Colombia 2010
September 2010
Colombia Doing Business Colombia 2010
2.2 Foreign Exchange Issues Supervised by Colombian Taxes and Customs Authority (DIAN) .... 5
2.6 Purchase and sale of Foreign Currency with Interventions purposes ........................................ 6
2.9 Transfers in foreign currency allowed between a main office and its Colombian Branch .......... 7
2.12 Foreign Exchange Regimes – General, Special, and Very Special ........................................... 8
4.22 Temporary Work Visas / Visas for Employment Agreement (Decree 4000 of 2004) ............... 29
4.23 Temporary Work Visas / Eligibility Requirements (Resolution 255 of 2005) ............................ 29
4.24 Business Visas (Decree 4000 of 2004, Resolution 4700 of 2009) ........................................... 29
6.6 Trademarks, Trade Slogans, Collective Trademarks, Certification Marks and Trade Names
and Emblems ........................................................................................................................................ 36
9.7 Essential Requirements for permanent accompanying to the current or future Investors by
entities under supervision of the Financial Superintendence of Colombia. .......................................... 59
1. Corporate Matters
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taken by a previously specified majority. Finally, it is Simple Limited Partnerships or Limited
mandatory to have a statutory auditor at all times. Partnerships by Shares
Shareholders’ Liability – It is limited to the value Concept – One or more partners are subject to
of the capital contribution. However, according to unlimited liability for the obligations of the company
case law evolution, liability regarding labor matters and one or more partners are only responsible up to
the value of the subscribed capital or capital
in stock corporations may also affect its
contributed to the company. The former are called
shareholders.
general partners and the later limited partners or
shareholders.
Capital Stock – Capital stock is represented by
shares. At the time of incorporating the company at The name of Partnerships shall be formed by the
least fifty percent (50%) of the authorized capital full name or the surname of one or more managing
stock must be subscribed and at least one third of partners and the expression ―”and Company” shall
the value of each share must be paid. If payments be added, or the abbreviation ―”& Cía.” followed in
are to be made by installments, the total payment any case by the abbreviated indication ―”S en C”
must be made at the latest one (1) year after or the abbreviation ―”S.C.A.” if it is formed by
subscribing the shares. Contributions in kind are shares, and failing this, it shall be assumed for all
allowed provided that the stockholders agree on legal purposes that the company is a collective
their valuation. Assignment of shares is carried out partnership. There are two (2) types of limited
by endorsement and delivery of the respective simple partnerships:
security.
(i) Limited Simple Partnership, which is regulated
similarly to the limited liability companies.
Limited Liability Company
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through an agreement or unilateral act evidenced in incorporate a branch domiciled in Colombian
a private document without need of a public deed. territory.
Administrative and Control Functions – The In respect to the reporting requirements and in
organizational structure of the company and other compliance with the Generally Accepted Accounting
regulations that rule its operation are freely Principles in Colombia (Colombian GAAP) 1, branch
determined. However, if not indicated in the bylaws, offices must keep accounting books and their
the administrative duties are exercised by: (i) accounting records denominated in Colombian
General Shareholders‟ Meeting or Sole pesos and in the Spanish language.
Shareholder, and (ii) Legal Representative. Each
capital share entitles to a single or multiple vote, as The main financial information includes the balance
indicated in the bylaws. Decisions must be made by sheet, income statement, statement of retained
a special majority previously specified. earnings, statement of changes in stockholders'
equity, statement of changes in financial position,
Stockholders’ liability – It is limited to the value of and statement of cash flows.
the capital contribution and its shareholders will
never be liable for the labor, tax or any other kind of Branch offices of foreign companies have an
obligations incurred by the company. obligation to appoint and have a Statutory Auditor
regardless of their income and/or shareholders'
Capital stock – The capital stock is represented by equity levels, as provided by article 489 of the
shares. The subscription and payment may be Commercial Code.
made in the conditions, proportions and terms
agreed in the bylaws; however, the payment term Pursuant to article 485 of the Commercial Code and
shall not exceed two (2) years. Contributions in kind Concept 220-58283 dated December 9, 1996; from
are permitted provided that the shareholders agree the Superintendence of Corporations, the home
on their valuation. The assignment of shares is office of a branch operating in Colombia has the
made by the endorsement and delivery of the risk of being considered responsible for the
respective security. activities of its branch office in the country.
Every foreign investment made in the company Pursuant to Decree 4350 of 2006 and 2300 of
must be duly registered before the Central Bank 2008, in general terms, commercial companies as
and must be brought into the country in full well as branches of foreign corporations, will be
compliance with foreign investment and exchange subject to surveillance by the Superintendence of
laws. Corporations, provided that as of the date of closing
3
of their financial statements they have assets or
gross income that exceed 30,000 minimum monthly
legal salaries (equivalent to COP $15,450,000,000
approximately US $7,725,000).
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2. Exchange and foreign
investments aspects
Law 31 of 1991 (Central Bank) The Colombian Taxes and Customs Authority
(DIAN) controls the fulfillment of exchange
Decree 1735 of 1993 (Defines the term “resident” obligations arising from imports and exports of
for currency exchange purposes). goods and services and their expenses, as well as
the financing in foreign currency of any foreign
International Investment Code - Decree 2080 of trade operation. In addition, DIAN is entitled to
2000 and its modifications. control any other exchange matter that has not
been included in the scope of the Financial
Exchange Regime Code – External Resolution 8 Superintendence or the Superintendence of
of 2000 issued by the Central Bank and its Corporations. The applicable regulations are Law
modifications. 383 of 1997, Decree 1074 of 1999 and Decree
1066 of 2006, which provides the exchange
Exchange Regime Manual - External Circular administrative procedure and penalties,
DCIN-83 and its modifications (includes, among respectively.
others, exchange forms and exchange item
numbers to identify transactions).
