Colombia Country Facts
We provide comprehensive information regarding, Culture, Work life, Taxation, Visa’s & immigration, Labour Law, recruiting in your country of choice and employment contracts.
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Expanding into Colombia generally comes with challenges, however, partnering with us and using Employer of Record (EOR) eliminates the frustrations you could encounter.
Companies moving into the Colombian economy can expect to find a high standard of living at affordable rates and a beautiful place to live. It has many climates and an environment including tropical jungles, rocky mountains, white sandy beaches and the Amazon rain forest in the southeast. It is one of the world’s most bio-diverse countries. Economic growth also makes this an attractive destination.
Of course, as with any country, whether people want to visit or work there, documentation is required. Companies trying to handle the paperwork from thousands of miles away will find this problematic. However, the process can be straightforward with the correct information, provided all the governmental requirements are met. Hence, knowing which Visa is the right one for employees is essential.
Colombia offers a full range of Visas for visitors depending on their nationality, the trip’s duration and its purpose. Some countries’ nationals are Visa-exempt; others can apply for an eVisa. The rest must apply online or visit a Colombian embassy or consulate in their home country for the appropriate visa. Mercosur agreement countries can travel to Colombia without either a passport or Visa.
In 2017, Colombia overhauled its Visa system, which now falls into three types, i.e., Migrant (M) Residence (RE) and Visitor (V). Employees with a contract with a resident foreign company in Colombia must apply for a Work Visa in either the M or V category. Also, 2022 sees a new presidential election and new rules are expected. Other changes have been in the pipeline for a while.
Many companies look towards a Professional Employer Organisation (PEO) and Employer of Record (EOR), such as Bradford Jacobs, to set up their business, onboard staff and operate payroll to save time and money, including assisting their team with their immigration and work documentation.
The different types of Visas and Work Permits for Colombia
Researching up-to-date information is vital when visiting, living or working in Colombia. The process and documentation are strictly regulated, so check what changes are coming online or are in the pipeline.
More than 90 countries are visa-exempt when travelling for tourism and business purposes for 90 days, with the possibility of renewing in Colombia for up to 180 days in 12 months. Others can apply online for the e-visa. Those nationalities which require a visa may be able to start the process online and then take the relevant documents to a local embassy or consulate, so check.
Visas are divided into three types:
- The visitor (V) is ideal for short visits to Colombia. The categories include Tourist visas, Student visas, Event or Convention visas, Business visas, medical visas, and work visas.
Their validity ranges from a week to two years. Tourist visas are generally for 30 or 60 days, but on request, they can be made for 90 days. These may be renewed in Colombia for another 90 days at the Office of Immigration Affairs (max. 180 days)
- Migrant (M) includes Work Visa, Pension Visa, Annuity for Investment Visa, Business Owner Visa, and Property Visa, which are the main. Generally, for up to three years and in the case of a Work Visa, this depends on the length of the contract but no longer than three years. Also, the Mercosur Visa can be applied for by nationals from Mercosur economic bloc countries (founder and associate members)
- Resident (RE) includes an Investors Visa and Qualified Visa (for those having lived in Colombia for three to five years) and others. Typically, the Residence stamp is for five years, after which holders apply for a Residence card without needing to renew the visa stamp.
The main Work Visas
After the changes to the visa system, one new requirement is the strict examination of applicants’ qualifications and work experience as required by the job offered, which also meets the relevant visa requirements. Employees need documented proof of their degree or qualification confirming professional, technological or specialist training for the role, where applicable. The Ministry of Education must validate degrees obtained outside Colombia.
However, for some professions, this is not enough as certain regulated professions may require Special Temporary Enrolment granted by the Professional Councils, in which case the employee requires a professional permit (i.e., a temporary professional license, permanent professional card, or a non-necessity certificate) to practice the profession. The employer needs to provide help.
Depending on eligibility, these visas permit people to work and live in Colombia.
- A work Visitor Visa (V) is a Temporary Work Visa for those who do not intend to permanently live and work in the country. This can be for up to two years for:
- Employees on a contract for companies or institutions incorporated in Colombia
- Non-contracted persons wanting to practice their professional or specialized work
- Employees transferred from overseas to fill a specific position in a branch of their home company, receiving payment from abroad (Intra-Company Transfer)
- Volunteers, missionaries, sports, cultural or artistic individuals who are paid for their activities
Generally, employees applying for their first temporary worker’s visa and working for resident companies or entities submit applications for their Work Visitor Visa at an embassy or consulate abroad. They may be able to start the process online, but documentation must be submitted in person.
- A Migrant (M-5) Visa is for employees with a job and employment contract. It replaces the old TP-4 visa. The visa’s duration typically matches the contract up to three years. The company’s activity must match the employee’s experience, who must also have the relevant qualifications; since Ivan Duque’s presidency, immigration rules have been tightened, and qualifications and job experience will be scrutinised. Employees must have degrees, diplomas, or certificates translated into Spanish and notarized or legalized by the relevant authority, which depends on the profession or occupation. This visa allows multiple entries.
These visas are generally applied for online. All relevant documents need to be scanned and uploaded. Check if they can be digitally signed. All travellers will require a return ticket (with a return date within the limit of their visa), and at least one hour before leaving for Colombia, an immigration form (Check-Mig) has to be completed. A confirmation email was received to submit to border control.
Foreigners who have a Colombian Visa for longer than 90 days must register the visa online or with a Migracion Colombia Office during the first 15 days after arrival and receive a Foreigners ID Card. Fines are applied for non-compliance. After five years, holders can apply for a Residence Visa.
How to apply for Visas and Work Permits for Colombia?
Regime changes within Colombia mean that work documentation can be fluid. So, as a first step towards applying for any visa, check about changes in the rules, regulations, eligibility and required documents with a local embassy or consulate.
Applying for a Work Visitor Visa or Temporary Work Visa (V) for contracted employees
- The first application for this visa must be made abroad through a local Colombian embassy or consulate. It can be started online, but documentation must be presented before a consular officer.
