How to set up a Foreign branch entity in Colombia?

Foreign branch entity in Colombia

Colombia is a considerably attractive country in the economic sphere, so there is strong competition in terms of marketing. That is why it is classified as one of the 4 countries with the highest foreign investment in Latin America.

In this article we are going to explain how to set up a foreign branch entity in Colombia so that these types of organizations can legally establish themselves in the country and start their commercial activities.

 

Learn about the types of companies in Colombia.

 

Legal requirements

The legal procedure to establish a branch in Colombia is as follows:

  • The parent company must draft an act authorizing the opening of the branch in Colombia
  • Said minutes must contain the statutes of the branch
  • You must register it before a public Notary.
  • It is essential that the branch be registered with the Colombian tax authorities (in this case it would be the DIAN)
  • You must also register with the Colombian Chamber of Commerce
  • It is important to clarify that the economic activity carried out by the company must be governed by Colombian laws. This implies that it is quite possible that there are certain actions that are not allowed (labor over-exploitation, wages below the minimum or no compliance with social benefits).

 

Required legal documents

Next, we will show some of the legal documents necessary to set up a foreign branch entity in Colombia. These are:

  • Certificate confirming the establishment of the branch by the parent company
  • Powers that allow the representative of said branch to act under the name of the parent company
  • The respective bylaws of the parent company
  • Short, medium- and long-term commercial objectives in the country (in this case, Colombia)
  • Amount of capital invested for the establishment of the branch
  • Appointment of a legal representative to direct the destinations of the branch in legal matters
  • Appointment of a tax auditor

It is relevant to point out that the last four (4) steps must be developed through a resolution drawn up by the parent company that authorizes the deployment of a branch of the company in Colombian territory.

 

Tax requirements

All private companies that carry out economic activities in Colombia must be registered with the DIAN (Directorate of National Taxes and Customs), including branches.

Once registered, the company will comply with its tax obligations in relation to the tax payments. The fiscal government entity will grant its respective RUT (Tax registration). This is a document in which all the taxpayers are found. Being a formally incorporated organization, it will also contain the company’s NIT (Tax Identification Number).

 

Open a National bank account

Branches and companies that wish to establish themselves in Colombia are obliged to open a national bank account and will be used to pay wages and salaries of their respective employees. As well as where they will carry out commercial transactions in relation to the purchase of raw materials, office equipment, machinery, and any assets necessary for the branch to function in optimal conditions.

However, the branch can also make use of its accounts abroad to make transfers in foreign currency to acquire merchandise that may not be available in Colombia.

 

Requirements at the labor level

It is relevant to note that once the branch is formally installed in Colombian territory, it must abide by the country’s labor legislation. Any breach in relation to labor laws can be subject to fines and lawsuits that could legally harm the company.

 

These are the most common mistakes in accounting for a business.

As you can see, the installation of a foreign branch in Colombian territory is a process that must be progressive and be carried out following the legal guidelines established by the different laws of the country.

However, our expert professionals from JLC Auditors will be able to advise you on how to create a branch of a foreign company in Colombia, following each of the legal guidelines at the tax, labor and commercial level. In such a way that you can satisfactorily meet all the requirements.

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