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2.3 Foreign Exchange Issues Supervised 2.7 Foreign Exchange Regulations
by the Superintendence of
Corporations Although the exchange market flows freely, there
are exchange regulations that establish those
The Superintendence of Corporations controls the exchange operations that must be channeled
fulfillment of exchange obligations arising from through the exchange market, the procedures and
international investments and foreign indebtedness penalties for infringement.
as working capital. Both the penalties and the
exchange administrative procedure are established The rules applicable on exchange matters are
in Decrees 1746 and 2578 of 1991. issued jointly by Congress, the Government and the
Central Bank. Congress has jurisdiction to issue
2.4 Foreign Exchange Issues Supervised general principles that will guide the Government to
by the Financial Superintendence regulate foreign trade and international exchange
as well as to issue laws related to the Central Bank
The Financial Superintendence controls the and the duties of its Board of Directors. The
fulfillment of exchange obligations by financial Government has the constitutional duty of issuing
intermediaries also known as exchange the foreign capital investment regime. ¨Banco de la
intermediaries. The penalties that may be imposed Republica¨ is the Central Bank of Colombia and is
by this entity are included in article 45 of Law 795 of the maximum authority on credit, monetary and
2003. exchange matters and, therefore, is the competent
authority to regulate exchange operations.
2.5 An Investments Promotion Agency –
COINVERTIR 2.8 Controlled Exchange Market
COINVERTIR is a nonprofit mixed private entity According to the Exchange Code, the following
operations must be channeled through the
created jointly by private companies and the
exchange market:
government. Its main object is to promote foreign
investment in Colombia. Importation and exportation of goods.
This entity promotes investment in the major Foreign indebtedness of Colombian residents
economic sectors and provides a guide and and financial costs inherent to these
information to foreign investors. It also submits operations.
proposal to the government to eliminate aspects
that may affect foreign investment in the country. It Foreign investments and their corresponding
profits.
was established in 1992.
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Foreign market intermediaries non residents. Through the special settlement
account, as an exception Colombian residents may
Foreign market intermediaries (FMI) are pay in foreign currency internal operations among
commercial banks, mortgage banks, financial themselves. For this purpose, it would be necessary
corporations, commercial financing companies, to have an account to make payments in foreign
Financiera Energética Nacional (FEN), Banco de currency or an account to receive such payments.
Comercio Exterior de Colombia S.A.
(BANCOLDEX), financial cooperatives, stock broker The holder of a special settlement account to make
companies and foreign exchange agents. payments only may receive a type of income in that
account, operations that are required to be
Settlement accounts channeled through the exchange market and as
withdrawals the following: payments in foreign
Residents in Colombia may freely establish currency to another resident in Colombia, sale of
deposits in financial corporations located abroad, foreign currency to intermediaries of the exchange
with money obtained through the exchange market market or to holder of other settlement accounts.
or with funds that do not require to be channeled On the other hand, the holder of a special account
through the exchange market. to receive payments only may receive in this
account the corresponding sum and as withdrawals
If the account is used to perform operations that are the balance of money may be used to: pay
required to be channeled through the exchange operations that are required to be channeled
market, the account will be called ―¨Settlement through the exchange market, sale of foreign
Account¨, which is subject to the following rules: currency to financial intermediaries and to other
holders of settlement accounts.
The account must be registered before the
Central Bank within the month following the Overnight operations and free market operations
date of opening or the date of the first are not permitted through special settlement
transaction in foreign currency. accounts.
Every month the holder of the account must 2.9 Transfers in foreign currency allowed
report the consolidated movement of the between a main office and its
operations carried out through it, to the Central Colombian Branch
Bank through the Webpage of said entity.
In general terms, the main office and its Colombian
branch are allowed to transfer foreign currency
In addition, the transactions made through the
corresponding to the following items:
account that are the competence of the DIAN,
shall be reported quarterly to the mentioned
entity in accordance with the last digit of its tax Transfers of assigned capital or supplementary
identification number (NIT). investment to the assigned capital.
The foreign currency deposited to the Remittance of profits or capital assigned and
settlement account may be sold only to supplementary investment.
exchange market intermediaries, other holders
of settlement accounts or be used to pay Payment of foreign trade operations in
compliance with tax and customs regulations.
foreign currency operations that require or not
to be channeled through the foreign exchange
Payment of services in accordance with tax
market.
regulations.
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2.10 Prohibition to pay in foreign currency produced in the country, to the companies engaged
between Colombian residents in the exploration and production of oil and natural
gas.
No contract, agreement or operation entered into
between residents is an exchange operation and Entities that are part of the special exchange
therefore shall be paid in Colombian legal currency. regime are permitted access to the exchange
Exceptions: Special exchange regime, special market in order to obtain the resources to pay their
settlement accounts, external credits granted by obligations as nonresident. Therefore, imports and
Foreign Market Intermediaries to residents. exports of goods may be reimbursable and have
access to foreign debt.
2.11 Deposits in Foreign Currencies in
Colombia Special Foreign Exchange Regime
It is not permitted that Colombian residents make Applicable to branches of foreign companies
deposits or have checking or savings accounts in engaged in the exploration and production of coal,
foreign currency in Colombian banks. Exceptions: natural gas, oil, ferronickel and uranium and to the
a) Individuals and legal persons not resident in the branches that provide services exclusively to the oil
country; b) Diplomatic and consular mission sector pursuant to Law 9 of 1991 and Decrees 2058
accredited before the Colombian Government and of 1991 and 1629 of 1997.
his officials; c) Multilateral organizations and its
officials; d) Public or private entities that are Branches that do not wish to be part of the special
carrying out international technical cooperation regime must notify this fact to the Central Bank by
programs with the National Government for means of a written communication and would be
amounts effectively disbursed by foreign excluded from it for 10 years counted as of the filing
cooperation organizations; e) International of said communication.
transportation agencies, travel and tourism
agencies, deposits and bonded warehouses and Branches of the special regime are authorized to
entities that provide port and airport services; f) make and receive payments in foreign currency
fiduciary companies in performance of trusts or as between themselves within the country, provided
representative, speaker or administrator of that the foreign currency proceeds from resources
autonomous equities; and g) Foreign agents who obtained in their operation. In addition, they have no
act as liquidity suppliers of foreign currency obligation to reimburse to the exchange market the
settlement and assessment systems. foreign currency from their sales in foreign
currency.
