Starting a Business
Excerpt from Working in Colombia.
If you are considering starting a business in Colombia there are a number of issues to consider. First of all, do you really need a corporation? Are you looking for limited liability, or succession rights or hiring a number of employees? If this is the case then a company may serve you well. If you are just looking to manage one or two apartments or start a one man shop then you may be creating unnecessary costs and obligations in filing tax documents for the tax department.
In Dec. 2010, a new law was passed to encourage the creation of new corporations with less than 50 employees and assets less than 5,000 minimum salaries, which is somewhere between $1,500,000 – $1,700,000 USD depending on the exchange rate. The incentives include a tax rate of 0% for the first two years and then increasing 25 % up to 100 % over the next four. In other words at year six the corporation will be paying 100 % of the taxable income. The Chamber of Commerce also has a reduced fee structure as well. This benefit will be in effect until December 31/14.
The most common types of companies are Limited Liability, Simplified Stock (S.A.S.) and corporations. To create a company there must be a formal set of bylaws. For the S.A.S. (Sociedades por Acciones Simplificadas) this can be a private document as long as part of the assets given to the company are not real estate. If this is the case, the creation of the company must to be done in a Notary, through a deed or escritura. For other types of companies these bylaws must be registered in a notary’s office. The bylaws and a formal application must be submitted to the Chamber of Commerce. This is obligatory. In other countries joining a Chamber of Commerce may be voluntary but in Colombia, it is the Chamber that manages and charges for this process. It is strongly advised that if you wish to create a corporation that you hire an attorney and an accountant. There are very specific steps that must be taken and forms to be filed. It is possible to do this on your own with assistance from the Chamber but you should be fluent in Spanish to undertake this task. You also need to be extremely patient as there are lineups in the Chambers and at the tax office (DIAN).
The creation of a corporation requires a registration with DIAN. You will be making a series of obligations to file forms for IVA the value added tax; Retencion en la Fuente, which is a withholding tax and Declaracion de Renta, which is income tax. Failure to file these forms on time, results in fines.
It is best to discuss your needs with an attorney. Look for a balanced opinion and weigh your options.