Doing Business in Colombia

Contents of this blog:

Challenges of expanding | Opportunities | Corporate taxes | Colombian Industry | Colombian Economy | Business Entity Structures | Business Culture

Challenges of Expanding in Colombia

Colombia presents exciting opportunities for business expansion, supported by a growing economy and strategic location. As with any new market, there are important aspects to consider. Understanding the local legal and regulatory frameworks is essential, as is adapting to cultural nuances to build strong business relationships. With the right preparation and local partnerships, these factors can be effectively managed to support long-term success. We break down the key International Business Compliance Obligations to help companies stay compliant across multiple jurisdictions.”

Bureaucracy & Regulatory Complexity

Opening a business in Colombia involves navigating a bureaucratic system that can be lengthy. The process includes registration with various government entities, such as the Chamber of Commerce, the DIAN (for its acronym in Spanish, National Tax and Customs Directorate), and social security entities. While recent reforms seek to simplify these procedures, regulatory complexity remains a significant challenge. Working with local advisors is strongly recommended to ensure compliance with all regulations. 

Strict Labor Laws & High Employee Costs

The country has strict regulations regarding employment contracts, minimum wage, working hours, and termination processes. In addition to wages, employers are required to contribute to social security, health insurance, and severance funds. These costs must be carefully factored into any business expansion strategy.  

Infrastructure & Logistics Bottlenecks

Colombia has made significant progress in modernizing its infrastructure, including major investments in highways, ports, airports, and rail systems through programs such as “4G Road Infrastructure” and “Plan Maestro Ferroviario”. These initiatives aim to improve connectivity between major cities and boost trade efficiency across the country and with international markets.

Opportunities of Doing Business in Colombia

Colombia offers numerous business opportunities, especially in sectors like technology, agriculture, tourism, and renewable energy. With its growing economy, strategic location, and government incentives, Colombia is an attractive destination for foreign investors. 

Colombia Location

Colombia is situated in the northwest of South America and is unique in being the only country on the continent with coastlines along both the Pacific Ocean and the Caribbean Sea. This geographical advantage establishes it as a key gateway for international trade. Important economic centers include Bogotá, the capital; Medellín, which is renowned for its innovation; and Barranquilla, a significant port city. This strategic location enhances export activities and facilitates regional distribution.

Cost-Effective Operations

Colombia presents competitive labor costs and affordable real estate compared to many other Latin American countries. These advantages make it a cost-effective location for businesses, particularly in manufacturing, business process outsourcing (BPO), and logistics. Companies seeking to reduce expenses while remaining close to the U.S. and Latin American markets often view establishing operations in Colombia as a strategic decision.

Consumer Market

Colombia's expanding middle class and rising internet penetration are changing the consumer landscape. E-commerce, financial services, and digital entertainment are all experiencing growth. For foreign companies looking to launch products or services, understanding local consumer behavior is essential. Starting a business in Colombia can provide access to a vibrant and evolving market with substantial growth potential.

General Economic Overview

Colombia boasts one of the most stable and diverse economies in Latin America. By 2025, its GDP is projected to surpass USD 330 billion, supported by key sectors such as services (including finance and telecommunications), manufacturing, agriculture, and mining. While inflation and exchange rate volatility remain concerns, the Central Bank of Colombia is proactive in managing monetary policy to ensure economic stability.

Macroeconomic Stability & Monetary Policy

Colombia follows an inflation targeting regime, currently around 5,15% and expected to reach 3% by the end of 2025. To control inflation and stabilize the Colombian peso, the Bank of the Republic adjusts interest rates. In March 2025, the Consumer Price Index (CPI) in Colombia reached 148.68 points. This reflects a monthly increase of 0.52% and an annual growth of 5.09%. When compared to the same period last year, this marks a decrease of 2.27 percentage points, as the CPI was 7.36% at that time.

Simple Solutions for Expanding into Colombia 

Expanding into Colombia presents both opportunities and challenges, but H&CO offers simple solutions to help businesses mitigate risks, ensure compliance, and achieve long-term success in the region.  

Market Entry & Expansion Support  

We provide expert local insights, comprehensive market research, and strategic business development solutions to help you establish a strong presence and successfully expand your business operations in Colombia. Discover how opening your business abroad plays a key role in successful cross-border expansion.

Staffing & Talent Solutions  

Build a high-performing and fully compliant workforce with our recruitment services, workforce management solutions, and HR compliance support tailored to the unique labor laws in Colombia. 

