10 Facts About Doing Business in Colombia in 2024

Why open a business in Colombia?

As one of the largest economies in Latin America, Colombia offers a myriad of opportunities for both local entrepreneurs and international investors. With a strategic geographic location, a growing middle class, and a government committed to economic reform, Colombia has become an attractive destination for business ventures across various industries. Colombia has a relatively open business environment, ranking 59th out of 190 economies in terms of overall ease of doing business, according to the Wall Street Journal Report for 2023.

With a booming economy, Colombia provides access to a dynamic and diverse market. The country's participation in key trade agreements and its rich endowment of natural resources further enhance its appeal. Additionally, government initiatives attract foreign investment and create a conducive environment for business growth.

Ease of Doing Business

Colombia's strategic location at the crossroads of North and South America provides businesses with easy access to markets on both continents. Its proximity to the Panama Canal also grants convenient access to Asian markets. Furthermore, Colombia boasts a robust infrastructure, with modern highways, ports, and airports. The country has also made significant investments in its digital infrastructure, making it an ideal destination for tech companies and startups. 

In addition, Colombia has streamlined the process for registering a new business. You can set up a business in Colombia within 3 weeks. Online platforms and simplified procedures have made it relatively straightforward to start a company.

According to the Global Entrepreneurship Monitor (GEM), which annually presents its comparative assessment of national entrepreneurial conditions (World Economic Forum), Colombia ranks 25th among the best countries for entrepreneurs in 2022 and first among Latin American nations.

English Proficiency

Generally, Colombia ranks 75th out of 111 regions in the EF English Proficiency Index (EF EPI) 2023. In major urban centers such as Bogotá, Medellín, and Cartagena, you will find a higher percentage of people with a good command of English, particularly in business and tourist districts. Professionals in multinational companies and industries like technology and finance often have a solid grasp of English. In contrast, in rural or less tourist-oriented areas, English proficiency may be lower, and you will likely encounter more individuals who primarily speak Spanish.

Business Establishment in Colombia

Starting a business in Colombia can be a simple process, thanks to the country's flexible business establishment regulations. Foreign investors have several options when it comes to setting up a company in the country. They can choose from several types of business entities, including: 

• Joint Capital Stock Corporation (Sociedad Anónima); 
• Simplified Joint Capital Stock Corporation (Sociedad por Acciones Simplificada); 
• Limited Liability Company (Sociedad de Responsabilidad Limitada); 
• Limited Partnership (Sociedad en Comandita Simple y por Acciones);
• Branch office of the foreign company. 

In general, more than 164,000 companies were created in Colombia in 2023. Both the Simplified Joint Capital Stock Corporation and the branch office are the most common corporate vehicles for foreign businesses.

While there are generally no minimum capital requirements for establishing a business in Colombia, certain sectors, such as banking and insurance, do have specific capital requirements (up to USD 3 million). Businesses in these sectors must obtain prior authorization from the Superintendence of Finance.

Colombia's Free-Market Economy

Colombia boasts a mixed economy with a strong emphasis on free-market principles. Over the years, the government has actively pursued policies aimed at stimulating economic growth through liberalization and deregulation. This has included initiatives to reduce trade barriers, attract foreign investment, and privatize state-owned enterprises. The country's business-friendly taxation and trade policies led to an increase in Colombian foreign direct investment (FDI) of an average of USD 2260,66 million from 1996 to 2023, reaching an all-time high of USD 6776,22. 

Further, Colombia participates in key international trade agreements, such as the U.S.-Colombia Trade Promotion Agreement, which bolsters its access to global markets. Colombia is a part of the World Trade Organization and the Community of Andean Nations, which has Bolivia, Ecuador, Peru, and Colombia as members. Colombia is also a member of the Pacific Alliance, which comprises Colombia, Chile, Mexico, and Peru and is the world's 8th largest economy.

While the country has made significant strides in embracing free-market capitalism, it also acknowledges the importance of social programs to address poverty and inequality, balancing market-oriented policies with measures to support vulnerable populations. During 2020, Colombia consolidated the most robust protection scheme in its history for the poorest and most vulnerable people. Colombia has extended support to the most vulnerable population through the Solidarity Income Program, also promoting financial inclusion.

Core Employment Protections

Colombian employment laws provide several core protections for employees, including protection against discrimination, minimum wage regulations (COP 1,300,606 in 2024), and rules regarding dismissal. The country also has specific laws related to gender equality in the workplace.

On top of that, Colombia has robust regulations related to maternity and paternity leave. Pregnant women are entitled to 18 weeks of paid maternity leave, and fathers are able to take 2 weeks of paid paternity leave.

The country also recognizes the importance of collective bargaining and union rights, allowing employees to join or form trade unions and engage in negotiations with employers. These core employment protections collectively contribute to a balanced and equitable labor market in Colombia, fostering an environment where both workers and employers can thrive while upholding fundamental labor rights. 

High-Skilled Labor Force

One of Colombia's most valuable assets is its highly skilled and educated workforce. With a literacy rate of 95% and increasing bilingualism, Colombia has a wide pool of talented professionals across various industries. Colombia's workforce is known for its technical skills, particularly in computing, data analysis, and design. Colombia's labor force participation rate averaged 62.37 % from 2001 to 2023, with a high of 66.89 % in October of 2015 and a low of 51.84 % in April of 2020.

Moreover, Colombia's government has prioritized investments in education and vocational training programs to continuously enhance the skills of its workforce. This proactive approach has resulted in a workforce that is not only highly skilled but also adaptable to evolving industry demands. Additionally, the presence of numerous universities and research institutions further contributes to the country's rich talent pool. This combination of education, training, and ongoing skills development positions Colombia as a competitive player in the global market.

