Starting a Business in Colombia: Guide 2024

Doing Business in Colombia

Doing business in Colombia offers promising opportunities in one of South America's largest and most diverse economies. With over 52 million inhabitants, Colombia presents a substantial consumer base and strategic access to regional markets. 

The country has made commendable strides in improving its business environment, streamlining processes like business registration and property acquisition. Foreign investment is actively encouraged, supported by incentives such as free trade zones and bilateral investment treaties.The Colombia Business Confidence Index is expected to hover around 3.50 points in 2024 and 5.00 points in 2025.

While challenges like bureaucratic hurdles and security concerns persist, Colombia's ongoing investments in infrastructure, including transportation and telecommunications, have enhanced connectivity. In addition, Colombia's strategic location in South America provides access to both the Pacific and Atlantic markets, making it an attractive hub for trade. There are also lots of business opportunities in agriculture and the IT industry.

Advantages of Starting a Business in Colombia

Starting a business in Colombia can be a promising venture for several reasons. Colombia has been working on improving its business environment and attracting foreign investment. The following are some advantages to setting up a business in Colombia:

1. Growing Economy

Colombia has Latin America's fourth largest economy. The country has grown rapidly in recent years, owing primarily to an increase in commodity exports such as oil, coal, and coffee. Services (53% of GDP) are the largest and fastest growing sector of the Colombian economy, including financing, insurance, and business services; community, social, and personal services; trade, repairs, restaurants, and hotels; and transportation, warehousing, and communication. The real estate market in Colombia has also experienced significant growth, contributing to the country's thriving economy.

2. Strategic Location

Colombia's location in South America is convenient for businesses looking to access both North and South American markets. Its western coast provides access to the Pacific Ocean, which can be beneficial for running business in international trade and shipping. Colombia is regarded as one of the world's most significant locations for business Processing Outsourcing (BPO) and Knowledge Processing Outsourcing (KPO) operations, with exports of these services exceeding USD 1.98 billion in 2022.

3. Trade Agreements

Colombia is a member of several free trade agreements, including the Pacific Alliance, which provides businesses access to a market of over 200 million consumers across the region. Additionally, Colombia is a signatory to the United States-Colombia Trade Promotion Agreement, further facilitating economic cooperation and trade between the two nations. This agreement has significantly boosted bilateral commerce and strengthened the ties between Colombia and the United States.

4. Skilled Workforce

Colombia has a well-educated and skilled workforce, particularly in areas like technology, engineering, and finance. Colombia's emphasis on education and vocational training has resulted in a steady increase in the number of STEM (science, technology, engineering, and mathematics) graduates, with notable growth in the past 5 years. 

5. Investment Incentives

The Colombian government has implemented various incentives to attract foreign investment. This includes tax benefits, free trade zones, and other financial incentives. Colombia's commitment to creating an investment-friendly environment is evident in its impressive track record. Foreign Direct Investment in Colombia increased by USD 5278.49 million in 2023.

6. Residency and Citizenship in Colombia  

Colombia has a variety of visa options for investors, including the Investment Visa (M-6 Visa) for investing in an existing or new business, which is intended for individuals who invest at least USD 33,000. After 5 years, this visa can lead to permanent residency, allowing foreign investors to establish a long-term presence in the country. After 10 years of residency, it is possible to obtain Colombian citizenship.

7. Tourism

Colombia has a growing tourism industry, which can be advantageous for businesses in hospitality, travel, and related industries. Between 2024 and 2028, the economic contribution of tourism in Colombia is projected to increase by a total of USD 14,4 billion. This burgeoning tourism sector also fuels demand for such spheres as food services, transportation, and cultural experiences, further amplifying its potential as a lucrative investment landscape.

8. Stability and Security

While Colombia has faced security challenges in the past, there has been significant progress in recent years in improving safety and stability. While challenges still exist, the overall situation has improved, making it a safer place to do business. Efforts continue to be made by both the government and local communities to further enhance security measures and ensure a stable environment for investors and businesses alike.

9. Natural Resources

The country is rich in natural resources, including oil, coal, gold, and emeralds. This wealth of natural resources presents a wealth of opportunities for investment and growth across multiple industries. Furthermore, the country is known for its rich deposits of precious metals. Gold, in particular, plays a pivotal role in the economy. Colombia gold reserves were reported at USD 292,200,000 in August 2023.