2.12 Foreign Exchange Regimes – General,
Special, and Very Special These branches are not allowed access to the
exchange market and therefore cannot acquire
General Foreign Exchange Regime foreign currency in the exchange market for any
purpose. Consequently, they have no access to
Applicable to branches of foreign companies and foreign debt, their imports of goods are not
companies incorporated under the Colombian reimbursable (they do not generate payment
legislation not engaged in the oil and mining sector. obligation abroad) and their exports of goods do not
have a refundable nature.
Under this regime, Colombian residents cannot pay
their obligations (with other residents) in foreign Nevertheless, prior certificate from the statutory
currency. However, there are some exceptions, auditor, they are allowed to resort to the exchange
such as special settlement accounts. In addition, market in order to issue abroad the following sums:
Colombian residents may pay in foreign currency to a) the capital investment in case of liquidation of the
ECOPETROL and to companies engaged in oil company, and b) the sums received in local
refinery, purchase of fuel for ships and aircraft currency on occasion of the internal sales of oil,
intended to international trips. natural gas or services inherent to the oil sector.
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Very Special Regime Direct Foreign Investment
Applicable to national companies and with foreign Activities deemed as direct foreign investments
capital, engaged in the exploration and production include the following: a) the acquisition of
of coal, natural gas, oil, ferronickel and uranium, as participations, shares, corporate quotas,
well as to companies that provide services contributions representative of capital of a company
exclusively to the oil sector in accordance with Law or bonds mandatorily convertible into shares; b) the
9 of 1991 and Decrees 2058 of 1991 and 1629 of acquisition of rights in autonomous equities created
1997. by means of trust agreements to carry out a
company or for the purchase, sale and
Companies of the very special regime are administration of participations in companies that
authorized to enter into and pay contracts in foreign are not registered in the National Register of
currency among themselves (including branches of Securities and Intermediaries; c) the supplementary
the special regime) within the country, provided that investment to the assigned capital of branches in
the respective foreign currency come from Colombia; d) the acquisition of real estate, as well
resources obtained in their operation. as equity securities issued as a result of a real
estate securitization process of a real estate o
They are allowed access to the exchange market in construction projects or through real estate funds:
order to obtain resources to pay their obligations to e) contributions made by the investor such as acts
non residents. In fact, they may have settlement or contracts when it does not represent a
accounts, access to foreign debt; their imports are participation in the company and the income that
non reimbursable goods and their exports of goods generates the investment depend on the profits of
do not have a refundable nature. the company; f) the acquisition of participations in
private capital funds.
2.13 Foreign Investments
Portfolio Investments
Foreign capital investments are allowed in
Colombia, including the acquisition of real estate. In Colombia, portfolio investments are defined as
However, certain specific sectors are forbidden for any investment made in shares, bonds mandatorily
foreign investments, for example, there can be no convertible into shares, and other securities
foreign investment in the national security or registered in the National Register of Securities.
defense activities or in activities related to the
processing and disposal of toxic, hazardous or Modalities of Foreign Capital Investment
radioactive waste produced abroad.
Foreign investment in Colombia may entail the
On the other hand, and according to Law 182 of following modalities: a) import of foreign currency
1995 modified by Law 680 of 2001 and Decree freely convertible into local currency; b) import of
1629 of 1997, the foreign investment in television is tangible goods such as machinery and equipment
limited to 40% of the total capital stock. Accordingly, or other physical goods imported under a non
60% of the capital participating in these companies reimbursable modality; c) contributions in kind
must be Colombian capital. consisting of intangibles such as technological
contributions, trademarks, patents, etc.; d) funds in
Foreign Investment Categories local currency entitled to be remitted abroad such
as the principal and interest of foreign credit, sums
Foreign capital investments in Colombia may be of due corresponding to reimbursable imports, profits
the following types: entitled to remittance and royalties derived from
duly registered contracts; and e) funds in local
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currency arising from local credit operations entered supplementary investment to the assigned capital
into the credit institutions, intended to the that are part of a special exchange regime.
acquisition of shares made through the stock
market. The registration must be made within a period of
three months (and may be extended for a period of
Registration process of Foreign Investments three additional months), counted as of:
before the Central Bank
Autonomous equities and real estate: from the
Foreign investments may be registered in three date of the exchange declaration for
different ways: international investments.
Automatic registration via the presentation of the Contributions in kind (tangible and intangible
international investments exchange statement goods): from the date of nationalization or
(Form No. 4) customs clearance of ordinary of non
reimbursable ordinary imports; the date when
This type of registration is applicable to the foreign temporary imports become ordinary; the date
currency remitted to Colombia for direct and of the form of movement of goods in free trade
portfolio investment, provided that the operation is zones (entry of goods) issued by the operator
performed through the exchange market. user and, the date they are accounted for in
the case of intangible assets.
Automatic registration via a request in due form
(Form No. 11 and plane file) Acts or contracts without participation in the
capital: from the date of the exchange
This type of registration is applicable for declaration for international investments in
investments under the modality of sums entitled to case that foreign currency is channeled
remittance, whether it refers to direct or portfolio through the exchange market and in modalities
investment. other than foreign currency said term will be
counted as of the date that the contribution is
In case of direct foreign investment, Form No. 11 accounted for.
must be submitted no later than March 31st of the
year following the date of the capitalization Supplementary investment to the assigned
accounting receipt is produced. This term is not capital for branches of the special exchange
extendable. regime: from the date of the annual closing of
the financial statements as of December 31st.
