Colombia Economy Overview

Currency

$ Colombian Peso (COP)

Working hours

47 hours/week

Public/bank holidays

18 public holidays

Capital

Bogota

Languages

Spanish

Population

52 million

Minimum hourly salary

COP 1,462,000

Tax year

1st Jan – 31st Dec

Date format

DD/MM/YYYY

Misclassification penalties

Penalties for misclassification may include sanctions from the Ministry of Labor equivalent to COP 5,800,000,000 depending on the time frame, number of employees, etc. 

Fun fact

Colombia ranks among the world’s most biodiverse countries. It holds a staggering 10% of the planet’s plant and animal species.

Forget what you think you know about Colombia. While this country has had a difficult history and a real image problem back in the 80s, things have changed and Colombia is on the up and up. Like most countries around the world, inflation went wild over the past couple of years but is expected to settle at 5% in 2024. The IMF also estimates a slow but steady 1.1% GDP growth this year, up from 2023’s $365.8 billion.

There are about 51 million Colombians who are known as resourceful, hardworking, and creative employees. Put this all together, and you have a picture of a country that’s positioned well for business. So, if you’re looking into doing business in Colombia, now might be the perfect time to get started. 

Overview of Columbia's Economy

Colombia runs on the COP or Colombian peso, which has fluctuated between 3000-5000 COP to the US dollar in the past five years.

Political changes in the country have been dramatic and the current left-wing government seems to be losing support through its tight economic controls and restrictions on oil and gas development. As such, controls are expected to loosen, and small but steady growth is expected in 2024 and into the next five years. Combined with decreasing inflation, the Colombian economy seems to be sustainable balancing economic activities and domestic demand. 

Key Industries and Resources
Mining (gold, emeralds, cement, coal)Chemicals
Hydrocarbons (oil)Steel products
TextilesAgricultural products
Natural resources (wild rivers and rainforests) 

Colombia has the largest coal reserves in South America though the current government is not promoting their exploitation. Colombia also produces textiles, chemicals, steel products, and agricultural products in abundance. The country also carries a wealth of natural resources, including wild rivers and rainforests.

It might also surprise you to learn that Colombia is the fifth-largest export market in the Western hemisphere and does 34% of its trade with the US, its biggest trade partner. Colombia is also one of the top ten suppliers of crude oil to the US. This is a country with a lot to offer.

Taxes

Employer Tax: 21.02% – 27.46%

Pension Fund

12%

Medical Plan

8.5%

Labor Risk

0.52% – 6.96%

Employee Tax: 9.00% - 10.00%

Pension Fund

4%

Medical Plan

4%

Gross Income (1 tax unit = 49,799 COP) 

Up to 0 – 1,090 Tax Units

1,090 – 1,700 Tax Unit

1,700- 4,100 Tax Units

4,100 – 8,670 Tax Units

8,670 – 18,970 Tax Units

18,970 – 31,000 Tax Units

More than +31,000 Tax Units

Tax Rate

0%

19%

28%

33%

35%

37%

39%

Business Regulation in Colombia

Business regulation in Colombia is generally quite liberal and it’s relatively easy to set up a business. There are seven major steps necessary to start a business in Colombia including obtaining a tax ID and registering with the relevant authorities. The whole procedure can be completed in only ten working days according to the World Bank.

The types of entities that are most commonly registered in Colombia are simplified joint capital stock companies (Sociedad por acciones simplified or SAS) and simplified joint capital stock corporations (sociedad anónima or SA). SASs can be formed through private documents, don’t require a statement of corporate purpose, and have no minimum required capital or a minimum number of required shareholders. In contrast, SAs must be incorporated by public instruments, have clear statements of corporate purpose, and must have at least five shareholders.

Companies in Colombia pay 35% corporate tax whether they’re local or foreign-owned. VAT in Colombia is 19% but some products and services are reduced to 5% or 0%. There is also a 0.4% levy on financial transactions in the country.

Colombian workers enjoy strong protections by law and also have a long history of forming trade unions and engaging in collective bargaining. Minimum wage is quite low at only 1.7 million COP or roughly USD 470. Average monthly salaries are around $1000. Employers must, however, provide a lot of benefits to Colombian employees like 15 days of annual paid leave, 16 paid national holidays, 18 months of maternity leave, and set premiums on overtime. Employers also pay 29.5% of a worker’s salary toward social programs, while employees contribute another 8% of their gross salaries in deductions.

Benefits of Doing Business in Colombia

If you’re considering doing business in Colombia, you have to be aware of both the positives and negatives involved. There are certainly lots of attractive reasons to set up in this vibrant country:

  • Enjoying a positive outlook for economic growth after bouncing back from the pandemic downturn.
  • Skilled workers with over 95% literacy rate and moderate levels of English language proficiency.
  • With a 12% unemployment rate, there are lots of skilled workers that are being underutilized.
  • Tax incentives for foreign direct investment, such as exemptions for agriculture and renewable energy projects and a special tax regime for mega investment projects.
  • A free trade agreement with the US and other agreements with 60 countries provides access to a substantial market.