- A job offer and employment contract is the most crucial factor when applying for a visa.
- All documents need to be translated into Spanish by a recognized translator in Colombia and certified by a notary or apostille.
- Note: if any documents require signing, digital signatures may not be accepted, and therefore, applicants should check.
Documents for Work Visa (V)
- Passport undamaged and valid for six months upon arrival, with empty pages for the visa stamp.
- Two passport-style photographs 3cm x 4cm taken within three months.
- Downloaded, completed, and signed the employment contract summary form, which outlines all employment contract details. This is for information only and does not replace the contract. The employer signs it in front of a notary in Colombia and the employee in front of the consular officer; both parties agree to the contract terms.
- Employer provides proof of business as a legal entity or incorporation documents called a
Certificate of Legal Existence, certified within three months of the application. - Employer provides six months’ bank statements to show turnover and liquidity.
- A regulated profession needs approval from the relevant authority or Professional Council. Qualifications need approval and verification. Employees must attain a professional card to practice their profession; non-regulated jobs must be certified by the Ministry of Education. Other employees require a letter from the employer saying they are experienced to work in the relevant position. Employers can organize this for employees.
- Health insurance before you travel is recommended, although not mandatory. However, health insurance when you arrive is compulsory for all employees and legal residents.
Applying for a Migrant Work Visa (M) for contracted employees
- The application can be made online, scanning and uploading all relevant documents. However, to receive the visa in the passport, the applicant must go to a local embassy or consulate where they reside.
- A job offer and employment contract is the most crucial factor when applying for a visa.
- All documents must be translated into Spanish by a registered translator in Colombia and certified by a notary or apostille.
Note: digital signatures may not be accepted if any documents require signing. Applicants should check.
Documents for Visa M-5
- Photocopy of the biodata page of a valid passport.
- Photocopy of any previous Colombian visas and, if relevant, the last entry or exit stamp.
- Digital photograph for uploading.
- Prove residence in the country they are applying from.
- Summary of contract form (Resumen de contrato) from the Ministry of Foreign Affairs, downloaded, completed, and signed. It does not replace the contract but must be signed by both parties before a notary in Colombia or a consular officer in the home country. If there are any disputes, the original contract may be requested.
- Letter of Motivation from the company/employer regarding hiring employees, i.e., that they are a good fit for the company, why they are necessary for the business/sector/country.
- Six months of the employer’s bank account statements show an overall average balance of more than COP 100 million (€23,600, US$25,440).
- Any other documentation that shows the employer is eligible to sponsor foreign employees.
- A regulated profession needs approval from a relevant authority in Colombia. Qualifications need approval and verification. Employees will receive a permit or license (professional card); non-regulated jobs are certified by the Ministry of Education. Other employees require a letter from the employer saying they are experienced in the position they have been employed for. Employers organize these ‘permissions or approvals.
- Previous work experience in their occupation should be certificated, translated, and notarized if required for the job position.
When employees receive the Work Visa, they can travel to Colombia, but first, they must fill out an immigration form, the ‘Check-Mig form’, online before departure. Also, although this is a multi-entry visa, holders must not be out of the country for more than 183 days, or they will lose it.
However, dealing with tax in Colombia while being overseas can be a tricky process and pose complications that would demand expert guidance for both individual and corporate taxes due to Colombia’s multi-layered personal tax regime. Foreign companies must establish a legal entity in Colombia in order to hire staff and run their payroll and typically choose to open a limited liability subsidiary, often as a small to medium-sized enterprise to gain a foothold in the region. In Colombia, this is a Sociedad de Responsabilidad Limitada, SRL, which needs two or more members or partners and is regulated by the Commercial Code.
Bradford Jacobs’ dedicated specialists remove the burdens of worrying about tax complications while you focus on building your business in a new territory. From locating the brightest talent to running your payroll, our Professional Employer Organisation (PEO) and Employer of Record (EOR) specialists will guide you every step of the way.
Overview of Tax in Colombia
Personal Income Tax (PIT):
Colombia’s progressive income tax system is organised into Tax Value Units (Unidad de Valor Tributario, UVT). The Colombian Tax and Customs National Authority (Dirección de Impuestos y Aduanas Nacionales, DIAN) set the UVT units at COP 38,004 (€9, US$9.60) for 2022.
Personal taxes are grouped into three ‘baskets’ for general employment, pension and dividends income. The tax-free allowance is up to UVT 1,090, with five other bands from UVT 1,700 at 19% up to 39% for income over UVT 31,000.
Social Insurance Taxes:
Employers contribute a total of 20.5% of payroll to the mandatory health, welfare and pension systems, with employees contributing a total of 8%. Caps apply.
Corporate Income Tax:
The headline rate is 35%. Financial companies with income exceeding 120,000 tax value units (UVT) (€342,036, US$364,838) are subject to a 3% surcharge paid in advance based on the previous tax year’s accounts. Qualifying businesses in Free Trade Zones pay CIT at 20%.
Value Added Tax (VAT):
The headline rate on goods and services is 19%. Categories such as foodstuffs and insurance premiums are rated at 5%, with zero-rated categories including more foodstuffs, books and magazines, and tourism packages for foreigners.
Withholding Tax (WHT):
Rates generally vary between 20% and 35% on payments made to non-residents for royalties and taxable interest.
Personal Income Tax in Colombia
Colombia has a progressive income tax system expressed in Tax Value Units (Unidad de Valor Tributario, UVT). For 2022 the Colombian Tax and Customs National Authority (Dirección de Impuestos y Aduanas Nacionales, DIAN) set the UVT units at COP 38,004 (EUR 9, USD 9.60).