In case of portfolio investments, the registration will
be made with transmission by the local 2.14 Importations and Exportations of
administrator of the fund, of the corresponding Goods
plane file, within the month following that of the
investment and in this case, this term is not Reimbursements or payments of importations of
extendable. goods shall be channeled through the foreign
exchange market. Therefore, in general terms,
Registration with fulfillment of requirements for importers of goods are required to carry out the
investment (Forms 11 and 13) importing process within the six-month period
following the issuing date of the transport
This type of registration is applicable to the document. Reimbursements will be paid up once
investment in autonomous equities, to the the Form No. 1 (exchange declaration for import of
acquisition of real estate goods, to the investment in goods) is duly filled-out and processed.
kind (tangible and intangible assets) and acts or
contracts that do not grant any participation in the Imports payable at a long term in excess of six (6)
capital of a company; to the acquisition of shares months, counted as of the date of the transportation
through the stock market with local currency funds document for a value equal to or exceeding USD
resulting from local credit operations, as well as the
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$10,000 or its equivalent in other currencies, 2.15 Foreign Indebtedness
constitute a foreign debt operation and shall be
informed to the Central Bank through an exchange The foreign currency received or paid as a
market intermediary within the mentioned term of consequence of a credit operation must be
six months. It should be noted that only financed channeled through the exchange market. In
imports require a report to the Central Bank by addition, prior to or simultaneously with the
means of Form No. 6 (foreign debt information disbursement, it will be required to report the
granted to residents) and for this purpose as import foreign debt to the Central Bank through the
value is understood the FOB USD value exchange market intermediaries.
corresponding to the tariff subheading declared. In
no case the value of the commercial invoice will be Colombian residents can only obtain credits in
taken into account. foreign currency from: a) foreign financial
institutions (FFI); b) foreign market intermediaries
On the other hand and in general terms, residents (FMI) directly or against rediscount public entity
in the country shall channel through the exchange funds, and c) through the placement of securities in
market the foreign currency from their exports of international capital markets. These modalities are
goods including those that they receive directly in considered liability credits since the debtor is a
cash, within six (6) months following the date of Colombian resident.
their receipt, either in the case of refund for exports
or those that are received as advance payment for Colombian residents and exchange market
future exports of goods (prior to the shipment of the intermediaries who obtain credits in foreign
goods). The reimbursement must be made through currency from financial entities abroad, can only
Form No. 2 (exchange declaration for exports of apply for those credits when the entities are
goods). published in the Webpage of the Central Bank. The
list will be make up by: a) foreign financial entities
Colombian residents may grant a term for payment located abroad with representation office in
of their exports to the buyers abroad. If the term Colombia authorized by the Financial
granted exceeds twelve (12) months counted as of Superintendence of Colombia; b) foreign reinsurers
the date of the final export declaration, the registered in the registration kept by the Financial
operation must be reported to the Central Bank Superintendence of Colombia. In this case, the
when the amount of the export declaration exceeds debtor must have the condition as Colombian
the sum of USD $10,000 or its equivalent in other insurer or reinsurer; c) international and/or
currencies. The obligation to inform must be fulfilled multilateral credit organizations; d) foreign risk
by the exporter within twelve months following the capital funds that evidence to the Central Bank that
date of the final export declaration by presenting they perform credit activities in different countries
directly to the exchange market intermediary and that those operations are made in cooperation
voluntarily used by the exporter, Form No. 7 with international and/or multilateral credit
(foreign debt information granted to non residents). organizations; e) multilateral financial promotion
funds created by international agreements executed
The foreign currency received by exporters on by the Colombian Government; f) the foreign
futures exports of goods, shall not constitute a financial entities that prove to the Central Bank their
financial obligation with recognition of interest, or capacity as such with the certificate from the
generate for the exporter an obligation other than specialized financial supervision entity equivalent to
the delivery of the goods. The corresponding export the Financial Superintendence of Colombia; g)
shall be made within four (4) months following the foreign entities that provide financial services
channeling of the foreign currency in the exchange intended to channel funds or grant credits with
market. If the term to make the export of goods is guarantee or insurance from multilateral or state
longer, the mentioned operation becomes a foreign foreign trade promotion or foreign investment
debt. protection and promotion agencies; h) agencies and
branches of exchange market intermediaries
Finally, it is important to point out that offsetting is located abroad; i) foreign bank institutions of a
not admissible in foreign trade operations. governmental nature for promotion of agriculture
that evidence to the Central Bank their condition as
such with the certificate from the corresponding
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specialized supervision entity; j) entities that do not
conform to any of the above criteria must evidence
the qualification of the institution or its shareholders
or participants or, that the applicant declares that
the institution complies with the money laundering
regulations in the jurisdiction where it performs its
operations.
2.16 Deposit
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3. State contracts
3. STATE CONTRACTS
State contracts are subject to the General Contracting Code of the Public Administration, provided by Law 80 of
1993 and Law 1150 of 2007 and their regulatory decrees:
13
Regulatory Decree Contents
entities subject to the supervision of the E.G.C
Decree 4533 of 2008 Regulates private initiatives specified in article 32, law 80 of 1993.
Decree 4828 of 2008 Regulates the Regime of Guarantees for public contracting.
Regulates the submission of proposals via electronic means for concession agreements
Decree 2345 of 2008
granted by the National Government.
Amends article 6, Decree 1800 of 2003. Regulates the creation of Colombia‟s National
Decree 1175 of 2008
Concessions Institute (INCO, for its acronym in Spanish) and defines its structure.
Adds to Decree 3620 of 2004. Regulates the creation of Colombia‟s Public Contracting
Decree 485 of 2009
Inter-Sector Committee (Comisión Intersectorial de Contratación Pública).
Decree 127 of 2009 Adds article 53, Decree 2474 of 2008.
Decree 490 of 2009 Amends Decree 4828 of 2008, in regards to provisions governing insurance companies.
Decree 2025 of 2009 Amends Decree 2474 of 2008.
Decree 3576 of 2009 Amends in part Decrees 2474 of 2008 and 2025 of 2009.
Enforces the provisions specified in article 14, Law 1150 of 2007, in regard to the
Decree 4548 of 2009 manager‟s role in the Departmental Plans for Water and Sanitation Business
Management, as specified in article 91, law 1151 of 2007.