Colombia's Business Culture 

To become successful in the Colombian business landscape, understanding and embracing the country's unique business culture is crucial. Colombians have a reputation for punctuality, valuing personal relationships, and displaying warmth and expressiveness. Here is a deeper look into the nuances of Colombia's business culture:

1. Punctuality Matters

Colombians take punctuality seriously in business settings. Being on time for meetings and appointments is a sign of respect and professionalism.

2. Building Personal Relationships

Establishing strong personal relationships is at the heart of Colombian business culture. Colombians prefer in-person meetings over phone calls or emails to foster trust and connection. Once negotiations conclude, taking some extra time for informal small talk can go a long way.

3. Family and Friendship

Family and friendship hold immense importance in Colombian culture. Family networks often play a significant role in business success. Collaborating with people known and trusted by Colombians is often more successful, so introductions by third parties can be beneficial.

4. Verbal Agreements

Trust is paramount in Colombian business interactions. Verbal agreements are typically honored, reflecting the emphasis on trust and personal relationships.

Overall, succeeding in Colombia's dynamic and relationship-focused business culture requires demonstrating respect, cultivating personal relationships, and adapting to local customs. 

Investment and Immigration Opportunities

Investing in Colombia provides the opportunity to obtain legal residency and gain Colombian citizenship after 10 years. You can apply for a Colombian M-6 Investment Visa if you create a new company or invest in an existing one. The minimum investment amount is USD 33,184.

On top of that, as Colombia's economy undergoes sustained growth and diversification, the nation offers a promising landscape for discerning investors. The following sectors particularly stand out for their potential:

1. Technology

With a young, tech-savvy population and a thriving startup culture, the country has fertile ground for innovative ventures. In 2021, the Colombian government presented its National Policy for the Digital Transformation of Colombia, signaling a strong commitment to advancing the tech sector. Colombia's transformation includes two complementary digital transformation paths:

• Broadband internet and digital inclusion for all Colombians;
• Digital transformation focused on the implementation of disruptive technologies such as blockchain, the internet of things (IoT), artificial intelligence (AI), and others.

2. Renewable Energy

The country boasts abundant natural resources, including solar, wind, and hydroelectric potential. Colombia's low-carbon electricity generation for 2023 amounts to 57.2 TWh, which primarily comprises hydropower at 54.39 TWh. Colombia aims to diversify its energy mix and is actively seeking investments in renewable energy projects.

3. Agribusiness

The country is a leading exporter of commodities such as coffee, flowers, and fruits. There is a growing demand for value-added agri-products and organic produce as well. Agricultural producer support in Colombia averaged 6.1% of gross farm receipts during 2020-2022.

4. Manufacturing

Colombia is an attractive hub for manufacturing operations. The government's efforts to improve infrastructure and logistics further enhance the appeal for investors in this sector. The share of value added by the manufacturing industry to the gross domestic product in Colombia increased by 0.3 percentage points (+2.69%) in 2022. In total, the share amounted to 11.51% in 2022. 

Taxes in Colombia

As of 2024, the corporate tax rate in Colombia is 35% for resident companies. This rate applies to both domestic and foreign companies that are considered residents for tax purposes.

In general, residents are taxed on their worldwide income and assets. Non-resident corporations and foreign companies with permanent establishments in Colombia are taxed only on their Colombian-source income.

The following are key points about Colombian taxes for companies:

• The tax year for corporations in Colombia generally follows the calendar year, from January 1st to December 31st.
• Colombia also has a Value Added Tax (VAT) system. The standard VAT rate is 19%, but there are reduced rates for certain goods and services.
• Dividends distributed by Colombian resident companies are generally subject to a withholding tax. The general withholding rate for payments is 20%, but there are reduced rates under double taxation treaties entered into by Colombia.
• Capital gains from the sale of assets may be taxed at a rate of 20%. The capital gains tax rate for non-resident individuals and foreign corporations rises from 10% to 15%. 
• Corporations in Colombia may be eligible for various deductions, allowances, and tax credits. These can include deductions for certain expenses, incentives for investment in specific industries, and credits for taxes paid in foreign jurisdictions.
• Colombia has tax treaties with 19 countries to prevent double taxation and provide guidance on how certain types of income are taxed.

AML/CFT, Anti-Bribery and Anti-Corruption

Over the last 15 years, Colombia has strengthened its efforts to fight against practices such as money laundering, terrorism financing, and the financing of weapons of mass destruction (AML/CFT/CFPWMD), as well as transnational bribery and corruption. To this end, Colombia has entered into several international agreements and conventions, some of them with the United Nations and the Organization for Economic Cooperation and Development. Both the public and private sectors have developed different strategies and policies to prevent, control, and punish such crimes.

The government of Colombia has also approved a set of regulations focused on the prevention of corruption, bribery, and AML/CFT/CFPWMD, within both public bodies and private companies.

It is worth noting that Colombia scored 39 out of 100 on the 2022 Corruption Perceptions Index. While the country is working to address corruption, businesses should remain vigilant in their dealings.

How We Can Help You

Our multilingual team of corporate support specialists at Golden Harbors has the knowledge and expertise to assist you in doing business in Colombia. Whether you're seeking to establish a new venture, expand an existing one, or explore investment and immigration opportunities, our team is dedicated to facilitating your success. From market research to legal compliance, we offer comprehensive services tailored to your specific needs. Our comprehensive portfolio of services, which includes company setup, accounting, tax advisory, and immigration matters, enables us to provide customized packages of integrated back-office solutions and serve as your single point of contact for conducting business in Colombia. Partner with us, and let's unlock the full potential of your business in Colombia together.