Residents’ and Non-Residents’ Annual Personal Income Tax (PIT) 2022:
From | Not Over | Tax %
UVT 0 – UVT 1,090 (EUR 9,810 – USD 10,464): 0%
UVT 1,090 – UVT 1,700 (EUR 15,300 – USD 16,320): 19%
UVT 1,700 – UVT 4,100 (EUR 36,900 – USD 39,360): 28%
UVT 4,100 – UVT 8,670 (EUR 78,030 – USD 83,232): 33%
UVT 8,670 – UVT 18,970 (EUR 170,730 – USD 182,112): 35%
UVT 18,970 – UVT 31,000 (EUR 279,000 – USD 297,600): 37%
Over UVT 31,000: 39%
*Above rates include pension income basket
Dividends Income Basket:
- From UVT 0 to UVT 300 (EUR 2,700 – USD 2,880): 0%
- Over UVT 300: 10%
Employee Social Insurance Taxes:
Contributions from gross salary to:
- Health welfare system: 4%
- Pension system: 4%
If earnings exceed four legal monthly minimum salaries of COP 4,000,000 (EUR 948, USD 1,016), employees must contribute an additional 1% to the pension solidarity fund. Those earning more than 16 minimum monthly salaries of COP 16,000,000 (EUR 3,790, USD 4,066) must make an extra contribution between 0.2% and 1% depending on salary.
Individual Tax Rules in Colombia
- The tax year is from January 1 until December 31.
- Colombia’s tax regime is assessed in Tax Value Units (Unidad de Valor Tributario, UVT). For 2022 the Colombian Tax and Customs National Authority (Dirección de Impuestos y Aduanas Nacionales, DIAN) set the UVT units at COP 38,004 (€9, US$9.60).
- Salaried taxpayers must file a return if their assets exceed UVT 4,500; credit card charges are more than UVT 1,400; bank deposits and investments are above UVT 1,400; income is above the tax-free amount of UVT 1,090. If tax residents, these requirements include worldwide income.
- Spouses must file separate returns, and filing usually starts in August, with the date determined by the official Decree issued the previous December.
- Penalties for late filing begin at 5% of the tax due for each month delayed, increasing to 10%. Taxpayers who fail to respond to a request from DIAN are also liable for interest, plus a 10% penalty on additional taxes due.
- The tax system asses income in three ‘baskets’ – employment and capital income, income from pensions, dividend income.
- Those residing in Colombia for a total of 183 days (not necessarily continuous) within 365 consecutive days are tax residents. If the 183 days cover two different calendar years, the individual is a tax resident for both calendar tax years.
- Tax residency applies if the individual’s spouse or dependents exceed the 183-day rule, 50% or more of direct or indirect income is earned in Colombia, and 50% or more of assets are managed or physically located in Colombia considerations.
- Tax residents (nationals and foreign) are taxed on worldwide income, and non-residents on revenue sourced in Colombia.
Employer’s Social Insurance and Statutory Contributions in Colombia
Employers contribute to the mandatory health, welfare and pension systems. The contribution is 8.5% towards the health program and 12% towards pensions. Contributions are capped at 25 times the national minimum wage, which in 2022 was COP 1,000,000 (€236, US$253) per month.
Employer contributions to the health system apply only to employees with legal salaries below ten minimum monthly wages – COP 10,000,000 (€2,370, US$2,528).
Employers contribute 9% to monthly payroll tax, 3% to the Institute for Family Welfare (ICBF), 2% to the National Apprenticeship Service (SENA), and 4% to the Family Subsidy Fund. Employers do not contribute to ICBF or SENA for employees earning less than ten times the national minimum wage of one million pesos (€236, US$253).
International companies planning to widen their global horizons can consider a subsidiary entity set up in Colombia. However, establishing a presence in a foreign country can be costly, both in time and money, without any certainty that the effort and financial outlay will bring success.
Suppose the blossoming economy of Colombia is the target for Global Expansion. In that case, foreign companies planning to hire or move staff there and operate payroll must establish a legal entity as a subsidiary. This is so they can deal with the Colombian Tax and Customs National Authority (Dirección de Impuestos y Aduanas Nacionales, DIAN) and the General System of Social Security in Health (Sistema General de Seguridad Social en Salud, GSSSH).
A popular choice is to establish a limited liability company operating under Colombia’s Commercial Code and known as a Sociedad de Responsabilidad Limitada (SRL). It has a minimum of two partners who generally have no liability. However, expanding overseas is a significant step. If the move fails, companies face the extra expenditure and stress of closing their operation, selling property and paying off employees. It is easy to stumble while chasing two objectives – advancing your company at home while crossing the world into new territory.
The sensible alternative is to use a Professional Employer Organisation (PEO) and Employer of Record (EOR), such as Bradford Jacobs, to locate the finest local talent and administer your payroll in Colombia. Your company will be up-and-running in days rather than weeks or even months and without running any risks.
How to Set Up a Colombian Subsidiary?
Are you considering a subsidiary entity set up in Colombia? First, decide on the business structure best suited to your vision for expansion. The typical choice is to move with a limited liability subsidiary. This operates under the Commercial Code in Colombia and is a Sociedad de Responsabilidad Limitada (SRL). It has a minimum of two partners who generally have no liability.
Registration and other procedures include the following:
- Colombian resident legal representative must be appointed via Power of Attorney. Foreign companies and individuals must provide extra documentation, notarized in the home country, before being forwarded to Colombia.
- Verify with the Single Business Register that the chosen company name is unique to Colombia and includes ‘Limitada’ or ‘Ltda’ in the title.
- Have company bylaws, and Articles of Association drafted and notarized
- Register public deeds with the Chamber of Commerce.
- The SRL has at least two partners/shareholders, individuals or entities. Two directors of any nationality are required, not necessarily Colombian residents.
- The minimum share capital of €1/US$1.
- Obtain company tax registration certificate and Tax Identification Number (TIN), assigned through the Tax Registry (Registro Unico Tributario, RUT).
- The TIN is required by all entities, individuals, withholding agents and those filing tax returns. The Tax and Customs National Authority (Dirección de Impuestos y Aduanas Nacionales, DIAN) use the TIN to access all information regarding taxpayers.
- Open a business bank account by showing the tax and registration certificates.