Specifies various regulations intended to promote the development of Small and Medium
Decree 3806 of 2009
Enterprises (SMEs) and the National Industry as a whole, by means of public contracting.
Decree 2493 of 2009 Amends in part Decree 4828 of December 24, 2008.
Regulates in part article 7, Law 1150 of 2007, in regard to guarantees for the execution
Decree 1430 of 2010 of contracts involving space technologies. Specifies other regulations applicable to the
undersigning of this type of contracts.
Decree 1039 of 2010 Adds article 79, Decree 2474 of 2008.
Regulates in part Law 1150 of 2007, in regard to verification of bidder‟s conditions and
Decree 1464 of 2010 accreditation before any Colombian Chambers of Commerce, under the Unified Bidders
Registration protocol. Further specifies other applicable regulations.
In general, regulations specified in the General Both, entities governed by the regime specified in
Contracting Code of the Public Administration are Law 80 of 1993, as amended, and state-owned
applicable to government agencies, as provided for entities that operate under regimes other than those
in article 2, Law 80 of 1993. Nonetheless, it should specified in the General Contracting Code, shall
be noted that certain agencies exist that, regardless execute their contractual activities under certain
of their public nature, perform contractual activities guiding principles which are intended to provide
that fall under special regimes other than those such activities with the levels of transparency,
defined under the General Contracting Code, as is accessibility, efficiency, equality and frugality that
the case of publicly funded utility companies, the Colombian National Government wishes to
governmental financial institutions, and industrial instill and sustain at state-owned entity levels.4
and commercial state-owned companies, as well as
mixed entities in which the National government
owns more than 50% of their corporate capital. To
become eligible to operate under special regimes, 4
Law 1150 of 2007, article 13. General principles for
the aforementioned entities are required to remain contractual activities by entities not subject to the general
competitive and operate under monopolistic or public Administration Contracting Code. “State-owned
regulated markets. entities that by law are required to operate under a
contractual regime other than that of the General Public
Administration Contracting Code shall apply, pursuant to
their special legal regime and during the execution of their
contractual activities, the administrative function and fiscal
management principles provided for in articles 209 and
267 of the Colombian Political Constitution, respectively as
the case may be, and shall further be subject to the
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The scope of the General Contracting Code covers entity; and, (ii) Availability of budget funds allocated
essentially the following stages of the contracting to the contracting public entity for contractor
process: (i) Pre-contractual; that is, the stage which payment purposes, as certified in the entity‟s official
involves planning for the forthcoming contracting records.
process, and selection of contractors; and, (ii)
Contractual; that is, the stage which involves the Minimum Requirements
execution of all contractual activities until the
successful termination and payment of all contracts Registration in the Single Suppliers Register
in effect.
The Single Suppliers Register (RUP, for its initials
Private law is applicable to governmental contracts, in Spanish) is the registration made by the
except in those cases in which the Colombian Chamber of Commerce, which contains information
Political Constitution, the General Public on the national or foreign individuals or legal
Administration Contracting Code, or the respective persons domiciled or with branch in Colombia, who
special regime specify specific regulations which expect to enter into contracts with state entities.
are to be incorporated into a certain contract.
RUP is the source of accreditation of the qualifying
3.2 Contracting Requirements - Form requirements to be met by bidders to participate in
the contracting processes, such as legal capacity
In general, contracts in Colombia are entered into and financial experience and organization
through the undersigning of a written document and conditions.
do not require a public deed5.
Any entity willing to become a contractor for the
If there is an evident urgent situation, that is, the Colombian Government must be registered in the
immediate need to overcome or put an end to RUP, except for those specific cases discussed
exceptional circumstances or disaster, it is not under Law 1150 of 2007. Among such exceptional
necessary to enter into a contract through a written cases, the following should be mentioned: Direct
document. In these cases, the payment to the contracting; contracts for the rendering of
contractor must be agreed by the parties, a healthcare services; contracts with a contract value
situation that must take place, at the most, when no greater than 10% of the lower-value contracting
the execution of the contract begins. If there is no mark fixed for the respective entity; state property
agreement, a third party or mediator makes the alienation processes; contracts for the acquisition of
valuation. goods of agricultural origin or destination, as offered
in legally constituted product exchange markets;
An articulated review of the state‟s entity annual acts or contracts whose main purpose is to carry
budget and contract value, may determine that the out commercial or industrial activities which are
contract not only must be in writing, but also must inherent by nature to the performance of
be published in the Official Diary. In these cases, commercial or industrial practices by Governmental
the contractor covers all the publication costs. The entities, mixed economy entities, or through the
general contracting code contains the relevant undersigning of any concession contract
guidelines. whatsoever. In all cases referred to above,
contracting entities are liable for verifying the
It should be noted that, pursuant to the regulations bidders‟ conditions and situation.
specified in all applicable laws6, the execution of
any governmental contract shall only take place if It corresponds to the interested bidders to carry out
the following requirements are duly met: (i) the process of registration at the corresponding
Approval of the Single Performance Guarantee Chamber of Commerce, which in turn will have the
submitted by the contractor before the government responsibility of checking the documentation
submitted in order to classify and rate the bidder in
respect to his experience, legal, financial and
inabilities and incompatibilities regime legally instituted for
all governmental contracting activities.” organizational capacity.
5
Except for those contracts which imply either a change of The registration procedure, its administration and
ownership or the enforcement of encumbrances and real
the work by the Chambers of Commerce are ruled
easements upon real estate properties, and, in general, for
those contracts that pursuant to legal regulations in effect by Decree 1664 of 2010.
must comply with said formalities.
6
Article 23, Law 1150 of 2007
15
If the bidder adopts an association scheme, such as In general terms, the inabilities and incompatibilities
consortium or temporary union, it is necessary that seek to avoid the execution of contracts with the
each member of the association will register state in case of family ties, or previous ties between
independently in the RUP. the contractor and the directors of the state entity
and the penalties imposed to the contractor in the
The registration in the RUP is a minimum past, among other circumstances.
requirement in order to submit an offer within a
selection process. Registration is subject to Inabilities and incompatibilities may take place
modifications through data updates which can be before or after the selection process. Once the
performed by the contractor when renewing the selection process starts, the inability or
commercial register, as required (on a yearly basis, incompatibility may take place during the selection
one calendar month prior to the registration‟s date process or during the performance of the contract.
of maturity). If the interested party fails to renew the The latter inabilities or incompatibilities are called
RUP within the term specified by the corresponding ¨surviving inabilities or incompatibilities¨.
