Foreign Investment in Colombia

The establishment of a company in Colombia benefits from its strategic location, which facilitates access to international markets through multiple trade agreements, offers logistical advantages, and is supported by a favorable time zone for the region. Furthermore, Colombia guarantees equal conditions for both foreign and domestic investors by prohibiting any form of discrimination or preferential treatment.

We invite you to explore some of the advantages and key considerations that foreign investors should evaluate when incorporating a company in Colombia.

Corporate Structures in Colombia

Foreign investors frequently inquire about the optimal corporate structure for establishing companies in Colombia, where the choice of legal form depends on the operational scope, management flexibility, and the benefits provided by local legislation.

Among the available options, the Simplified Stock Company (SAS) stands out for its numerous advantages, while a foreign company branch allows the parent company to demonstrate its track record and financial stability. Below is a comparative analysis of both structures:

	Simplified Stock Company - SAS	Foreign Company Branch
Method of incorporation	Private document. In the case of contributions in kind, a public deed is required.	Public deed.
Legal Nature and Liabilities	A distinct legal entity from its shareholders, who are liable only up to the amount of their contribution, except in cases of fraud.	Considered a commercial establishment of the parent company, with responsibilities in Colombia assumed by the parent.
Share capital	Shareholders may subscribe to and pay the capital under conditions and proportions they establish, within a maximum period of 2 years.	The capital must be paid at the time of incorporation; however, a floating capital that can be adjusted without amending the bylaws is permitted.
Statutory Auditor	As stipulated by law.	Mandatory.
Management	There is no obligation to form a board of directors; alternatively, the assembly or sole shareholder assumes the functions.	A General Manager is appointed, who acts as the administrator and representative before third parties.
Advantages	Facilitates the free negotiation of shares, the formation of new companies, or integration into existing companies.	According to Article 22 of Law 80 of 1993, it allows for demonstrating the foreign company’s experience and financial capacity, as well as offering foreign exchange advantages for sales conducted in foreign currency, particularly relevant for the mining and energy sector.

This comparison is designed to guide foreign investors in selecting the corporate structure that best meets their needs in the Colombian context.

Colombian Holding Companies Regime

The Colombian Holding Companies Regime targets companies established in Colombia whose primary activity is the investment and management of securities, both domestically and internationally. It offers fiscal benefits such as exemption from income tax on dividends received from non-resident entities and on dividends paid to foreign shareholders. To qualify for this regime regulated by Article 894 of the Tax Statute companies must meet requirements such as maintaining a minimum stake of 10% in at least two entities for twelve months, possessing human resources and a physical address in the country, and making strategic decisions within Colombian territory. This framework strengthens the national and international investment environment and places these companies on par with offshore jurisdictions.

Free trade Zones

Incorporating a company in Colombia entails taking advantage of its strategic location and dynamic investment environment. The free trade zones regime provides a specialized regulatory framework in matters of taxation, customs, and foreign trade. This regime not only enables companies to benefit from a preferential income tax rate of 20% for industrial users, tariff and VAT exemptions on imports, and export facilitation measures, but it also requires the fulfillment of commitments related to job creation and investment under the principle of exclusivity, ensuring that only authorized activities are carried out in the free zone area. The tax reform, enacted through Law 2277 of 2022 and partially regulated by Decree 0047 of 2024, conditions the application of this tax rate on industrial users agreeing to an Internationalization and Annual Sales Plan aimed at effectively executing export activities and achieving net revenue targets, thereby reinforcing the incentive for projects with significant economic and social impact.

Agreements to Eliminate Double Taxation in Colombia

To encourage foreign investors to establish their companies in the country and to avoid double taxation, Colombia has entered into agreements with various nations. These agreements establish a clear legal framework that prevents the imposition of duplicate taxes on residents of the signatory countries. Among the existing income tax agreements, Colombia currently maintains treaties with nations such as Japan, France, Italy, the Czech Republic, Portugal, India, Korea, Mexico, Canada, Switzerland, Chile, Spain, the United Kingdom, and Northern Ireland, as well as with the member states of the Andean Community of Nations. These agreements foster a more favorable fiscal environment by eliminating additional tax concerns for those wishing to establish a company in Colombia.

Foreign Exchange Regime in Colombia

Foreign capital investments must be registered with the Banco de la República using the appropriate form, thereby ensuring that the investor attains legal status in the country. This registration can be carried out either through foreign exchange market intermediaries or directly with the Banco de la República via electronic means. The process commences at the time of the company’s incorporation in Colombia and must be repeated each time additional capital contributions are made, dividends are distributed, or transactions are conducted in foreign bank accounts authorized under this regime.

Transfer Pricing

Colombia’s transfer pricing regime ensures that transactions between affiliated companies or companies within the same economic group are conducted on arm's-length terms, thereby guaranteeing fair competition. This system is designed to prevent or detect practices aimed at reducing profit margins in countries with higher tax burdens, making it particularly relevant for multinationals seeking to establish a presence in Colombia. Taxpayers required to comply with this regime must meet certain conditions: they must be subject to income and supplementary taxes, have economic ties with entities abroad or within free zones, and have conducted transactions with such entities during the relevant tax year. Furthermore, these taxpayers must submit the informational declaration and transfer pricing studies to DIAN, ensuring compliance with current regulations for legal operation in the country.

Strategic Planning for Investment in Colombia

Before establishing an investment vehicle in Colombia, it is essential to define your objectives and carefully evaluate the available legal structures whether forming a traditional company, setting up in a free zone, or leveraging specialized regimes. This rigorous analysis is key to maximizing benefits and mitigating risks.

Our team of experts offers comprehensive guidance throughout every stage of the process from selecting the optimal corporate structure to managing legal and tax requirements ensuring a seamless formation process and the sustainable success of your investment in Colombia.