- Foreign investment must be declared through the Colombian Central Bank.
After establishing the subsidiary, companies must take on other procedures and responsibilities to run payroll for their staff. Essential requirements include:
- The first step is to create an employment contract for the employee and ensure any foreign workers have the correct work visa and other required permits. Additionally, they must have a Foreigners’ or Alien Identity Card, and if their contract exceeds three months, advise the Colombia Migration Administrative Unit within 15 days of beginning or ending employment.
- A company doctor must examine the individual at least three days before starting work.
- Register with the General System of Social Security in Health (Sistema General de Seguridad Social en Salud, GSSSH) once the individual has been hired, with the employee selecting from the options for health insurance and pensions.
- All enrolment forms must be completed on the first day of work. Digital signatures are not permitted, so the individual must sign them in person.
- Employers must enrol the employees on the welfare system and insure them against employment labour risk.
- Designated professions may require Special Temporary Enrolment granted by the Professional Councils.
- Obtain employees’ tax registration certificate and Tax Identification Number (TIN) through the Tax Registry (Registro Unico Tributario, RUT). This number is required by all individuals, entities, withholding agents and those filing tax returns.
- Register employee with the Colombian Tax and Customs National Authority (Dirección de Impuestos y Aduanas Nacionales, DIAN).
Benefits of Setting Up a Colombian Subsidiary
International companies having established a subsidiary entity in Colombia operate under the Commercial Code, while the Labour Code governs the relationship with their employees. The subsidiary has a separate legal identity from the parent company and is treated the same as a local company. The parent company’s liability is generally restricted to the invested share capital; neither is it responsible for any subsidiary debts.
The subsidiary provides the parent company with the potential for further expansion throughout Central and South America as a stepping stone into other regional economies. Additionally, the subsidiary can ‘test the market’ by following its business ideas and entering into different areas of operation for the owning company. The subsidiary can also draw up its contracts and agreements with clients.
Other benefits for a subsidiary:
- Easier to obtain potential benefits and incentives and enter into contracts with other Colombian, Central and South American companies.
- More impact with clients and suppliers, as subsidiaries imply more permanency than branches.
- Employees feel there is more stability and job security than from being with a branch.
However, there is a more straightforward option to the risks and costs of setting up a subsidiary in Colombia. Working with Bradford Jacobs and using a global Professional Employer Organisation (PEO) such as Bradford Jacobs means staff can be sourced, placed in their roles and be up and running within days rather than months. All the payroll, taxation and compliance difficulties are under control thanks to our Employer of Record (EOR) services.bo
Subsidiary Laws in Colombia
The Commercial Code regulates all companies operating in Colombia. Registration, compliance and management requirements include:
Registration and Documentation:
- Power of Attorney for Colombian resident legal representative
- Unique business name verified with the Single Business Register
- Notarized company bylaws and Articles of Association
- Incorporation through public deed registered with the Chamber of Commerce
- Commercial registration must be renewed annually
Accounts and Taxation:
- The minimum share capital of €1/US$1
- Obtain a tax registration certificate and Tax Identification Number (TIN) from the Tax Registry (Registro Unico Tributario, RUT)
- Subsidiary taxed on corporate profits; partners etc., tax on distributed dividends
- Foreign investment must be declared through the Colombian Central Bank
- All companies must file annual tax returns approved by partners
- No statutory requirement for an auditor unless assets exceed limits as described by Law 43
- The company bank account must be in Colombia
Management:
- Two partners or shareholders can be individuals or entities. Maximum of 25
- Partners must hold annual general meetings, but there is no statutory requirement for a board of directors
- Partners are responsible for running the company, but they can appoint a manager
- There is no requirement for a company secretary
- There are no restrictions on the nationality of partners, shareholders, directors or officers, but their nationality and domicile must be registered on incorporation documents.
Entering the Colombian market would offer many opportunities for companies undertaking Global Expansion or expanding into Latin America (LATAM). In the near future, Colombia is looking to play a broader role in global economies. The Colombian Government is continuing to develop an increasingly welcoming attitude towards private enterprise and entrepreneurial activity.
Consumerism is growing in this upper-middle income market, along with development in the electronics, chemicals, services and high-tech sectors, thanks to a highly-educated and well-motivated workforce. Traditional economic strengths still lie in mining for gold and precious gems, oil and petrochemicals, coffee, textile and agriculture.
Colombia has many free trade agreements on the global economic front, including with the US and European Union. It is a member of the Pacific Alliance trading bloc, among other regional trade organisations, such as Mercosur. Colombia’s geographical location in the northwest of South America adds to its trading potential. There is a Caribbean coastline to the north leading to the Atlantic, a Pacific coast to the west, and the land border with Panama is the route to Central and North America. Colombia also has land borders with Brazil, the region’s leading economy, and Ecuador, Peru and Venezuela.
Starting a business in Colombia
International companies planning on entering the Colombian market can take a foothold by launching a subsidiary as a limited liability company. This is known as a Sociedad de Responsabilidad Limitada, SRL and is regulated by the Commercial Code. Establishing the entity is necessary if companies intend to run payroll for their staff.
Compliance with the Code means satisfying the following requirements:
- Obtaining Power of Attorney for a Colombian legal representative to liaise with authorities for the company.
- Confirmation from the Single Business Register that the company name is unique in Colombia; the title must include the suffix ‘Limitada’ or ‘Ltda’.
- Providing notarized company bylaws, Articles of Association, and the public deed registered with the Chamber of Commerce.
- The minimum share capital of €1/US$1.
- Obtaining the company tax registration certificate and Tax Identification Number (TIN) from the Tax Registry (Registro Unico Tributario, RUT).
- A business bank account was opened after providing the tax and registration certificates.
- Foreign investment must be declared through the Colombian Central Bank.
Expanding your business into Colombia
Opening a business in any overseas territory brings issues, as moving staff worldwide means lengthy processes to obtain Visas. Entering the Colombian market is no different. Once your employees are in place, who will handle their payroll? How will your company deal with regulations on taxation, entitlements and benefits, termination and severance? Drawing up an expansion blueprint is not enough. Your business plan will have to deal with all these issues.