Chamber of Commerce, all registration benefits will
cease to exist until the interested party reactivates Effects Arising from inabilities and
the registration.7 incompatibilities Issues Identified Prior to the
selection Process
After making the registration, the respective
Chamber of Commerce will certify the rating, (a) In regard to the selection process:
classification and qualifying requirements of the
bidder. Consequently, government agencies shall
refrain themselves from requesting any information Report to the Chamber of Commerce in such a
that is already certified under the RUP, and shall way that the inability will be recorded for future
therefore carry out their reviewing activities on the purposes; and
basis of the information duly certified by the
Chamber of Commerce with jurisdiction. Report to the General Attorney‟s Office of the
Nation, that is the Colombian entity that
exercises the disciplinary control on public
State entities will also provide information to the
aspects including state contracts.
Chambers of Commerce, in order to register the
data in respect to the contractors, such as contract (b) In respect to the contract:
awarded, contract performance indicator, amount of
contract, value of fines and description of fines
imposed. The legal representative of the state entity may
terminate or avoid the contract;
Absence of inabilities and incapacities
If a good faith failure is proven, possible
The inabilities and incompatibilities are exceptional disciplinary penalty for gross negligence of the
situations and comprehensive under Colombian officers who took part in the contracting
law. The latter prevent the participation of the process;
bidder in a selection process. Inabilities and
incapacities are defined pursuant to various Impossibility to contract with the State during
regulations which are enforced to protect the public the five (5) years following the execution of the
interest and relate to the achievement of fixed contract; and
levels of impartiality, effectiveness, efficiency and
morality during the execution of contractual Possible criminal liability of public officials and
operations. Inabilities and incompatibilities can only contractors.
be established by law. Therefore, the state entities
themselves cannot establish inabilities or Effects Arising from Surviving inabilities or
incompatibilities. incompatibilities:
16
Correlative impossibility to assign its contract. If the contract is not awarded to the single-
participation to any third party. purpose corporation, then it will be dissolved. The
(b) In respect to the contract: liability of the partners is the same liability
applicable to the members of a consortium.
Assignment of the contractual position to a
third party, prior approval by state entity; Project corporations
It should be noted that the main difference between Foreign individuals with no domicile in
a consortium and temporary union is that, if any Colombia, or foreign entities with no branch in
bidding/contract non-compliance penalty is the country, who are willing to enter into
enforced upon the latter, such penalty will be contracts with government entities are not
imposed individually to each of the members of the required to be registered under the RUP. The
temporary union, according to the degree of current situation of such foreign individuals and
involvement each one had in the execution of the entities is verified by the contracting entity,
obligations in question, while if enforced upon the pursuant to provisions specified in article 53,
former, penalties will not be individualized and all Decree 1464 of 2010.
consortium members will jointly liable regarding the
penalty imposed. Fulfillment of qualification factors
17
On a case-by-case basis, government entities Currently there is a legal regime that supports
define the requirements to be applied to each national industries. In this respect and in order to
bidding process. By law, compliance with such support those industries, there is a legal distinction
requirements will not award scoring points to the between national goods and services and foreign
bidder under the bidding process, since such goods and services. If the goods or services are
requirements are merely the minimum or enabling national, the state entities assign a specific
requisites which all applicants must meet to percentage score within the selection process,
become eligible to participate in the actual selection which is higher than the one given to offers
process. containing goods or services of foreign origin.
Pursuant to Law 1150 of 2007, and as a general Notwithstanding the aforementioned, it should be
rule, Chambers of Commerce are required to verify noted that Colombian laws provides the same legal
all data submitted by companies under the RUP, as treatment given to national goods or services to any
evidence to support their experience and eligibility. good or service of foreign origin that were to be
Hence, government entities are not authorized to provided or rendered as part of the execution of a
demand as further evidence any document that has contract with a government entity, inasmuch as the
already been verified by a Chamber of Commerce country of origin of the bidder in question
with jurisdiction. reciprocates and gives equal treatment to
Colombian goods or services.
Consequently, in order for government entities to
make an objective selection during the process of 3.5 Selection Process
awarding a contract resulting from a bidding
process, Law 1150 of 2007 provides the following Bidding
as enabling requisites for bidders:
Bidding is one of the selection processes specified
1. Legal capacity. in Law 80 of 1993, pursuant to which a contractor
will be selected as a result of a procedure by which
2. Experience levels. a public entity publicly calls on all persons legally
able to participate, and invites them, under the
3. Financial capacity. principle of equal opportunity, to submit their
proposals. The bid that is deemed as the most
4. Bidders‟ organization. favorable to the Colombian public is then selected.
3.3 Bid Scoring Criteria Public biddings will be legally applicable to all cases
in which government entities need to acquire
Items 2, 3 and 4 of article 5, Law 1150 of 2007, goods, works or services, except for those events
specify the regulations that govern the bid scoring specified in items 2, 3 and 4 of article 2, Law 1150
process. of 2007; that is, those events in which government
acquisitions are deemed as eligible for abbreviation
As a general rule, the technical and financial selection, contest of merits, or direct contracting
elements of each bid will be weighed against the processes.
terms and conditions specified in the corresponding
invitation to bid. Biddings are public processes that, driven by the
principle of equal treatment, intend to make an
3.4 Treatment to National and Foreign Offers objective selection of public contractors. As a
general rule, selection processes are performed as
The general contracting code contains the biddings, unless a special regulation exists which
reciprocity principle of treatment between national overrides this general choice of process and is
and foreign offers. According to this principle, an specifically applicable to the topic object of the
equal treatment is given to national and foreign selection process.
bidders, provided that national bidders receive the
same treatment as foreign bidders in the country of These processes are subject to a case-by-case
the latter. In any event, national offers have priority regulation called terms of reference. Bidders must
if there is a tie. strictly abide by the provisions set forth in the terms
of reference. The content of same is incorporated
18
into all contractual activities, including the sales public investment, when the public investment
contract. is higher than the private one;
Bidders produce and submit their proposals within Contracts entered into by state entities which
strictly defined terms. Then, an evaluation report activity involves the performance of programs
produced by the government entity is forwarded to intended to protect threatened persons,
demobilization and reinsertion programs for
bidders, as a means to obtain feedback, comments
members of illegal armed groups, programs for
and opinions by participants. Once the referred to
assistance to victims of violence and violation
above events are completed, the government entity
of human rights; and
may or may not choose to award the contract which
results from the bidding process.