International Expansion into Colombia

Many international enterprises are looking to South America for new, untapped markets. With the third-largest GDP on the continent, Colombia is a location of interest. So, how do most companies expand into this Latin American market? There are three main ways that businesses normally use to start working in Colombia.

Columbia Employer of Record (EOR)

The Columbia EOR becomes the official legal employer of your Columbia team. This method is fast and efficient, making it perfect for companies that need to quickly deploy staff on the ground. 

An EOR handles payroll, benefits, taxes, and compliance with local labor laws, allowing businesses to focus on their core activities. They may also provide additional services, such as Columbia talent acquisition and visa support. 

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Recruitment Agencies

Recruitment agencies in Colombia help businesses expand by connecting them with skilled local talent across various industries.

Remote People provides recruitment solutions that simplify hiring and ensure compliance with Colombian labor laws.

For businesses looking to grow in Colombia, Remote People offers the expertise and resources needed to build a local workforce quickly and effectively, making it a practical solution for market expansion.

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Columbia Professional Employer Organizations (PEO)

A PEO company or professional employment organization, is a popular choice for a lot of international companies wanting to work in Colombia. While they still need to register an entity, they can outsource their HR functions for local staff to the PEO to manage. 

 A similar option for hiring Colombian staff is to contract a Colombia Employer of Record Service. An EOR can hire workers on your behalf and handle their HR needs while the workers are contracted to work for your company. In addition to EOR services, many of these HR providers can also support your company with other oursourced tasks, such as talent search and visa acquisition in Colombia. If you want to hire skilled Colombians for remote work, an EOR is an excellent option.

Partnering with a professional employer organization (PEO) allows companies to employ local staff in Columbia without the need to establish a legal entity. This approach is quicker and less expensive, making it ideal for businesses testing the Columbia market or those with limited operations. PEOs handle administrative tasks and ensure that companies comply with Columbia regulations, reducing the complexity and risk associated with hiring local employees. 

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Subsidiary Incorporation

A subsidiary is considered an independent part of a corporate group and can be set up by a foreign enterprise in Colombia. A subsidiary holds its own capital, is responsible for its own, debts and makes its own contracts. There is limited liability between it and its parent company.

 

You have several choices for how to incorporate a subsidiary in Colombia, including as a joint stock company (SAS), simplified joint capital stock corporation (SA), or a limited partnership (Sociedad en Comandita Simple y por Acciones or SCSA). Typically, no minimum capital investment is required for incorporation. Subsidiaries pay taxes and are otherwise treated as local entities, and therefore they’re able to perform activities different to their parent companies.

Branch Registration

Another choice for an established enterprise seeking to expand into Colombia is to open a branch. In this case, the branch needs to be empowered by its parent company to undertake business activities in Colombia. It also needs to follow the bylaws of the parent company and, as such, is not able to conduct activities outside the scope of the parent company’s purpose.

A branch is considered a local extension of the parent company, and therefore, the parent is legally responsible for it. A branch representative must be identified to represent the branch in all of its activities.

Business Opportunities in Colombia

Colombia has one of the top 50 biggest economies in the world and that’s set to grow steadily in the next few years. With over 50 million people, this is a market you can hardly afford not to be in. While taxation may be high, skilled workers are currently underutilized and that’s an opportunity not to be passed up.

As a member of the Pacific Alliance and a signatory to multiple free trade agreements, Colombia offers access to major markets in the Americas and beyond. Key sectors with significant investment potential include:

Business OpportunityReason
Agribusiness and Food ProcessingColombia’s diverse climate, vast agricultural land, and strong export potential create opportunities for investments in crop production, livestock farming, and value-added food processing, particularly in coffee, fruits, and vegetables.
Infrastructure and ConstructionAs Colombia continues to invest in its infrastructure to support economic growth and regional integration, there are opportunities for construction companies, engineering firms, and project developers in areas such as roads, airports, and public utilities.
Renewable EnergyWith its abundant solar, wind, and hydropower resources, Colombia offers significant potential for investments in renewable energy projects, as the country aims to diversify its energy mix and reduce its carbon footprint.
Tourism and HospitalityColombia’s rich cultural heritage, diverse landscapes, and improved security situation present opportunities for investments in hotels, resorts, ecotourism, and adventure tourism, as the country seeks to boost its international visitor numbers.
Technology and InnovationColombia’s growing tech ecosystem, skilled workforce, and government initiatives to promote digital transformation and entrepreneurship offer opportunities for investments in software development, fintech, and other knowledge-based sectors.

Colombia’s strategic location, with access to both the Pacific and Atlantic oceans, makes it an attractive hub for regional trade and logistics. So whether you plan to hire Colombians remotely, open a branch, or even start a new company, Colombia looks like an attractive place to get into business.