SAP Business One Implementation & Support    

Optimize your business operations with SAP Business One, a powerful ERP solution designed for small and medium-sized enterprises. Our team provides seamless implementation, customization, training, and ongoing support to enhance efficiency and streamline processes.

Accounting & Financial Management

Keep your finances on track with our outsourced accounting, bookkeeping, and ERP solutions, including SAP Business One and other leading platforms, designed to enhance financial organization and operational efficiency. 

Payroll & Labor Compliance     

We provide full payroll management, including accurate payroll processing, social security contributions, and administration of mandatory employee benefits, ensuring compliance with Colombian labor laws while preventing costly disputes. 

International Tax Compliance & Optimization  

Our experienced tax specialists offer tailored tax solutions to minimize liabilities, manage VAT obligations, and ensure full compliance with Colombian transfer pricing regulations, helping you reduce tax burdens and maximize profitability. 

Corporate Taxes in Colombia

Companies are subject to Income Tax, which is levied on their worldwide income at a general rate of 35%. Additionally, there is the Industry and Commerce Tax (ICA)—a local tax imposed by municipalities on gross income generated from commercial, industrial, or service activities.

When a third party withholds this tax at the source, it is referred to as RETEICA. Another important obligation is withholding tax (retención en la fuente), a mechanism through which the government ensures the advance collection of taxes by requiring payers to withhold a percentage of payments made to suppliers or contractors.

Tax

• VAT (IVA in Spanish) is 19%.
• The calculation of ICA/RETEICA is 4.14 x 1000 to 11.04 x 1000 (depending on the economic activity and the municipality).
• The corporate income tax is 35%.
• Withholding tax rates in Colombia vary from 1% to 11%, depending on the type of economic service or purchase being made by the company.

Colombian Economy - overview in figures

Population: 53.43 million inhabitants 

Language: Spanish 

Currency: Colombian Peso (COL) 

GDP per capita: USD 6,947.4 (2023) 

Political System: Colombia is a democratic, unitary presidential republic, characterized by a separation of powers among the executive, legislative, and judicial branches. The president serves as both the head of state and the head of government, as well as the commander of the Armed Forces. The Congress of the Republic consists of two chambers: the Senate and the House of Representatives. 

Tax Treaties: Colombia has signed several Double Taxation Agreements (DTAs) to facilitate international investment and reduce cross-border tax burdens. It currently has tax treaties in force with countries such as Spain, Chile, Mexico, Canada, Switzerland, South Korea, Japan, India, the United Kingdom, and the Andean Community. 

These treaties cover income and capital tax aspects and generally reduce withholding rates for interest, dividends, and royalties. 

Interesting fact: Colombia is the second most biodiverse country in the world, after Brazil, and #1 in bird species. This natural wealth has made Colombia not only a hotspot for ecotourism but also a growing leader in sustainable agriculture and bioeconomy, sectors prioritized in the 2023–2026 National Development Plan. 

Colombia's Economy & Business Environment 

Colombia is Latin America's fourth-largest economy and one of the most stable in the region. Over the past decade, it has shown consistent GDP growth, supported by a diversified economic base. Key sectors driving the economy include oil and mining, agriculture (notably coffee, bananas, and flowers), manufacturing, and an expanding services industry—particularly in finance, IT, and tourism. For more details on trade documentation and local regulations, see our full guide on Requirements for Exporting in Latin America.

A few years ago, the government implemented a series of reforms to encourage entrepreneurship, improve transparency, and attract foreign direct investment (FDI). As a result, Colombia has steadily risen in the World Bank's ease of doing business rankings and has received excellent credit ratings from international agencies.

Colombian Industry 

Energy & Mining 

The mining and energy sector in Colombia is at a pivotal moment, as national and sectoral policies are geared toward developing strategies and actions that will allow for a Just Energy Transition (TEJ). This means that the national government is working to transform the energy mix to reduce dependence on oil and gas, mitigating the negative impacts these activities have on the environment and advancing toward a productive transformation that maintains a community and territorial focus. 

Just Energy Transition demands a strategic diversification of labor and production, which is essential for developing robust supply chains and enhancing installed capacity in alignment with the opportunities presented by new energy sources. This diversification will directly facilitate the establishment of agricultural, industrial, and eco-tourism alternatives in regions where traditional economies have become unsustainable. Invest in training and qualifications to empower individuals to realign their productive activities. Furthermore, understanding the critical importance of this transition within a framework that prioritizes life and respects nature is non-negotiable. 