Colombia is increasingly open to foreign investment, but there are always considerations surrounding compliance with the relevant legislation. In Colombia, this revolves around the Commercial Code and the Labour Code, which lays down the obligations of employers and the protected rights of their employees. There are other issues, too. Where will you find manufacturers, offices or distributors?
There is a simple and effective alternative. By partnering with a Professional Employer Organisation (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in Colombia. But for those who want to “go it alone”, here we set out some of the necessary steps.
Finding an Office in Colombia
Colombia is one of the up-and-coming countries in South America for companies looking to explore the opportunities offered by the flourishing technology and tech bubbles and a burgeoning middle-class consumer market.
Bogota is the capital and the heart of Colombia’s commercial trade. Increased foreign investment through a positive government outlook has enabled multinationals to establish offices and flourish in the city, such as Microsoft and Proctor & Gamble.
Over 100 firms covering marketing and advertising have also been attracted to the business activity. Introducing a ‘new free-trade zone system’ designed to promote exports and economic recovery with tax and customs concessions with duty deferred or reduced; can give companies a larger pool of skilled labour, with centralised supply chains and modernised logistics. Also, check out Startup Grind, a community of enthusiastic entrepreneurs whose ethos is opening the door to new opportunities.
Medellin is a rising star for many local and foreign tech start-ups. It received a Netexplo award in 2020 for its transformation into a cultural and social ‘smart city’ offering support services, training and funding while encouraging innovation.
The ACI Medellin, the agency for cooperation and investment, is committed to the city’s continued development and its suburbs. To keep its position as an attractive destination for business, it offers sharing knowledge, maximising ideas through networking, and guidance with research and development opportunities.
Cali is situated in the Cauca Valley, and its beauty is matched only by its business acumen; However, a smaller city than Bogota and Medellin, it still attracts companies such as Johnson & Johnson and FullStack Labs. Cali is a particular favourite with the manufacturing industry and IT services and has a flourishing Internet of Things hardware and software enterprise, health and fitness and digital PR businesses.
Etix Everywhere is the latest company to establish a data centre with an investment of US$10 million alongside four others, servicing the retail, healthcare, finance and banking sectors increasing Colombia’s potential for doing business.
Free Trade Zones or FTZ
These areas were set up to help combat the higher corporate income tax (CIT) rate of 35% and promote competitiveness with preferential tariffs, e.g., reduced CIT (20%). They offer more relaxed regulations while providing centralised warehousing, distribution and shipping operations which is more beneficial for importing and exporting goods, including customs duties referral or reduction. There are around 112 FTZs around the country divided into three categories which are:
- Permanent – used by many companies.
- Special Permanent – for special large projects used by a single entity.
- Transitory – designated for trade fairs, conferences, exhibitions etc., held for the benefit of international trade.
Some Colombian Facts
- Capital – Bogotá.
- Population – 52 million.
- Regions – Traditional geographic regions are the Atlantic lowlands, the Pacific coastal region, the Andean region, the Llanos and the Amazonian rainforest.
- Official language – Spanish.
- Economy and world ranking – US$300 billion, 44th globally, in 2021. US$350 billion is predicted for 2022.
- Leading sectors – (2020) Services 60%, industry 24%, agriculture 7%.
- Main exports – Crude petroleum, coal briquettes, coffee, gold, refined petroleum.
- Main imports – Broadcasting equipment, refined petroleum, cars, packaged medicines, corn.
- Main trading partners – US, China, Mexico, Brazil, Germany, Ecuador, and Panama.
- Government – Presidential system, unitary state, constitutional republic.
- Currency – Colombian Peso.
Advantages and Challenges when entering the Colombian Market
The advantages of entering the Colombian market include the following:
- Location: Strategically excellent position in the northwest, has Caribbean (access to Atlantic) and Pacific coastlines with land routes into Central and North America and borders with five nations.
- Investment: Agro-industrial, tourism and technology are highlighted as growth areas for foreign involvement.
- Workforce: Well-educated, entrepreneurial and highly motivated towards innovation with relatively low labour costs.
- Growth: Gross Domestic Product is expected to grow to US$350 billion in 2022.
Challenges of entering the Colombian market include:
- Security: Overcoming concerns regarding drug trade-related violence, which the government has made decisive moves to counteract. Now confined mainly to rural areas, where professional security research is still advised.
- Business: The World Bank’s last ‘ease of doing business report in 2020 ranked Colombia 148th for paying taxes and 133rd for trading across borders, and 177th for enforcing contracts out of 190 nations.
- Logistics: Connections between cities can be inefficient, although the 4G road network project is expected to resume in 2022.
The Labour Code will regulate the company’s employment relationship with its staff regarding statutory minimums. However, case law, Decrees and Collective Bargaining Agreements (CBAs) can also apply. These are vital considerations for hiring, onboarding and drawing up contracts with new staff.
Once Bradford Jacobs’ Professional Employer Organisation (PEO) recruitment networks have located the best talent for your company, we step in to steer you through this crucial element of recruitment.
The different types of Colombian Employment Contracts
Open-ended contracts can be written or verbal, but specific rules apply to fixed-term contracts.
Indefinite, open-ended employment contracts (Contrato a término indefinado): This typical contract form can be written or oral, without any variation between the terms and entitlements for the employee. The contract can be terminated mutually or by either party in compliance with termination and severance regulations.
Fixed-term employment contracts (Contrato a término fijo): These must be in writing and can be agreed for any term within three years, either cumulative or in one agreement. If the initial contract is for less than one year, it can be renewed only three times, after which it can only be renewed again for a minimum of one year.
Probationary Period (Período de prueba): On open-ended agreements, these can be a maximum of two months. For fixed-term contracts, the trial period is up to 20% of the length of fixed-term.
