Your obligations in Colombia

• Company Creation and Registration: In Colombia, companies must be legally registered with the Chamber of Commerce and DIAN (Dirección de Impuestos y Aduanas Nacionales). This process involves registering your business name, legal structure, and tax identification. Failure to do so can result in legal and financial penalties.

• Municipal Tax Registration: Companies may also need to register with the local municipality for municipal tax purposes, including Industry and Commerce Tax (ICA), depending on where the company operates.

• Beneficial Owner Reporting: Colombian companies must report information about their final beneficial owners to DIAN. This is an additional registration and reporting obligation that must be kept updated.

• VAT Declarations: Report and pay VAT to DIAN every two months or every four months, depending on the company’s tax responsibilities.

• Withholding Taxes: When applicable, file monthly withholding tax returns and pay withholding taxes to DIAN on certain transactions.

• Annual Income Tax Declaration: Prepare and submit the company’s annual income tax declaration to DIAN.

• Exogenous Information: Prepare and report detailed third-party information to DIAN. This annual reporting is one of the most complex compliance obligations for companies in Colombia and another reason accounting records must remain accurate throughout the year.

• Municipal Taxes: File and pay applicable municipal taxes, such as Industry and Commerce Tax (ICA), depending on the company’s activity and municipality.

• Electronic Invoices: Sales invoices must be issued electronically and reported to DIAN through compliant accounting software.

• Electronic Payroll Support: Payroll payments must be supported through electronic payroll documents, commonly known as nómina electrónica.

• Supporting Documents: Certain purchases from suppliers who do not issue electronic invoices may require an electronic supporting document, known as documento soporte.

• Maintain Accounting Records: Accurate and timely accounting is essential to understand the company’s financial situation, but Colombian companies are also required to maintain complete and accurate accounting records. These records must include all relevant transactions, such as sales, purchases, expenses, payroll, taxes, bank movements, and the documents that support those transactions.

• Digitalization of Accounting Documents: We recommend keeping digital records of all accounting documents, including purchases, expenses, sales, income, payroll, bank statements, and tax documents, facilitating audits and compliance with regulatory requirements.

• Monthly Bank Reconciliation: Reconcile the company’s financial records with its bank statements at least monthly to detect and correct discrepancies.

• Preparation of Financial Statements: Colombian companies must prepare financial statements based on their accounting records and the applicable Colombian financial reporting standards, which are based on IFRS. These reports may include a balance sheet, income statement, cash flow statement, and other required financial reports, depending on the company’s situation.

• Financial Information for Compliance: Financial statements and accounting reports may be required for tax filings, Chamber of Commerce renewals, banks, shareholders, or other official requests. Keeping accounting records accurate throughout the year is essential so the company is prepared for any such request that may arise.

• Commercial Registration Renewal: Colombian companies must renew their commercial registration with the Chamber of Commerce every year and pay the corresponding renewal fee. This requires updated company and financial information and must be completed on time.

• Payroll and Social Security: Companies with employees must complete the required affiliations with different social security entities, including health providers, pension funds, labor risk administrators, and compensation funds. Payroll must be calculated correctly, including salaries, employee deductions, employer contributions, surcharges, service bonus, severance, interest on severance, and other labor benefits.

• Contractor Compliance: Companies that work with contractors or natural persons must verify the contractor’s tax registration (RUT) and social security support before engaging them. This is a company obligation and is also important for withholding tax and deductible expense treatment.

If you're not familiar with some of the terms used in the explanation above, please visit our “Tax & Accounting Terms” section where you can find a glossary of the different terms and definitions, or you can contact us for a free consultation.