Contracts related to goods or services for
security or national defense purposes.
19
Direct Contracting article 69 of the Colombian Political
Constitution.
Direct contracting takes place exceptionally, since
most of the state contracts are subject to bids or In those cases in which the executing public
contest procedures. Direct contracting can only entity requires subcontracting for any of the
occur if there is a legal base that gives rise to that activities deriving from the principal contract,
process. neither the executing party nor the
subcontractor may contract or engage
Under a direct contracting process, there are more individuals or entities who have effectively
flexible terms than those obtained in bidding participated in the production of any
processes. preliminary study, design or project that is
directly related to the object of the principal
In any event, selection processes both by public agreement.
bidding and by direct contracting are subject to the
principles of state contracts, including equal Insurance contracts entered into by
treatment and the obligation to make an objective government entities are excluded from the
selection. legal figure of inter-administrative agreements.
The following are the legal bases upon which direct Contracting of goods and services by the
contracting processes are allowed: National Defense sector or the Colombian
Administrative Department of Security (DAS),
Situations of latent urgency. as these goods and services require high
levels of secrecy and confidentiality at the time
Loan agreements. of purchase.
20
performance. In case of fundamental breach of Contracts regarding activities deemed as
contract, the power may entail a penalty, as it is the Government monopolies.
case with the so called lapse of contract.
Utilities contracts.
Exceptional clauses are excluded in some
contracts. In other contracts, they may be included Public goods concession contracts; and,
and in other they must be included.
Construction contracts.
Contracts in Which Exceptional Clauses are
Excluded In respect to public utilities contracts, it is necessary
to make a distinction between domiciliary and non
Exceptional clauses cannot be included in the domiciliary public utilities.
following contracts:
In the former, the regulatory commissions
Contracts involving international public parties. determine the cases and contracts where
exceptional clauses must be incorporated. In the
Contracts regarding cooperation and latter, their inclusion is mandatory.
assistance activities.
3.7 Exceptional Clauses (Types of Clauses)
Inter-administrative agreements.
Unilateral Interpretation
Loan contracts.
This term is applied to those cases in which a
Donation contracts. dispute arises between the public entity and the
private party, due to differences in the interpretation
Contracts regarding commercial or industrial of any contractual stipulation, in circumstances
activities by public entities, which do not match under which such dispute may lead to the disruption
the activities specified for contracts requiring or alteration of the utility service which, under any
exceptional clauses. other circumstance would be provided pursuant to
the terms of the contract. In case no agreement
Contracts required for the execution of may be reached among the parties, the public
scientific or technological activities. entity, by ways of a motivated administrative action,
will make their own interpretation of the contractual
Insurance contracts undersigned by term in question.
government entities.
Unilateral Modification
Contracts That Allow the Inclusion of
Exceptional Clauses This term has the same purpose as the unilateral
interpretation clause. In case that there is a
It is possible to include exceptional clauses in the difference with the private party and in the absence
following contracts: of an agreement, the state entity goes on
unilaterally to modify the contractual terms by
Supply contracts; and, adding or eliminating works, supplies or services.
Service agreements. In this case, the private party may terminate the
contract if the modification is equal to or higher than
In practice, it is common to find this type of clauses twenty percent (20%) of the contract value initially
in supply agreements, since they represent one of agreed. If there is a termination, the parties will go
the main sources procurement of state entities. on to liquidate the contract.
Unilateral Termination
Contracts in Which the Inclusion of Exceptional
Clauses is Mandatory Unilateral termination may be enforced by the
public entity by means of a motivated administrative
Exceptional clauses must be included in the act, if any of the following situations were to exist:
following contracts:
21
Whenever public utilities requirements demand penalties that provide government entities with the
the termination of the agreement, or whenever right to enforce the penalties included therein upon
public policies require such termination; the contractor, in case of any breach of contract.
The government entity shall then follow a procedure
Death or total incapacity of the private to enforce the penalties agreed on, and such
contractor (if an individual); or, dissolution of a procedure will involve a public hearing in which the
company, in which case the warrantor may principles of due process and fair trial will be
continue to comply and execute the contract; honored to the fullest extension of the law.
Legal injunction or declaration of bankruptcy, in The government entity may materialize the
which case the warrantor may continue to aforementioned penalties by way of paying any
comply and execute the contract; and outstanding balance to the contractors, either by
executing the corresponding guarantee or by any
Any suspension of payments, insolvency or other means within its reach that may allow
court order to freeze assets against the disbursement of said payment.
contractor, inasmuch as such requirements
may severely affect the execution of the 3.9 Economic Balance
agreement.
If unforeseeable events, beyond the control of the
Under any of the clauses referred to above, the party affected take place during the contractual
contractor will have the right to receive any sort of performance, and those events alter the economic
compensatory payments that may arise from the balance of the transaction, the affected party is
government entity‟s decision to terminate the entitled to obtain the restoration of the economic
contract. balance up to a point where it has no loss. If the
unforeseeable events form a part of the usual or
Lapse of the Agreement ordinary risks that arise from the contract, then
there will be no right to restoration.