Agriculture 

Agriculture in Colombia is diverse and influenced by factors such as geographic location, climate, and local culture. The main crops grown in Colombia include bananas, coffee, sugar, floriculture, and plantains. However, the agricultural sector in Colombia also faces various challenges, such as the lack of access to modern technologies, the scarcity of natural resources, and the impact of climate change. 

Services & Finance 

The services sector accounts for over 60% of GDP. Bogotá serves as the financial hub, hosting most national and multinational banks, insurance companies, and FinTech startups. 

From Colombia to the world

The Colombian government is concentrating on social and tax reforms, sustainable development, and addressing inequality. The National Development Plan for 2023–2026 emphasizes digital transformation, green energy, and rural development to promote long-term growth. 

Foreign Direct Investment (FDI) 

Colombia is one of the leading recipients of FDI in South America. Major investment destinations include Bogotá, Medellín, and the Caribbean region, with a focus on energy, infrastructure, real estate, and technology. 

Some incentives that the country proposes are legal stability agreements, government-backed investment promotion via ProColombia, and free Trade Zones (FTZs) offering preferential tax regimes. 

Free Trade Agreements 

Colombia has established a network of 17 Free Trade Agreements (FTAs) with various countries and regional blocs, facilitating trade and investment. Notable agreements include those with the United States, Canada, the European Union, Mexico, Chile, and the Pacific Alliance. These FTAs aim to eliminate tariffs, remove trade barriers, and promote economic integration.

For instance, the U.S.–Colombia Trade Promotion Agreement, effective since May 15, 2012, has significantly enhanced bilateral trade by eliminating tariffs and improving market access for goods and services. Learn how New Tariffs are Transforming Global Expansion and what it means for companies operating in Colombia

Visas for Foreign Investors 

Colombia offers specific visa categories to attract foreign investors:  

• Migrant (M) Visa: This visa is available to individuals who invest in Colombian businesses or real estate. For example, an investment of approximately $25,000 in a Colombian business or $75,000 in real estate can qualify an investor for this visa. The M visa is typically valid for three years and can be renewed. 
• Resident (R) Visa: After maintaining an M visa for five years, investors may apply for an R visa, granting permanent residency. This visa is a pathway to Colombian citizenship, provided the investor meets additional requirements, such as language proficiency and continuous residence. 

International Investment Laws in Colombia 

Colombia has developed a robust legal framework to protect and promote foreign investment. The country adheres to international standards of investor protection and offers equal treatment to both local and foreign investors under Law 9 of 1991 and Law 963 of 2005. These laws guarantee free movement of capital, profits, and dividends, as well as legal stability for long-term investments through special agreements known as legal stability contracts. 

Banking & Financial System in Colombia 

Colombia has a well-regulated and modern banking system, supervised by the Superintendencia Financiera de Colombia (SFC). The financial sector plays a critical role in the country’s economic growth and offers a wide range of services for both individuals and businesses, including checking and savings accounts, international transfers, investment products, and commercial credit. 

The Central Bank, known as Banco de la República, manages the country’s monetary policy, controls inflation, and regulates currency exchange. Foreign investors and companies can freely remit profits, capital, and dividends if their investments are properly registered with the Central Bank. 

Foreign Companies in Colombia 

Foreign companies can establish a presence in Colombia through several legal structures, including subsidiaries, branches, or representative offices. Branches are commonly used for direct operations and must be registered with the local chamber of commerce and DIAN. They are treated as extensions of the parent company and are subject to local tax obligations. 

Business Entity Structures in Colombia 

When starting a business in Colombia, investors can select from various types of legal entities based on their objectives, the nature of their operations, and considerations regarding liability. Below is a summary of the most common structures. 

1. Sociedad por Acciones Simplificada (S.A.S.): The most common structure for foreign and local entrepreneurs due to its flexibility. It provides limited liability, meaning shareholders are only responsible for their contributions, and there is no minimum capital requirement. The S.A.S. has become the preferred option for startups, SMEs, and foreign investors establishing subsidiaries, mainly due to its quick incorporation process and simplified internal governance. 
    