Duration of work employment and occasional employment contracts: Duration contracts can be verbal or written, assigned to a specific project, and automatically expire when the work is completed. Periodic agreements can be written or spoken but cannot exceed one month.
Collective Bargaining Agreements (CBAs): Employers and employees have the constitutional right to associate through trade unions and employers’ associations. Only the unions may negotiate on behalf of their members and start the collective bargaining process towards an agreement with individual employers or associations.
Colombian Employment Contracts Requirements
General considerations include:
- A contract, either verbal or in writing, must be agreed upon at the start of the onboarding process
- Written contracts are recommended, but in the case of oral agreements, they must at least cover the role, salary and duration of employment.
- Fixed-term contracts must be in writing and can total a maximum of three years.
- Probationary periods must be confirmed in writing and cannot exceed two months for an open-ended contract or 20% of a fixed-term contract.
- Medical examinations by the company are compulsory for prospective employees, carried out at least three days before they are due to start work.
- Documents must be signed in person by the employee, as digital signatures are not allowed.
Employee Benefits in Colombia are generally covered by the Labour Code and the Constitution. The Code was updated in 2021 with the latest version known as the Substantive Labour Code (Código Sustantivo del Trabajo). This is regularly updated and amended by additional Laws, Decrees and Amendments, rather than by entire new pieces of legislation. International companies hiring employees in Colombia must establish a legal entity in the country and then operate within this framework of legislation, which provides safeguards and guarantees for the workforce. Minimum guarantees include paid vacations, working hours, termination, severance and notice periods, sick leave, maternity allowances.
The responsibilities of foreign companies reach further than simply complying with tax, social security, and payroll regulations. Failure to comply with specific regulations applying to benefits and entitlements runs the risk of fines and sanctions. It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect the employer-employee relationship. This is where Bradford Jacobs steps in to point you in the right direction, drawing on over 20 years of experience as a Professional Employment Organisation (PEO) and Employer of Record (EOR).
What are the Compensation Laws in Colombia?
Under Colombia’s employment laws, all employees are entitled to minimum rights. The legislation is governed mainly by the Colombian Labour Code (Código Sustantivo del Trabajo, CST), which dates from 1950 as the Constitution.
Colombia’s progressive income tax system is expressed in Tax Value Units (Unidad de Valor Tributario, UVT). For 2022 the Colombian Tax and Customs National Authority (Dirección de Impuestos y Aduanas Nacionales, DIAN) set the UVT units at COP 38,004 (€9, US$9.60).
In some instances, rates will be given as pesos and in others as UVT figures.
National Minimum Wage (NMW): The government set the monthly legal national minimum wage for 2022 at one million pesos (€236, US$253), an increase of 10.07% over 2021. The legal transportation allowance was increased by the same percentage to COP 117,172 (€27, US$29) for employees earning less than twice the national minimum. For employers, the NMW also affects the rate of salaries due to social security, welfare and pension deductions from employees’ wages.
Sick Leave and Benefit: Claimants must have verification from a Colombian social security authority that they cannot work to receive paid sick leave for up to 180 days. Employees receive two-thirds of their salary for the first 90 days (the employer paying for the first two) and 50% of their salary for the remainder, with the employer reclaiming from the social security system. Where illness or injury is work-related, the employer must pay 100% of wages for the duration of incapacity.
Working Hours and Breaks: The Labour Code allows for a maximum of 48 hours a week over five or six days, but there must be at least one paid day off every seven. Regular working hours are between 6 am and 9 pm. The Colombian Congress has approved reducing the maximum working hours in stages by July 15 of the following years – 47 hours by 2023, 46 hours by 2024, 44 hours by 2025 and 42 hours by 2026. The changes cannot affect salaries and workers’ rights, and employers can introduce reduced hours ahead of the deadlines. Regular working hours should be split into two sections to give employees a guaranteed break; this is not considered work time.
Overtime: The Labour Code restricts overtime to two hours a day and 12 per week. Daytime overtime between 6 pm and 9 pm is compensated at a minimum of 25% above the regular hourly wage. Employees working nights between 9 pm and 6 am are paid at a minimum 35% above the standard rate; if they are asked to work overtime during these hours, the premium is 75%. Employees asked to work 10 hours a day cannot be required for overtime.
Paid Vacations: Employees are entitled to 15 days as a paid vacation after working for one year, with leave adjusted pro rata for those who have not been with the employer for 12 months.
Public Holidays: Mandatory public holiday entitlement is added to annual leave. Employers required to work on national holidays must be paid 150% above their regular pay or be given time off in lieu. When public holidays fall on a Sunday, they are moved to the following day.
- New Year’s Day, January 1
- Epiphany January *
- Saint Joseph’s Day March *
- Maundy Thursday, March/April
- Good Friday, March/April
- Labour Day, May 1
- Ascension Day May *
- Corpus Christi June *
- Feast of the Sacred Heart June *
- Feasts of Saints Peter and Paul July
- Independence Day, July 20
- Battle of Boyacá Day August
- Assumption of Mary August *
- Day of the Races October *
- All Saints Day November *
- Cartagena Independence Day November 14
- Feast of the Immaculate Conception December 8
- Christmas Day, December 25
* When these holidays do not fall on a Monday, they are moved to the following Monday.
Maternity / Paternity / Parental Leave and Benefit: Employees are entitled to 18 weeks of paid maternity leave, generally one week before the due date and 17 weeks after. If medically advised, the pregnant employer can take two weeks before the birth or have all the leave after the birth. Mothers adopting a child and fathers caring for the child due to the death or ill health of the mother are also entitled to leave. The employer pays the benefit and reimburses the social security system. Working fathers receive two weeks of paid paternity leave for children of the spouse, their permanent partner or as an adoptive father. Parental leave can be shared between parents for the last six weeks of maternity leave.
Discrimination: Labour Code legislation and the Constitution prohibit discrimination against employees or applicants based on ethnicity or race, gender or sexual orientation, health or disability, beliefs or opinions, marital status, union or other memberships or affiliations.
