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Colombia
We have a team of experienced professionals dedicated to supporting all your business requirements—ensuring smooth operations and full regulatory compliance. This strong foundation enables you to confidently establish and grow your business in Colombia with efficiency and assurance.
WHY COLOMBIA?
Colombia, officially the Republic of Colombia, is a country primarily located in South America with insular regions in North America. The Colombian mainland is bordered by the Caribbean Sea to the north, Venezuela to the east and northeast, Brazil to the southeast, Peru and Ecuador to the south and southwest, the Pacific Ocean to the west, and Panama to the northwest. Colombia is divided into 32 departments. The Capital District of Bogotá is also the country’s largest city hosting the main financial and cultural hub. Other major urban areas include Medellín, Cali, Barranquilla, Cartagena, Santa Marta, Cúcuta, Ibagué, Villavicencio and Bucaramanga. It covers an area of 1,141,748 square km (440,831 sq mi) and has a population of around 52 million.
Its rich cultural heritage including language, religion, cuisine, and art reflects its history as a colony, fusing cultural elements brought by immigration from Europe and the Middle East, with those brought by the African diaspora, as well as with those of the various Indigenous civilizations that predate colonization. Spanish is the official language, although Creole, English and 64 other languages are recognized regionally. Historically an agrarian economy, Colombia urbanized rapidly in the 20th century, by the end of which just 15.8% of the workforce were employed in agriculture, generating just 6.6% of GDP; 20% of the workforce were employed in industry and 65% in services, responsible for 33% and 60% of GDP respectively. The country’s economic production is dominated by its strong domestic demand. Consumption expenditure by households is the largest component of GDP. According to International Monetary Fund estimates, in 2023, Colombia’s GDP (PPP) was US$1 trillion, 32nd in the world and third in South America, after Brazil and Argentina. The financial sector has grown favourably due to good liquidity in the economy, the growth of credit and the positive performance of the Colombian economy. The Colombian Stock Exchange through the Latin American Integrated Market (MILA) offers a regional market to trade equities. Colombia is now one of only three economies with a perfect score on the strength of legal rights index, according to the World Bank.
ADVANTAGES
- Gateway to Latin America: Strategic location connecting North & South America, with access to both Pacific and Atlantic coasts.
- Growing Economy: A rapidly growing economy with a large, young population and an expanding middle class.
- Free Trade Agreements (FTAs): Extensive FTAs with major economies (US, Europe, Asia) reduce trade barriers.
- Innovation Hub: A growing startup ecosystem (over 1,100) and focus on digital transformation.
- Low Labor Costs: Competitive wages attract foreign companies, particularly for services like tech and call centres.
- Skilled Workforce: A diverse, committed, and trainable workforce.
- Competitive Production Costs: Lower costs for human capital, raw materials, and distribution.
- Clean Energy Leader: Strong potential in solar, wind, hydro, biomass, geothermal, and low-emission hydrogen.
- Manufacturing & Tech: Opportunities in automotive, pharmaceutical, metallurgy, software, and outsourcing.
- Agriculture & Tourism: High potential in the agricultural sector and unique tourism offerings (Pacific coast, cultural festivals).
- Tax Incentives: Tax breaks for Free Trade Zones (20% rate) and specific sectors like tech and agriculture.
- Simplified Business Structures: Advantages with Simplified Stock Companies (SAS) and streamlined immigration processes.
- Pro-Business Reforms: Government focus on economic stability and attracting foreign investment.
- Supply Chain Support: A robust network of suppliers and service providers.
- Leader in Energy Transition: Adopting and promoting renewable energy sources.
- Sustainable Development: A hub for investments in sustainable projects.
TAX REGIME
Individual Income Tax
- Residency Rule: Individuals are considered tax residents if they stay in Colombia for more than 183 days (continuously or not) within a 365-day period.
- Tax Basis: Residents are taxed on worldwide income and assets; non-residents are taxed only on Colombian-source income [0.1.1. 0.1.3].
- Rates:
- Residents: Progressive rates ranging from 0% to 39% based on income “baskets” (labour, capital, dividends, etc.).
- Non-Residents: Generally subject to a flat rate of 35% on Colombian-sourced income [0.1.1. 0.1.5].
- Exemptions (FY 2025/2026): Residents are not taxed on the first COP 54,281,000 of labour and capital income [0.1.1. 0.1.36].
Corporate Income Tax (CIT)
- General Rate: The standard CIT rate for 2026 is 35% for both national companies and foreign entities.
- Surcharges:
- Financial Institutions: A 5% surcharge (total 40%) applies if taxable income exceeds 120,000 UVT (valid through 2027).
- Extractive Industries: Coal and oil companies may face surcharges of 5% to 15% depending on average commodity prices.
- Hydroelectric Facilities: A 3% surcharge (total 38%) applies through 2026.
- Minimum Tax: A minimum effective tax rate of 15% applies to resident corporations.
- Incentives: Reduced rates of 20% apply to eligible companies in Free Trade Zones (FTZs).
Value-Added Tax (VAT)
- Standard Rate: 19%.
- Reduced Rates: Some goods/services are taxed at 5% (e.g., certain agricultural equipment and hybrid vehicles) or 0% (e.g., basic foods and exported services).
- Consumption Tax: An indirect tax replaces VAT for specific sectors: 4% for mobile data, 8% for restaurants/bars, and 8% or 16% for certain vehicles.
Other Significant Taxes
- Capital Gains Tax: A flat rate of 15% applies to gains from assets held for more than two years (up from 10% in previous years).
- Wealth Tax: For 2026, individuals with net equity exceeding 72,000 UVT (approx. COP 3.77 billion) are subject to progressive rates of 0.5% to 1.5% [0.1.1. 0.1.26].
- Financial Transactions Tax (GMF): A 0.4% “4 per 1,000” tax applies to bank withdrawals and fund transfers.
- Stamp Tax: Reintroduced in 2025 for luxury real estate transfers exceeding 20,000 UVT (approx. COP 1.047 billion) at rates of 1.5% to 3%.
Local Taxes: Including the Industry and Commerce Tax (ICA), which ranges from 0.2% to 1.4% of gross revenue depending on the municipality.
COLOMBIA COMPANIES
Simplified Stock Company (Sociedad por Acciones Simplificada – SAS):
The most common and flexible, requiring only one shareholder, can be formed by private document, and offers limited liability.
Corporation (Sociedad Anónima – S.A.):
Capital divided into shares, shareholders liable to their contributions, suitable for larger businesses or public offerings, requires at least five shareholders.
Limited Liability Company (Sociedad de Responsabilidad Limitada – Ltda.):
Partners’ liability limited to contributions, generally for small businesses, up to 25 partners.
Branch Office (Sucursal de Compañía Extranjera – SSE):
For foreign companies, with the parent company directly liable for the branch’s obligations.
Partnerships (Sociedad Colectiva, Sociedad en Comandita Simple/por Acciones):
General or limited partnerships with varying partner responsibilities, less common now.
Sole Proprietorship (Persona Natural/Empresario Individual):
A single individual running a business, with full personal liability.
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Contact Us
Get in touch with the right people to get the right help in setting up your business in Colombia.
enquiries@chandrawatpartners.com.