Increased safety in the last decade, and efforts by the Colombia tourism board to show the world that the country has a lot to offer, and has moved past the dark years of instability in the eighties and nineties, has led to an influx of visitors from around the world, attracted by the natural beauty, diverse culture and warm hospitality of Colombian people.
In terms of business, Bogota has long been established as a business hub for Latin America, and in the last 5 years, Medellin has received global recognition as a city buzzing with positive change. “The City of Eternal Spring” was awarded the city of innovation award in 2013, and has recently been featured in many leading publications such as the BBC and NY Times as a city rich with social development, as ear-marked as the next emerging tech hub in Latin America.
The favorable climate, strong dollar and high quality of life in the main urban hubs are making many foreigners consider moving to Colombia on a more permanent basis, and bringing their businesses with them. However, while tourist VISAS can easily be reviewed for up to 6 months each year, prospective ex-pats should realize the process for moving to Colombia, and setting up shop here are more complicated than meets the eye.
We spoke to Alan Gongora, Harvard University graduate, US attorney and Managing Partner of Langon Colombia SAS, a leading law firm based in Medellin, who offer their services to businesses and foreign clients who need help establishing themselves in Colombia. Alan imparted some words of wisdom for foreigners to consider before making the move to Colombia to set up a business:
Living legally: how do entrepreneurs organize their work visas?
There are a variety of visas available to entrepreneurs:
- Business visas (NE-1): These are generally best for entrepreneurs who are managing a multinational business, who aren’t living long-term in Colombia and who aspire to have a team in place locally to handle day-to-day aspects of the business. The Visa is limited to six months per year.
- Company Owners Visa (TP-7): These visas are perfect for anyone who can demonstrate local business investment of between US$27k and US$31k depending on currency exchange rates. Most owners of tech startups obtain this visa as it allows them to stay in COL for the entire year.
- Independent Activities Visa (TP-7): These visas are also fairly popular as they allow individuals to provide services in Colombia directly. There are no investment requirements as with the Company Owner Visa, but it’s one of the more risky visas to request given the ambiguities of what, in fact, qualifies as an independent activity in Colombia.
- Work Visas (TP-4): These visas would require the sponsorship of a business entity or individual in Colombia. Note that if a business entity is the sponsor of a work visa (including, for example, the company owned by the entrepreneur) it would be required to demonstrate bank balances of approximately US$30k over past 6 months depending on currency exchange rates.
Actual visa acquisition strategies may vary depending on the client’s overall goals and their own specific situation. I would urge clients to take a step back and consider their real needs for their business in Colombia: How much time they will spend in the country each year? Whether they will be hiring employees? Will their business be conducted here or abroad? All of these factors are very important.
Should entrepreneurs set up a company here in Colombia?
Not always. For many entrepreneurs who are setting up their own small businesses and do not require a visa to stay in Colombia, it’s perfectly acceptable to organize a solo proprietorship under which they can market and sell goods and services in the local market. Other’s prioritize limited liability, credibility and other factors and decide to register a company with the local Chamber of Commerce.
What support is available to help them do this?
We certainly offer that service. Also, assuming the client can speak Spanish, or has someone who can help them, the representatives at the Chamber of Commerce are very helpful in case entrepreneurs have any questions regarding the process.
How long will the process take? What’s the cost, on average?
We tell our clients to budget between 5-8 business days just to register the entity. If they want to obtain a visa and become the legal representative of their own company we tell them that they should budget 4 to 6 weeks to allow time to (i) register the company; (ii) apply for and obtain the visa; (iii) register their visa; (iv) obtain their national ID card (“Cedula”) and (v) become the legal representative of their own company.
If a client does not need a visa they should budget between US$750 and US$900 to register a basic business entity, depending on exchange rates.
If a client is interested in a Company Ownership Visa they should budget between US$1,500 and US$1,850 in order to register their company and apply for a visa, depending on exchange rates.
Most of the costs involve third party fees such as government application fees, tax assessments etc…
Are there limits on money transfers to and from the USA?
Any limits are based on the amount of risk that any financial institution identifies in processing these transfers. Most financial institutions will require a certain amount of paperwork in order to do their due diligence regarding the origin of any funds to be transferred. If they approve the transfer you should be fine.
Dealing with taxes can be complicated enough in my own country, will I have to pay twice (at home and in Colombia)?
Typically, there are offsets that you can use to make sure you do not pay twice. If, for example, your tax liability in the US is US$X, you can use it as a credit to bring down any tax liability applicable in Colombia. Anyone facing this issue should contact a competent tax attorney/accountant. There are plenty of qualified, experienced English speaking professionals here who we can put you in touch with.
Once I’m established as a business in Colombia, can I sponsor visas for foreign workers, or can I only employ local/already legal individuals?
If your business qualifies as a sponsor of a work visa you can absolutely sponsor foreign employees. As mentioned above, if a business entity is the sponsor of a work visa it would be required to demonstrate bank balances of approximately US$30k over past 6 months.
What are the main benefits coming to Colombia for business?
This really depends on the type of business you want to conduct in Colombia. However, many foreign investors have been attracted by:
- Highly educated work force
- Low wages depending on the industry
- Stepping-stone towards a much wider Latin American expansion strategy
- A great deal of pent-up demand in the local market
What are the main drawbacks I should consider?
Setting up a business in a foreign country will always pose challenges wherever you are in the world. Business owners should expect to conduct the majority of local business in Spanish, so a Colombian partner or translator could make things a lot easier for you. That said, the Colombian government is promoting a bi-lingual initiative to improve English teaching in schools, and the majority of large international companies will employ bi-lingual staff. Here are some factors that you should consider:
- Doing business is still somewhat complicated for foreigners. While things are getting better, the process is not streamlined and can be hectic.
- The financial system is still inflexible (money transfers, payments, etc…)
- Anyone living in Colombia in excess of six months per year may be considered a tax resident of Colombia
Alan serves as Managing Partner of Langon Law Group LLC and Langon Colombia S.A.S. Langon Law Group LLC are an innovative law firm that offers comprehensive legal services to businesses, private equity entities and high net worth individuals in Colombia and around the world.
Based in New York City and boasting a multijurisdictional approach to client service, Langon Colombia has quickly established a reputation for excellence in the local market.
From negotiating multi-million dollar M&A transactions to developing tax-efficient international expansion strategies, Langon Colombia can help your business navigate the legal and regulatory landscape in Colombia from day one.
For more information visit langoncolombia.com