Termination / Severance / Redundancies: All employees are subject to termination laws, and employers can dismiss with legally justified cause without incurring liability, following a disciplinary process. Termination without cause is liable to incur severance obligations. Certain terminations, even with reason, must be authorized by the Ministry of Labour or a Labour Judge. This applies to maternity, paternity and health issues, union officials during collective agreement negotiations and employees within three years of retirement. Severance payments depend on seniority and earnings. They range from 30 days’ pay for the first year of service and 20 days for subsequent years; to 20 days’ pay for the first year and 15 days for the following years. The mandatory minimum is 15 days’ pay. Fixed-term employees are compensated for the income that would have been earned by completing the period or project. Redundancy regulations apply when the following occurs over six months:
- 30% of employees in companies employing between 10 and 50
- 20% in companies employing between 51 and 100
- 15% in companies employing between 101 and 200
- 9% where between 201 and 500 are employed
- 7% were between 501 and 1,000 work
- 5% in companies employing more than 1,000
Notice Periods: Employer or employee can terminate unilaterally without reason or giving notice, but the terminating party may be liable for repaying against resulting costs or loss of pay. Employers terminating with cause may be required to provide 15 days’ notice. Fixed-term employees should receive notification 30 days before the end of the contract to prevent automatic renewal.
Guarantees and Restrictions on Employee Benefits in Colombia
Guaranteed Benefits:
The Labour Code and various updated Laws, Decrees and Amendments lay down minimum benefits and entitlements for employees in Colombia. Categories include:
Maternity Leave Benefit: The entitlement is 18 weeks of leave, usually with one taken before the due date. If medically required, the employee can take two weeks pre-birth or have all 18 weeks after the birth. The employer pays the benefit and reimburses the social security system.
Sick Leave Benefit: Paid sick leave is up to 180 days, with the employee receiving two-thirds of the salary for the first 90 days (the employer paying for the first two) and 50% of their salary for the remainder; the employer reclaims from the social security system.
Paid Vacations: Employees are entitled to 15 working days as paid vacation after working for one year, with leave adjusted pro rata for those who have not been with the employer for 12 months. They also have 18 paid public holidays.
Restrictions:
Maternity Leave: Claimants must be enrolled in the social welfare system, give the employer a medical certificate confirming how many months the employer has been pregnant, and indicate the due date and the start of the leave.
Paid Vacations Benefit: Employees must have worked 12 months with their employer for the full benefit of 15 days of paid leave. Six days must be taken, but employees can apply to carry over unused leave to the following year.
Social Security in Colombia
Social welfare in Colombia is governed by the General System of Social Security in Health (Sistema General de Seguridad Social en Salud, GSSSH). The regulatory and management authorities are the Ministry of Social Protection and the National Health Regulation Commission, while the National Health Authority is responsible for managing health facilities. The GSSSH is compulsory for everyone employed in the formal ‘legal’ economy, and the self-employed earn a stipulated minimum salary. The system is complemented by the Solidarity Guarantee Fund, which subsidizes benefits for older persons, the poor, and others not covered under the contributory scheme.
Members of both schemes are entitled to a primary health care package. Claimants of the subsidised plan are entitled to primary care and complete coverage for serious illness. Claimants of the subsidized program are entitled to primary care and complete coverage for serious illness. Members of the contributory scheme are allowed more comprehensive services, including inpatient and outpatient care, paid maternity leave and sick leave.
Contributions to the social security system covering pensions, solidarity pension fund and health and labour risks are based on the monthly salary earned by the employee. Contributions are capped at 25 times the national minimum wage, which in 2022 is COP 1,000,000 (€236, US$253) per month.
The percentage of contributions in health and pensions for employees for 2022 continues to be the same as for 2021. That is, 12.5% for health (8.5% paid by the employer – when applicable – and 4% paid by the employee) and 16% for pensions (12% paid by the employer and 4% paid by the employee).
Colombia’s location on the northwestern coast of South America places it in a prime position as a base for further expansion in the region. It has a Caribbean coastline to the north, a Pacific coast to the west, and the land border with Panama is the route to Central and North America. Colombia also has borders with Brazil, Ecuador, Peru and Venezuela.
The Colombian government is encouraging private enterprise and an entrepreneurial spirit, which is seeing growth in electronics, tourism and the services sector, while a number of free trade zones are further inducements. Consumerism is definitely growing in this upper-middle income economy, despite wage inequality, where the main traditional sectors are mining, oil and petrochemicals, textiles, agriculture, steel and coffee. Don’t forget the Colombian coffee!
Nevertheless, finding and recruiting in Colombia is a major task for companies who are setting their sights on Global Expansion – and it is a venture that faces many obstacles. This is where Bradford Jacobs’ global experience is vital for taking the smartest recruitment route into Colombia. Our benchmark platforms as a Professional Employer Organisation (PEO) have worldwide reach and include a total understanding of the complexities of Colombia’s employment market, which has both a ‘legal’ formal economy and an informal employment market.
Recruiting in Colombia
Word-of-mouth, recommendations are frequent when recruiting in Colombia. Maybe these are not typical or conventional routes for recruitment, but they certainly play a role in Colombia’s employment market. Job boards are also a popular platform for recruiters but make sure you highlight the salary, as this will rate above the company’s brand for attracting recruits. Positions in sales, the service sector and production are often best filled by recommendations from staff already in place.
The potential workforce is highly motivated, willing and well-educated. Colombia’s universities are rated among the best in South and Latin America, so the outflow of students can be the most promising source for high-level professions in medicine, business and engineering.
Recruitment is the first stage of making your company operational and competitive in Colombia. However, complications surround moving staff into the country and obtaining visas. It is vital to know where to locate the finest candidates for your company’s expansion plans to avoid these issues.
Employers are responsible for various procedures and registrations and must ensure their employees comply with several regulations. Once recruited, companies must then consider the implications of handling payroll for their staff and dealing with the Colombian Tax and Customs National Authority (Dirección de Impuestos y Aduanas Nacionales, DIAN) and the General System of Social Security in Health (Sistema General de Seguridad Social en Salud, GSSSH). Responsibilities include the following:
- Starting the onboarding process with an employment contract/agreement with the employee.