10. Tax Benefits 

Colombia has competitive corporate tax rates compared to many countries, which can be advantageous for businesses seeking to maximize profits. Colombia taxes dividends and capital gains at very low rates. Please see the table below. 

Tax Regulation for Foreign Business in Colombia

Dirección de Impuestos y Aduanas Nacionales (DIAN), a national entity subordinate to the Ministry of Finance, administers the tax system in Colombia. Among its functions are the following: 

• Manage and observe the exchange rate regime; 
• Support international commerce operations; 
• Tax and customs management in Colombia, including tax collection, tax inspection, tax settlement, and tax refunds. 

Overall, a company's tax residency is determined by the country in which it is managed and controlled. Resident individuals and businesses are taxed on their worldwide income and assets in Colombia. Non-resident individuals, non-resident corporations, and foreign companies with permanent establishments in Colombia are taxed only on their Colombian-source income. 

The general tax rates for foreign business in 2024 are as follows:

The tax rates can be reduced under double taxation treaties signed by Colombia. 

The tax year in Colombia generally follows the calendar year (January to December). The deadline for filing income tax returns is typically March 31 of the following year.

Strategies of Starting Business in Colombia as a Foreigner

In order to open a business in Colombia as a foreigner, first conduct thorough market research to identify promising industries, then establish strong local connections, navigate legal procedures, and consider partnering with a Colombian national to benefit from their local expertise and access to resources. 

Starting a Marijuana Business in Colombia

A marijuana business in Colombia presents a unique opportunity given the country's favorable climate and legal environment for cannabis cultivation and production. Cannabis has been fully legal in Colombia for medicinal purposes since 2016 and for industrial purposes since 2021. Colombia's cannabis market is projected to generate $140,10 million in revenue by 2024.

With a clear business plan in place, business is required to secure the necessary licenses and permits from the relevant government authorities, which include the Ministry of Justice, the National Police, and the Colombian Agricultural Institute (ICA). These permits will be essential for legally operating your cannabis business. Furthermore, obtaining sufficient funding, selecting an appropriate location, implementing stringent quality control measures, and establishing robust security protocols will all be critical steps in the successful establishment and operation of your marijuana business.

Starting a Webcam Business in Colombia

The Colombian camming industry refers to the online webcam modeling sector in Colombia, where individuals, often referred to as cam models, perform live shows for an online audience in exchange for tips or private chat fees. The Colombian camming industry, like in many other countries, operates in a legal gray area. While it is not explicitly regulated, it is generally considered legal as long as participants are of legal age and consent to the work. On April 27, 2021, the Constitutional Court issued an unprecedented ruling in Colombia in which it recognized labor rights for a webcam model. 

Building a successful webcam business in Colombia involves creating a safe and respectful environment for models and customers. Implementing strict policies against harassment, discrimination, and exploitation is essential. Providing support and resources for models, including education on internet safety and privacy, can foster a positive working environment. Additionally, investing in secure payment systems and data protection measures is important  to protect the financial interests of both the business and its models.

Finally, marketing and promotion are key elements in establishing a webcam business. This includes creating an appealing and user-friendly website, leveraging social media platforms, and potentially collaborating with influencers or other models to expand the customer base. 

Starting a Manufacturing Business in Colombia

Colombia has become an attractive destination for foreign investors looking to establish manufacturing operations. The value added by the manufacturing industry to Colombia's gross domestic product increased by 0.3 percentage points (+2.69 %) in 2022 compared to the previous year. In total, the share was 11.51 % in 2022. 

Colombia provides a wide array of opportunities across industries like textiles, food processing, automotive, and electronics. To set yourself up for success, begin with thorough market research. Understand the demand, competition, and customer base for your product. From there, craft a comprehensive business plan that outlines your objectives, target market, marketing strategy, and financial projections. Next, choose the right legal structure and register your business. Do not forget to obtain all necessary licenses and permits, as the requirements may vary depending on your location and the nature of your manufacturing activities.

Cost of Starting a Business in Colombia

Incorporating a business in Colombia involves various costs, which can vary depending on the type of business, location, and scale of operations. The common expenses you might incur are outlined below: 

Registration and Legal Fees

• Company Registration: This includes fees for registering your business entity. Costs can vary depending on the type of company (e.g., sole proprietorship, partnership, or corporation). Generally, the registration fee is 0.7% of your investment capital. You must also pay an additional fee of USD 20
• Paid-up Capital: There is no minimum capital requirement. 
• Notary and Legal Fees: These fees are associated with drafting legal documents, contracts, and notarizing important documents and start at ~USD 2,500.