2. Sociedad Anónima (S.A.): More suitable for larger corporations, especially those intending to issue shares or operate in regulated sectors such as banking or insurance. The S.A. requires at least five shareholders, none of whom may hold more than 95% of the shares. It is subject to stricter governance rules, including the mandatory appointment of a board of directors and a statutory auditor. 
    
3. Sociedad Limitada (Ltda): This entity can be formed by a minimum of two and a maximum of twenty-five partners. Liability is limited to the value of each partner's capital contribution. Unlike the S.A.S., the capital of an Ltda. It is divided into quotas rather than shares, and changes in ownership tend to be more restrictive, making it less flexible. 
    
4. Empresa Unipersonal (E.U.): Allows a single person to create a business with limited liability. While once more common, this structure has declined in popularity due to the greater flexibility and advantages offered by the S.A.S. 

Selecting the right legal entity is a key strategic decision that depends on the scale of investment, the type of activity, and the long-term vision for doing business in Colombia.

Colombia Business Culture & Practical Tips

Colombian Business Etiquette 

In their relationship code, meetings usually begin with a friendly conversation; topics such as family, culture, or sports are safe and even encouraged before discussing business matters. 

The corporate attire is generally formal and conservative, especially in large cities like Bogotá, Medellín, and Cali, where most corporate headquarters are based. Business professionals are expected to present a polished and elegant appearance, as it reflects seriousness, respect, and credibility in negotiations and daily interactions.

Business Hours

Offices typically operate Monday through Friday, from 8:00 a.m. to 6:00 p.m., while lunch hours are typically from 12:00 p.m. to 2:00 p.m. Government offices, however, may have slightly different hours.

Colombia Local Insights

Colombia's business norms vary by region. Bogotá has a formal environment, while Medellín and Barranquilla are more relaxed and entrepreneurial. 

Colombia's multilingual population is growing, but Spanish remains the dominant language of business. It is advisable to conduct meetings in Spanish or have professional interpreters available, particularly when dealing with government authorities or smaller companies. 

Ways of Communication in Colombia

In Colombian business culture, communication tends to be formal, especially during initial meetings. Titles and last names are used as a sign of respect, and Spanish is the primary language for most business interactions, although English is increasingly common in multinational environments.

Transportation

Bogotá is known for its TransMilenio rapid bus system, while Medellín boasts an efficient Metro network. Ride-hailing apps such as Uber, DiDi, and Cabify are popular and considered safer alternatives to traditional taxis. Domestic air travel is frequent and affordable, with airlines like Avianca and LATAM Colombia connecting major cities. 

Where lunch

In the Colombian capital, Zona G and Zona T are known for their high-quality cuisine, ideal for executive meetings. The El Poblado neighborhood, especially the Provenza area, is the culinary epicenter of Medellín, offering ideal options for business meetings. 

• El Cielo Restaurant: Recognized for its signature cuisine and unique sensory experiences. 
• Harry Sasson: Located in a restored house, it offers international cuisine with a focus on local ingredients. 
• Memory Restaurant: Located in the Wellcomm Hotel, it offers a panoramic view of the city of Medellín and a varied menu. 

Top Business Hotels & Workspaces in Colombia

In Bogotá, top business hotels include the Four Seasons Hotel Casa Medina, renowned for its elegant meeting rooms and personalized services, and the JW Marriott Bogotá, located in the financial heart of the city with state-of-the-art conference facilities. 

In Medellín, the Hotel InterContinental offers business amenities and relaxation areas, while the Click Clack Hotel is ideal for creative professionals seeking a stylish atmosphere near El Poblado. 

Colombia's top cities provide a variety of flexible office and coworking space options for those in need. For instance, WeWork has locations in Bogotá, Medellín, and other major cities, offering flexible office spaces, private meeting rooms, and virtual office services in prime areas such as Calle 93 and El Poblado. 

Embassy & Consulate Information 

The U.S. Embassy in Bogotá is one of the largest diplomatic missions globally, offering services for American citizens and businesses, including passport assistance, notarial services, and commercial advisory support. 

Visit  https://co.usembassy.gov/  

Other important embassies located in Bogotá include the Embassy of Canada, the Embassy of the United Kingdom, the Embassy of Germany, and the Embassy of Spain, each providing consular assistance, visa services, and commercial support for companies and entrepreneurs looking to engage in Colombian markets.  

Business travelers are strongly advised to register with their respective embassies when visiting Colombia for extended stays or important negotiations. For more information, you can consult https://www.cancilleria.gov.co/en/services/consular/directory