures for actually doing business in Colombia.
How to legally do business in Colombia
First things first, you must know that starting a business in Colombia requires certain steps, just like anywhere else.
For starters, you need to be able to identify, either by yourself or with a legal advisor by your side, which is your specific goal and migrant situation inside Colombia in order to start your own business.
For example, if you are a short term visitor aspiring to start a business in Colombia but not actually live in the country, your status might be resolved by applying for a V – Business Colombian Visa.
The V- Business Colombian Visa allows individuals who work for foreign corporations to visit the country with working purposes, although it does not allow mentioned individuals to invest in Colombia.
To correctly apply for a Colombian V – Business visa, a legal representative of the foreign corporation will be required to present some information such as the applicant’s position held in the business and the entrepreneurial activities to be developed in Colombia for the duration of the visa.
Nevertheless, remember this is more of a short term visa and not actually meant for making investments.
The other side of the coin is, when you move to Colombia or want to move to Colombia and actually start your own business once here.
For this case, you require a Migrant Visa, which we have discussed previously in this blog, and allows you to enter or remain in the country with intentions of establishing. The Colombian Migrant Visa type that may apply to your case would be the M- Business owner visa.
It is important to keep in mind that in order to be eligible for an M – type visa, and in this case, the M – Business Colombian Visa, the applicant must show an investment 100 times the minimum salary into the company, which roughly translates into $25,100 USD for the current time in which this post is being written.
For the M- Colombian Business type of visa, the foreigner has 2 years to invest the full amount into the company.
And as to Resident Colombian Visas, if your plans involve business and you meet the criteria to live in Colombia and remain inside the country for an indefinite period of time, you may apply for an R- Colombian Visa Type.
This type of visa, the R – Foreign Direct Investment Colombian Visa, will allow you to stay in the country and even become a resident, making it so much easier for you to handle your business.
As to the R type Colombian Investment Visa, the criteria is to invest a minimum of 650 times the minimum wage, translating into $160.000 USD for the current time this post is being written.
Remember to keep in mind that, as we described in our website section about Colombian Visas, if you’re a foreigner aspiring to apply for a business Visa in Colombia, you must prove that you have the resources and intentions to successfully run a business in Colombia.
So, once your legal status in Colombia is resolved, what is next?
Steps to follow
There’s no doubt that Colombia has walked a long way into implementing new economic policies which became highly beneficial for foreign investors in the past few years.
The optimal conditions Colombia offers now to companies and business became an attractive item when thinking business-wise, and to put it into simpler words, here we offer you a list of steps to follow for you to get familiarized with the process of setting up your own business in Colombia.
1. Define the company or business name: This is the legal name with which the company will be identified in the commercial world. It must be a unique name in order to be registered.
2. Define the type of company: For this point it is important to have clear what activity the company is going to carry out in the country. The types of companies in Colombia are:
SAS Companies: This is the most popular and common company type in Colombia, this could be due to its flexibility.
Thus, It can be set up with a single partner without specifying the corporate purpose, the responsibility of each partner will depend on the contributions they make and the company has no obligation to create a board of directors.
Collective Society: This company must be made up of at least 2 partners who will have participation and vote to make administrative and managerial decisions, all partners can make these decisions and it is usually named after one or both of the partners.
Corporation (S.A.): It is incorporated by public deed between five or more shareholders, who are responsible only for their contributions.
Limited Liability Company (Ltda.): This type of company is set up in a public deed between, at least, two partners and, at most, 25, who respond according to their contributions and capital is divided into shares of equal value.
Sociedad en Comandita Simple (S. en C.): Here, collective partners who contribute work coexist and, who may or may not contribute, capital and limited partners who only contribute capital, and which is dedicated to the exploitation of the corporate purpose in a collective name
Sociedad en Comandita por Acciones (S.C.A.): It is incorporated by public deed between one or more managing partners and at least five limited partners or capitalists.
In this type of company there’s the groups or managers and the limited partners.
3. Register into the mercantile registry: Next step will be to take documents to the commercial registry and wait for the entity to legally approve setting up the company in Colombia. The fee for this part of the process has a cost of 0.7% of the capital subscribed into the company.
4. Register with the DIAN: As we have previously discussed in this blog, the DIAN is the Colombian Tax and Customs National Authority. So, right after the company is successfully registered in the commercial register it must be taken to the DIAN. Here, you are required to request the Tax Office the Tax Identification Number (NIT), a document that will allow the entity to monitor and control the fiscal situation of the company.
5. Registration with the local Chamber of Commerce: Here, it is required to register the company at the headquarters of the Chamber of Commerce of the city where the company will reside.
6. Legalize the foreign investment: A very important requirement is that all foreign investment must be legalized. This process is done through the Banco de la República (Central Bank of Colombia) and it must be carried out around the first three (3) months after the capital enters Colombia.
7. Open a business bank account: A bank account registered in the name of the company will be necessary to have control over all commercial transactions that the company executes.
8. Social Security: In order to hire employees, it is a legal requirement in Colombia that the company is registered to social security.
Business obligations to keep in mind in Colombia
Besides the legal instructions to follow when setting up a business in Colombia, it is relevant to note that all companies inside the country must comply with some other obligations.
Among these, your aspiring business or company in Colombia will be required to follow
- Tax obligations: These include the RUT registration, and the declaration and payment of taxes. Mentioned taxes include IVA, income tax, corporate tax rate, etc.
- Accounting obligations: This is the point where all accounting books will be checked with the proper registered and supported numbers.
- Labor obligations: Referring to employees. These obligations include contacts, wages, social security, etc.
BUSINESS IN COLOMBIA MADE EASY
We understand that the legal process and requirements for setting up a business in Colombia may be lengthy and overwhelming.
Although it is true that the Colombian government provides you with a variety of beneficial reasons to promote foreign investment in the country such as Colombian residency visas and economic facilities, the paperwork part might be the hardest and most complicated one.
This is why we consider that having someone by your side with the appropriate knowledge in the mentioned topics would be a relief and an easy way to set up your business with confidence in Colombia.
And here at Nexo Legal we have that option you’ve been looking for, so if you have any questions about doing business in Colombia don’t think about it twice and contact us right away to start your journey into the business panorama in Colombia in the most efficient way.
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Phone: (+57) 315 3354174
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Medellín, Colombia
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