Business Licenses and Permits

Depending on the type of business you are starting, you may require a variety of licenses and permits, with fees starting at USD 1,500. It is worth noting that the application process for licenses and permits can vary in complexity and duration. Some permits may be obtained relatively quickly, while others, especially those involving specialized industries or environmental considerations, might require thorough inspections or additional paperwork.

Bank Account Opening 

In Colombia, opening a bank account typically involves an initial deposit, which can vary depending on the type of account and the chosen bank. Additionally, some banks may charge monthly or annual maintenance fees, and there may be additional costs associated with services such as debit or credit cards, international transactions, and ATM usage. It costs at least USD 1,000 to open a bank account.

Other Related Costs 

This includes expenses related to leasing or purchasing a physical space for your business, utility bills, equipment and supplies, employees costs, accounting and bookkeeping, etc. Other related costs may also encompass expenditures associated with marketing and advertising efforts to promote your business and attract customers. Insurance premiums for protecting your assets and liabilities can be considered part of these costs as well. 

Legal Requirements for Starting a Business in Colombia from USA

Launching a business in Colombia from the USA involves navigating certain legal requirements. Below, we outline the key steps you will need to take:

1. Work Visa

As a U.S. citizen looking to run a business in Colombia, you will likely need to secure the appropriate work visa. There are three types of visas available: visitor (V-type), digital nomad (V-type), and migrant (M-type). 

2. Company Name

A company is required to obtain separate approval for its name before it can proceed with incorporation. The name approval process is expeditious, provided that you adhere to the following guidelines:

• Distinctiveness: The chosen name must not be identical or substantially similar to the name of an existing business in Singapore.
• Availability: The name should not have already been reserved by another individual or entity. A name can only be reserved by one party at any given time.
• Trademark Compliance: The selected name must not infringe on any existing trademarks or copyrights that are not under your ownership.
• Decency: The name should not contain any obscene or vulgar language, and it must uphold a level of decency in its composition.

3. Legal Structure and Registration

You must determine the legal structure of your business and register it with the Chamber of Commerce. 

4. Directors and Company Secretary

Depending on the type of business you plan to incorporate, the number of directors and company secretaries will vary. For example, a partnership requires 2 partners who serve as directors, unless otherwise specified. In contrast, corporations have 5 shareholders, limited liability companies  require a minimum of 2 partners, and simplified stock companies must have at least 1 shareholder.

5. Bank Account and Financial Reporting

You are obliged to have a local corporate bank account for your business operations in Colombia. Additionally, you must establish proper financial reporting and accounting practices to meet regulatory standards.

6. Licensing and Intellectual Property Protection

One of the main requirements is to obtain any necessary permits and licenses for your specific industry or business activities. This may include local, regional, or national-level authorizations. If your business involves intellectual property, such as trademarks, patents, or copyrights, consider registering them in Colombia to protect your assets.

Types of Companies in Colombia

The table below provides a concise overview of Colombia's top business structures, their main characteristics, and some key details about each.

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Company Registration in Colombia: Step-by-Step Process

The registration process takes approximately 3-4 weeks and can be completed remotely using a Power of Attorney. It consists of the following steps:  

Step 1. Choose a Business Structure

Selecting the appropriate legal structure for your company is an important decision that lays the groundwork for its operations in Colombia. The country offers several options, each with its own set of advantages and legal implications. The most commonly chosen structures for you  include the Simplified Stock Company (SAS), Corporation (S.A.), and Limited Liability Company (SRL). Each of these structures comes with distinct features related to ownership, liability, and governance.

Step 2. Verify Name Availability

You should confirm that your chosen company name is available and not already in use. An appropriate and unique name for your company is more than just a formality. Before finalizing your chosen name, it is recommended to conduct a thorough search to ensure its availability. This involves checking not only the national business registry but also any regional or municipal databases to confirm that no other entity is already using a similar or identical name. Register your company's name in the Single Business Register.

Step 3. Draft Articles of Incorporation

In this step, you need to prepare the Articles of Incorporation (Escritura de Constitución) outlining the company's purpose, structure, and rules.It should provide a clear and comprehensive description of the company's objectives, specifying the products or services it will offer.