- Ensuring foreign workers have an Alien Identity Card if the contract exceeds three months and that they report to the Colombian Migration Administrative Unit within 15 days of starting work.
- Confirming they undergo a medical examination by the company doctor at least three days before starting work.
- Ensuring the employee personally signs all relevant forms. Digital signatures are not permitted.
- Obtain the employee’s tax registration certificate and Tax Identification Number (TIN) through the Tax Registry (Registro Unico Tributario, RUT).
Employees’ Legal Checks in Colombia
Colombian law and the Labour Code impose few restrictions on employers who want documented confirmation of information provided by an applicant. Required checks include:
Immigration: Verifying the individual has the necessary permits and visas to work.
Education and qualifications: Documented proof of degree or qualification confirming professional, technological or specialist training for the role, where applicable. The Ministry of Education must validate degrees obtained outside Colombia. Regulated professions may require Special Temporary Enrolment granted by the Professional Councils, in which case the employee will need a current professional card.
Medical: The candidate must undergo a medical examination by the company at least three days before the scheduled start of work.
General: Further background checks require the candidate’s permission and can be conducted by the employer or a third party. Typically, they include checking professional qualifications, employment history; criminal and financial records; global sanctions lists. Checks that can be regarded as discriminatory should be avoided.
Basic Facts when Recruiting in Colombia
The primary legislation governing the employer-employee relationship in Colombia is the Labour Code, which establishes any necessary contractual requirements when onboarding staff. However, case law also comes into play.
- A contract must be agreed upon at the outset of the onboarding process.
- Contracts can be written or oral, but the latter must confirm the role, salary, and duration.
- Written contracts are advised.
- Fixed-term contracts must be in writing, with no limit on the number of renewals up to three years. Apart from specific projects or timescales, they should also apply to teleworkers and remote workers.
- Probationary periods must be confirmed in writing and cannot exceed two months for an open-ended contract or 20% of a fixed-term contract.
- Employees must be given 30 days’ notice confirming the end of their fixed-term contract, or the contract will automatically renew for the original period.
- Potential employees must undergo a company medical examination at least three days before starting work.
- All enrolment forms must be completed on the employee’s first day of work and personally signed. Digital signatures are not permitted.
- Employers must enrol the employee on the welfare system and insure them against employment risk.
After hiring and onboarding, employers must comply with all the provisions laid down by the Labour Code and any Decrees or Collective Bargaining Agreements. Statutory minimum standards include wages, sick leave, working hours, maternity allowances, paid vacations, termination and severance, notice periods and social insurance payments. Other rules regulate workplace discrimination. Examples include:
- Employees receive paid sick leave up to 180 days on two-thirds salary for the first 90 and 50% for the balance, paid by the employer and reclaimed from the social security authorities.
- The Labor Code permits 48 hours a week over five or six working days. The Colombian Congress has approved reducing the maximum working hours in stages by July 15 of the following years – 47 hours by 2023, 46 hours by 2024, 44 hours by 2025 and 42 hours by 2026.
- The employer pays the benefit and reimburses the social security system. Maternity leave entitlement is 18 weeks, with usually one week taken before the due date. The employee can take two weeks before the due date or all 18 weeks post-natal for medical reasons.
- Overtime hours are restricted to two hours daily and 12 a week. The rate is 25% above regular hourly pay for extra daytime hours. Employees working nights between 9 pm and 6 am are paid at a minimum 35% above the standard rate; if they work overtime during these hours, the premium is 75%.
This is also reflected in Colombia’s growing profile in the world economy. Colombia became the 37th member of the Organisation for Economic Cooperation and Development in 2020 and is also a member of the United Nations, the World Trade Organisation, the General Agreement on Tariffs and Trade and the World Bank.
On the economic front, Colombia has many free trade agreements, including with the US and European Union. It is a member of the Pacific Alliance trading bloc, among other regional trade organisations. Colombia’s strategic position in the northwest of South America adds to its trading potential. There is a Caribbean coastline to the north Pacific coast to the west, and the land border with Panama is the route to Central and North America. Colombia also has land access to Brazil, Ecuador, Peru and Venezuela.
Nevertheless, traditional values and outlooks will still apply in some sectors of the business environment, both for companies and individuals. So, there will be a lot to get used to.
The Basics of the Colombian Work Culture
Language: Spanish is the language, so learn some phrases even if advised the meeting will be in English. Check ahead and, if necessary, engage an interpreter.
Punctuality: Although ‘Colombian time’ may come into play regarding timescales and schedules, it is essential to make the right impression by being on time for meetings.
Negotiations: Tread carefully, as communication is often oblique and not very direct. Although discussions can be pretty effusive, do not cross the line by being rude or argumentative. The attitude is based on ‘getting the job done.’ scheduled meetings and timetables will likely extend if there is unfinished business.
Greetings: A smiling and cheery ‘Buenos días’ is the way to start; shake hands with open and friendly eye contact. Small talk will be part of the ‘getting to know you’ process. Colombians are extremely family-oriented, so expect them to be interested in yours! You will quickly be on first name terms but use titles and surnames, to begin with, and address the men as Señor and women as Señora. Even the men will likely exchange hugs with a friendly pat on the shoulder for subsequent meetings. However, where hierarchy still plays a role, be sure to address the most senior members of the other team first.
Business Cards: In Spanish on one side, which should be presented face up, with the English version on the reverse.
Dress Code: Look smart and well-presented—suits and jackets for men; knee-length skirts, trousers, and elegant tops for women. ‘Business casual’ in younger companies is becoming more usual. It is essential for Colombians.
Out of Hours: Always accept invitations to social gatherings, lunches and dinners, as they are integral to developing relationships and business.
Avoid Stereotypical references to aspects of Colombian culture portrayed in the media, movies and on TV.
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