Doing business in Colombia
Colombia is one of the most appealing economies in Latin America for international trade and foreign investment, offering a wealth of opportunities to investors.
However, it is also amongst the most complex jurisdictions in the world when it comes to doing business, with a host of challenges related to tax, accounting and regulatory compliance. Companies expanding into Colombia must therefore build a deep understanding of the country’s business environment.
Colombia, officially the Republic of Colombia, is a country located in the northwest region of South America. It is the fourth-largest country in the continent – after Brazil, Argentina and Peru – and plays an important role in the Latin American business world.
Mining, energy, agriculture, financial services, manufacturing and tourism are amongst the key sectors of Colombia’s growing economy. The country is increasingly active on the global stage, and is a member of the Andean Community, the Latin American Integration Association (LAIA), the Pacific Alliance, the World Trade Organization (WTO), the Community of Latin American and Caribbean States (CELAC), the Latin Union, the Organization of American States (OAS), the Union of South American Nations (USAN), the United Nations (UN) and UNESCO. After receiving a formal invitation to become a member of the Organisation for Economic Co-operation and Development (OECD) in 2018, Colombia became the 37th member in April 2020
Fast Facts: Colombia
- In 2023, Colombia had a GDP of US$363.5 billion [World Bank]
- Currency – Colombian Peso (Sign: Col$; Code: COP)
- Language – Spanish
- GNI per capita – US$6,870 in 2023 [World Bank]
- Population – 53.2 million [Worldometer, February 2025]
- Capital – Bogotá
- Key sectors: agribusiness, business process outsourcing, chemicals, energy, financial services, manufacturing, mining, software/IT services, tourism
- Key cities: Bogotá, Medellín, Santiago de Cali, Barranquilla, Cartagena, Bucaramanga, Cúcuta, Ibagué, Pereira
TMF Group’s Global Business Complexity Index 2024 highlighted that Colombia is amongst the most complex jurisdictions in the world when it comes to ease of doing business. The country’s high ranking is driven by its complicated accounting and tax systems. This complexity extends to regulatory issues and also the cultural aspects of Colombia’s different regions.
It is therefore essential that investors and companies expanding their business into Colombia take the time to research and understand the country’s economic landscape and then plan an appropriate market entry strategy.
Business opportunities in Colombia
Doing business in Colombia offers a host of opportunities in one of South America’s largest and most diverse economies. With a population exceeding 53 million, Colombia provides a large consumer base to foreign investors, as well as strategic access to key regional markets.
The government actively encourages foreign direct investment (FDI), which has grown significantly in recent years, led by mining, construction and logistics and underpinning a range of new export opportunities in Colombia. The government’s ongoing investments in infrastructure, including transport and telecommunications, have further enhanced connectivity.
Colombia’s fintech sector is emerging as a major player in Latin America, with Bogotá home to the largest number of startups. While challenges like fluctuating investment and relatively low online banking penetration persist, the rising adoption of artificial intelligence (AI) in particular suggests a promising future.
Advantages of doing business in Colombia
Colombia is one of the most attractive jurisdictions for doing business in Latin America. The country is rich in natural resources, including oil, gold and emeralds, presenting a wealth of opportunities for investment and growth across multiple industries.
Colombia has a well-educated and skilled workforce, particularly in areas like technology, engineering and finance. The government’s emphasis on education and vocational training has resulted in a sharp increase in the number of STEM (science, technology, engineering and mathematics) graduates, with notable growth in recent years. There is also a strong governmental commitment to building a culture of compliance, especially when it comes to payroll-related issues.
There are strategic advantages associated with Colombia’s location. The country’s prime position near the Panama Canal makes it a natural gateway to a wide range of markets. It links North and South America and is the only country on the continent with access to both the Pacific and Atlantic Oceans.
Colombia is a member of the Pacific Alliance, a Latin American trade bloc that includes Peru, Mexico and Chile. The Alliance aims to increase competitiveness by integrating its member economies and facilitating the free flow of capital, goods, people and services. It is estimated to represent 50% of total trade and attracts 45% of FDI in the region.
Colombia has 42 permanent Free Trade Zones and 78 special permanent Free Trade Zones, and therefore offers investors 120 areas within the country that enable commercial activities under special customs, tax and foreign trade regimes.
Challenges of doing business in Colombia
While Colombia is now one of the most attractive economies in Latin America for international trade and foreign investment, the complex business environment means that investors must carefully navigate challenges around tax, accounting, regulatory compliance and foreign exchange rules.
The current Colombian administration leans to the left in terms of economic and social policies, with policies favouring increased taxation, the enforcement of labour rights and spending on social issues, which can impact business opportunities.
Security remains a major business risk. Despite significant efforts and some success over the last few years, several regions continue to suffer from political turmoil and threats from criminal organisations. Companies doing business in Colombia should consider security measures and know their areas of operation well to protect the safety of their activities and employees.
Companies looking to expand into the Colombian market should read our article outlining the top challenges to doing business in the country. This will help you to navigate bureaucracy and overcome market entry barriers in Colombia.
Compliance and the regulatory environment in Colombia
Colombia’s corporate law landscape and regulatory framework is very complicated, with frequent changes made to laws and regulations. Recent reforms to tax labour and pension laws seek to address the widespread social inequalities throughout the country. Companies doing business in Colombia must ensure they fully understand the regulatory risks in Colombia and remain adaptable and well informed to stay on top of these shifts.
