Colombia is one of the most attractive economies in Latin America for foreign investment however, its complex tax, legal and regulatory regimes make having professional Colombian law and tax advisors essential.
Colombia remains one of the most economically and politically stable countries in Latin America and is an increasingly attractive place for foreign individuals and companies to do business. Colombia is a member of the Pacific Alliance which includes Peru, Mexico and Chile. This group totals 57% of Latin America’s foreign trade and 41% of total foreign investment in the region. Colombia is also a member of the Andean Community (“CAN”) and the Latin American Integration Association (“ALADI”).
The USA and UK are the largest investors in Colombia and significant opportunities exist in a number of sectors. The UK Government priorities for Colombia include strengthening bilateral relations and securing a significant increase in international trade and investment opportunities. The UK Government is supporting a suite of initiatives and policies to strengthen the bilateral relationship between the two countries and develop Colombia’s role as a key partner on regional and global issues, including:
- preparing the ground for a future Free Trade Agreement (FTA); Colombia’s membership of the OECD
- improving Colombia’s capacity to counter serious and organised crime (SOC)
- protect Colombia’s unique environment and diversity while working with the UK in climate change negotiations
- collaboration on contraband and tax reform
- securing credit lines for Colombia from UK Export Finance (UKEF)
There have been many recent financial and legal reforms in Colombia to modernise the business landscape, which our in-country Colombian law and tax representatives have genuine experience and understanding of. Foreign lawyers are not authorised to conduct cases in the Colombian courts – only lawyers who have graduated from Colombian Universities can practice law in Colombia.
Through the use of Powers of Attorney, we are able to perform many legal transactions for our clients who are not physically present in Colombia and our bilingual Spanish and English-speaking lawyers can advise you on the processes and steps required to achieve your objectives. We also understand the cultural subtleties of doing business or investing in Colombia, which is essential in corporate negotiations.
Doing business and investing in Colombia
Investments in Colombia made by foreign individuals or companies receive the same treatment as those made by Colombian nationals. Encouraging foreign investment is a long-standing feature of Colombian economic policy and foreign entities have a wide range of options, both when deciding how they wish to structure investments or finance operations in Colombia.
In general, a Colombian company can be 100% foreign-owned and foreign investments can take the form of:
- joint ventures or non-profit entities
- portfolio investments
- private equity funds.
Legal issues in Colombia
There are various legal hurdles you must cross in order to do business in Colombia which include:
- Company registration – businesses must be registered at the Chamber of Commerce, National Tax Office (DIAN) and the Municipal Tax Authority (SDH) and deposit capital must be paid.
- Employment – Employees and employers must be registered with several mandatory social security entities such as: Administrator of Professional Risks (ARL), Health Insurance Entity (EPS) Pension Fund Entity (AFP) and the Welfare Entity (CCF). Employment in Colombia is primarily governed by the Labour Code, which regulates the terms and conditions of employment, such as employment contracts, salary types, working hours, holiday, and termination.
- Registering property – It takes seven procedures to register a property, requiring a lawyer or notary to oversee most aspects.
- Investors – Colombia has wide legislation and jurisprudence regarding investor protection, directors’ duties, shareholder rights and corporate transparency requirements to reduce the risk of abuse.
- Taxation – Tax is a very complex affair with many levies that can catch people off guard and result in penalties.
- Cross Border activity – The cost of trading across borders is far higher than in most Latin American and Caribbean countries by around three times. It can be time-consuming and complex with overlapping tariff duties – local knowledge is essential.
- Intellectual property – Colombia has its own intellectual property registry and for effective management of your intellectual property rights in Colombia a strategy tailored to the country is crucial.
Commercial and Private Client Legal Disputes in Colombia
The main Colombian commercial dispute resolution methods are local courts, domestic arbitration, extrajudicial conciliation, and occasionally voluntary mediation. Arbitrators and judges have broad powers to control and manage litigation. Legal and technological developments are currently aiming to implement online dispute resolution (ODR) for local courts although no official systems are available yet.
In family and private client cases, parties can only file their claims before Court after they have tried to settle their dispute by conciliation. If they fail to comply with this pre-action requirement the judge must declare the inadmissibility of the claim and grant the claimant five days to present evidence of the extrajudicial conciliation. Otherwise, the court will dismiss the claim without prejudice.
With increased international litigation in Spanish-speaking countries, we have developed a virtual Hispanic Dispute Resolution Centre in London via our offices based in the Strand. We have a core of bilingual Spanish and English-speaking lawyers, who together they have deep expertise in international arbitration in different markets, providing a solution for faster dispute resolution, avoiding the time and expense of traditional litigation, and can facilitate the smooth handling of the ADR from start to finish.
How we can help
Colombian Tax & Legal Counsel Abogada (Bogotá)
Gabriela Mastrodoménico runs Del Canto’s Colombian Desk, providing legal, judicial and tax advice to private clients and companies in Colombia.
Gabriela has been an independent litigator since 2007, specialising in Civil, Commercial, Labour, Tax, Contract, Property, and Disciplinary Law. She obtained her law degree from the Santo Tomás University in Colombia and has been a professor on Civil Law for the Universidad Santo Tomás and for the Universidad del Sinú.
Our lawyers work across sectors and borders to deliver truly international commercial advice, mitigating risk and highlighting opportunities. Our ability to be able to provide in-house, country-specific legal expertise is something that few UK-based law firms like us can offer.
Del Canto Chambers offers a turnkey project management approach with a full-service support system, including decision-making protocols and timelines. We offer proven turnkey solutions to successfully manage international projects with multiple local country partners, helping you navigate international complexities. This holistic turnkey approach facilitates effective coordination between different parties, and jurisdictions, ensuring that projects are delivered on time and budget, from initial execution through to completion.
Del Canto Chambers specialists are constantly up to date with new legislative changes and aware of any tax and legal implications. We understand local and regional Colombian business practices, the tax and legal issues and the regulatory practices. Our clients can rely on credible advice, tailored to their unique requirements, whilst taking into account the diverse and complex legal and tax systems in the country they wish to do business in.
With coronavirus related travel restrictions set to continue for the foreseeable future, we have developed a virtual Hispanic Dispute Resolution Centre in London via our offices based in the Strand. As members of The Leading Edge Alliance, the second-largest international association in the world, we work with local accounting, financial, tax and business advisory services we can put our clients in touch with for local Colombian business support.
How can we help you?
Whether you want to own property, do business or invest in Colombia, we have the local knowledge to explain the legal system, demystify the taxation regimes and identify risks and opportunities in a way which will make sense to you.