Step 4. Register with the Chamber of Commerce

When submitting your application to the Chamber of Commerce, you have to include a comprehensive set of documents to ensure a smooth process. This typically involves providing the Articles of Incorporation, which were meticulously drafted in the previous step, along with the identification of the designated legal representative. Additionally, proof of payment of registration fees is required to cover administrative costs associated with the registration process.

Step 5. Obtain a Tax Identification Number (NIT)

Once your company is successfully incorporated, the next crucial step is to secure a Tax Identification Number (Número de Identificación Tributaria or NIT) from the Colombian Tax Authority (DIAN). This unique identifier is essential for conducting any form of business in Colombia, as it facilitates compliance with tax regulations and allows for accurate reporting of financial activities

Step 6. Open a Business Bank Account

You will establish a business bank account in the company's name with the obtained NIT and other relevant documents. The banks with the friendliest customer service are BBVA, Banco de Colombia, and Davivienda Bank Colombia. 

4 Tips for Starting a Company in Colombia from Golden Harbors

Setting up a company in Colombia offers a wealth of opportunities in a rapidly growing economy known for its vibrant business landscape. However, navigating the intricacies of Colombian entrepreneurship requires strategic planning and a solid understanding of the local market. Based on our experience, there are some tips for starting a business in Colombia:  

1. Research and Planning

Before diving into any business venture, thoroughly research the Colombian market. Understand the demand for your product or service, identify your target audience, and assess the competition. Create a comprehensive business plan that outlines your company's goals, strategies, and financial projections. A well-thought-out business plan will not only guide you but also be essential when seeking funding or partnerships.

2. Cultural Understanding and Networking

Build strong relationships with local contacts. Networking is essential in Colombia, and having a solid local network can provide valuable insights and support for your business. Understand and respect Colombian business culture. Being punctual, polite, and showing genuine interest in building relationships will go a long way in establishing trust with potential partners, clients, and employees.

3. Secure Financing and Resources

Determine how much capital you will need to start and run your business. Explore options like personal savings, loans, investors, or government grants. In addition to traditional financing methods, consider exploring newer avenues such as crowdfunding platforms or peer-to-peer lending networks, which can provide a diverse pool of backers or lenders interested in supporting innovative business ideas.

4. Compliance with Regulations

Familiarize yourself with Colombian business regulations, including tax laws, labor laws, and any industry-specific regulations that may apply to your business. Hire a local accountant or corporate service provider who is well-versed in Colombian business laws to help ensure compliance and navigate any potential legal issues. Engaging Golden Harbors is a wise decision for navigating the complexities of establishing and running a business in the country. You gain access to a wealth of expertise in areas such as legal compliance, accounting, tax planning, and administrative support when you work with us.

FAQ 

How much does it cost to register a company in Colombia?

The cost to register a company in Colombia can vary depending on several factors, including the type of company, legal requirements, document preparation, and translation. In general, the registration fee for a limited liability company starts at USD 5,000.   

How long does it take to register a company in Colombia?

It takes about 3–4 weeks to register a company in Colombia, depending on how quickly shareholders and directors provide the necessary supporting documents, company details, and KYC reviews. The registration process can be handled remotely. 

Can a foreigner start a company in Colombia?

Yes, a foreigner can start a company in Colombia. Colombia has an open and welcoming business environment for foreign investors. There are several types of legal structures that a foreigner can choose from when starting a company in Colombia, including a Simplified Stock Corporation (SAS), Limited Liability Company (LTDA), Joint Stock Company (S.A.), among others.

Is there any government support for foreign business in Colombia?

Yes, there is government support for foreign business in Colombia. Colombia has implemented several measures to assist foreign companies. These include the establishment of Free Trade Zones (FTZs), which offer tax exemptions and streamline customs procedures. The government also actively promotes foreign investment through agencies like ProColombia, which provides information, assistance, and incentives to foreign investors. Moreover, Colombia has signed bilateral investment treaties and double taxation treaties with various countries to protect the rights and interests of foreign investors.

How does doing business in Colombia help to get residency in Colombia?

Doing business in Colombia can significantly bolster your chances of obtaining residency in the country. The Colombian government encourages foreign investment, and as a business owner, you demonstrate a commitment to contributing to the local economy and society. The Investment Visa (M-6 Visa), for instance, is specifically tailored for individuals who invest at least USD 33,100 in Colombia, which can be through starting a new venture or injecting funds into an existing company. This visa allows for permanent residency after 5 years and citizenship after 10 years of living in Colombia.