Compliance requirements around transparency are on the rise globally, and public Ultimate Beneficial Owner (UBO) registers are one aspect that is becoming more common. Colombia has already adopted regulation to properly identify and screen all parties involved in business operations. The Colombian tax authority (Direccion de Impuestos y Aduanas Nacionales - DIAN) issued Resolution No. 164, outlining the criteria for determining the UBO of legal entities or structures without legal status. The resolution details what information must be reported to DIAN, the technical requirements for reporting, and the deadlines for submitting the information. This resolution was updated in late 2024 to expand the scope of required disclosures. Companies operating in Colombia should therefore check the latest updates on the DIAN website.
Colombia has also been ahead of the curve in implementing Environmental, Social and Governance (ESG) reporting processes, and businesses have been adapting to these requirements for a number of years. While additional reporting adds an element of complexity, it is not expected to significantly impact the overall business environment. Instead, it places Colombia in a strong position as ESG principles become increasingly common worldwide, potentially enhancing the country’s competitiveness and attracting more international investors.
Hiring and managing talent in Colombia
Colombia’s Labour Code applies to all employees in the country, regardless of their nationality. It covers all aspects of employment, including the form and duration of employment contracts, probation periods, minimum wage levels, working hours, holidays and leave, termination of employment and collective bargaining.
In December 2024, Colombia’s government decreed a 9.53% minimum wage hike after employers and labour unions failed to reach an agreement, as well as an accompanying increase in the transportation allowance. Social benefits are a key pillar of labour laws in Colombia, and employers are required by law to pay these benefits in addition to a regular salary.
Foreign employees require a valid work visa to live and work in Colombia. A visa can also be granted – but is not mandatory – for foreigners whose purpose is to invest capital in the incorporation of companies, or in activities that generate employment or increase exports. It is worth noting that Colombian visa applications are typically processed in about two to three weeks but can take as long as 30 days. Foreign employees are required to enrol in Colombia’s social security system. An exception may occur regarding pension schemes, subject to compliance with special conditions.
Companies operating in Colombia should also familiarise themselves with the Remote Work Law (Law 2121/21) which governs remote working, hybrid models and digital nomad visas.
Law 2101/21, meanwhile, marked an important milestone in Colombian labour legislation by introducing a gradual reduction in the working day. The aim is to improve working conditions for employees and promote a better balance between work and personal life. It’s crucial that employers understand this regulation to ensure compliance and to help their employees take advantage of its benefits.
TMF Group’s experts have prepared a guide to payroll compliance to help companies address recruitment challenges in Colombia.
The financial and tax environment in Colombia
Colombia’s business environment is characterised by frequent tax reforms, with as many as 20 introduced in recent years. As such, tax compliance in Colombia can be complicated and depends on a thorough understanding of all the various taxes levied. This includes the financial transactions tax, which is a permanent tax of 0.4% on financial transactions that involve the disposal of resources deposited in checking or savings accounts and the issuance of cashier’s cheques.
Colombia’s Consumption Tax
This tax is levied on the consumption of certain goods or services, when they are acquired and/or imported. Different rates apply to certain goods and services, such as:
- Mobile telephony, navigation and data services – 4%
- Vehicles, yachts etc. with a value less than US$30,000 [except taxis and ambulances, amongst others] – 8%
- Vehicles, yachts etc. with a value exceeding US$30,000 – 16%
- Expenditure of meals prepared in restaurants, cafeterias, self-services and ice cream shops etc. – 8%
VAT is levied on the sale of tangible goods; the sale or transfer of rights over intangible assets associated with industrial property; and the provision of services – regardless of whether the services are rendered in Colombia or overseas, as long as the beneficiary of the services is located in Colombia. The standard VAT rate is 19%, though rates of 5% and 0% apply to certain goods and services.
The corporate income tax rate stands at 35%, though companies established in the country’s Free Trade Zones are subject to a reduced rate of 20%. A series of additional surcharges, both temporary and permanent, were applied to certain industries in 2023/2024, including financial services, crude oil and coal extraction and production and hydroelectric power.
All companies, and branches of foreign companies, must prepare and file annual financial statements in accordance with International Financial Reporting Standards (IFRS). Branches and Stock Corporations (SA) are required to appoint an external auditor, while other companies may be required to appoint an auditor in specific cases.
Starting a business in Colombia
When setting up operations in Colombia, companies must ensure they fully understand and abide by the latest rules and regulations to stay compliant.
Foreign investors can choose from a range of different types of business representation in Colombia. These include a Stock Corporation (Sociedad Anónima, SA), which requires at least five shareholders at any time. No shareholder can hold 95% or more of the capital stock and the liability of the shareholders is limited to their capital contribution.
There is also the Simplified Stock Corporation (Sociedad por Acciones Simplificada, SAS), which has become the legal vehicle of choice for many in the business community due to its flexibility regarding the incorporation process and administration. Other popular options include a Limited Partnership (Sociedad en Comandita Simple y por Acciones) and a General Partnership (Sociedad Colectiva).
All companies are required to register with the appropriate Chamber of Commerce and the national tax authority, and, regardless of company type, there will be a number of steps involved in becoming fully operational.
Read how TMF Group helped Tate & Lyle to set up its new commercial office in Colombia to get a taste of what’s involved.
Find out more about doing business in Colombia by requesting our in-depth guide today.
Request now Request now