If there is a breach of contract by the contractor,
which seriously and directly affects the contractual If the restoration is applicable, then the parties shall
compliance and may lead to its interruption, the adopt, as soon as possible, all economic and
state entity may order, by virtue of a reasoned financial measures that lead to the restoration of the
administrative act, the termination and liquidation of economic balance of the transaction.
the contract.
3.10 Dispute Resolution
If the entity decides not to exercise this power,
adopts the measures to guarantee the fulfillment of The parties of state contracts may stipulate
the contract, notwithstanding its right to take arbitration in order to obtain a final and binding
possession of the works or installations or its right solution of their disputes. However, Colombian case
to continue immediately with the contractual law, in the field of state contracts, has determined
performance, by means of a guarantor or another that the legality of the so called exceptional clauses
contractor. is not within the scope of the arbitrator‟s jurisdiction
(lack of objective arbitrability). According to said
In case that the lapse is declared, the contractor case law, exceptional clauses refer to public
would not be entitled to compensation, would have policies and sovereign powers of the State.
inability to participate in any bidding or competitive Therefore, the arbitrability of these clauses is not
process, and would not be able to enter into possible, since the arbitrators have been
contracts with the state during five (5) years characterized as private parties that act as judges
following the declaration of the lapse of contract. occasionally and transitorily. Thus, domestic
arbitration, within the field of state contracts, is
3.8 Penalties possible in respect to almost any situation that
arises from a state contract, except the legality of
Under Colombian law, penalties are not deemed as exceptional clauses.
exceptional clauses. Nonetheless, the National
Government and the private contractor may include In any event, Colombian state entities may be the
such penalties in the contract to be entered into by subject of international arbitration either with
and between them. Most public contracts include investors (investment arbitration) or private
22
contractors (commercial arbitration). In fact,
Colombia is party to the New York Convention on
the recognition and enforceability of foreign
arbitration awards and also party to the Washington
Convention, whereby the International Center for
Settlement of Investments Disputes (ICSID). On the
other hand, Colombia recently closed negotiations
of the Free Trade Agreement with the United States
of America (FTA). Therefore, in case that any
differences arise between investors and state
entities on the parts of the treaty, such differences
may be submitted to investment arbitration,
pursuant to the rules contained in the treaty.
23
4. Legal Labor System of
Colombia
24
The employer and the employee may agree on the in cash exists regardless of the time worked, that is,
mandatory rest day; in any event, the employee it exists as of the first day. (Judgment by the
must take Saturday or Sunday. The number of Constitutional Court C-019 dated January 20,
hours worked per day may be divided in a variable 2004).
manner with a minimum of four (4) continuous
hours per day and a maximum of ten (10), without 4.6 Minimum Age
need to pay overtime for the two (2) additional
hours. As a general rule, the Colombian Constitution
prohibits employment of children under fourteen
The employer may increase these hours if it pays (14) years of age in most jobs. Youngsters under
overtime at the rates established. eighteen (18) years of age exceptionally may work,
but provided they have authorization from their
4.4 Overtime parents and from the Ministry of Social Protection
(Article 30, Labor Code).
In no case the day or night overtime may exceed
two (2) hours per day and twelve (12) hours per Children from twelve to fourteen (12-14) years old
week (Article 22, Law 59 of 1990). may work a maximum of four (4) hours a day and
twenty-four (24) hours a week in light jobs (Article
One (1) overtime daytime hour (that is, from 6:00 161 of the Labor Code). Youngsters from fourteen
a.m. to 10:00 p.m.) must be remunerated with to sixteen (14-16) years old may work a maximum
twenty-five percent (25%) of increase over the of six (6) hours a day and thirty-six (36) hours a
ordinary work hour (Article 168, Labor Code and week (Article 161 of the Labor Code). Young people
Article 25 of Law 789 of 2002). On the other hand, from sixteen to eighteen (16-18) years of age may
one (1) overtime nighttime hour (that is between work a maximum of eight (8) hours a day and forty-
10:00 p.m. and 6:00 a.m.) must be remunerated eight (48) hours a week (Article 161 of the Labor
with an increase of seventy-five percent (75%) over Code).
the ordinary work hour (Article 168 of the Labor
Code). 4.7 Minimum Wage
One (1) normal night time hour is remunerated with Every January, the government establishes the
an increase of thirty-five percent (35%) over the minimum monthly salary for workers that will serve
ordinary work hour (Article 179 of the Labor Code, as reference for salary negotiations (Article 145 of
modified by Article 26 of Law 789 of 2002). the Labor Code).
Increases may be simultaneous, that is if one hour
of overtime required to the worker is worked on a The minimum monthly wage fixed for year 2010 is
Sunday or holiday, it would have a surcharge of COP $515,000 (approximately USD $257). Based
100%, 25% for being overtime and 75% for being a on the country´s inflation rate every year, the
Sunday or holiday. minimum monthly salary is increased (Law 278 of
1996). However, this minimum salary is a very low
4.5 Vacations sum of money. In most cases it is not enough to
have a decent standard of living.
Every employee is entitled to fifteen work days of
paid vacation per year of service (Article 186, Labor 4.8 Unionionized Employees
Code, modified by Article 27 of Law 789 of 2002).
Mass termination of labor agreements requires the
If the employment agreement ends, and the express authorization in writing by the Ministry of
employee has not taken the corresponding Social Protection. Any termination of agreement will
vacation, the Labor Code authorizes the be deemed as mass termination in accordance with
remuneration of the vacation time in cash (Article the company‟s total employees and the period of
189 of the Labor Code). The right to remuneration
25
time elapsed while agreements are effectively amount is deposited in the personal bank account
terminated. (Article 67, Law 50 of 1990). of the employee. It has to be paid in January of
each year using the rate of the severance accrued
4.9 Legal Service Bonus during the immediately preceding year (Article 1,
Law 52 of 1975).
Every year, in the months of June and December,
employers are required by law to benefit all their 4.14 Integral Salary System
employees with a legal premium pay. This legal
premium pay is equivalent to a fifteen (15) working Employees whose monthly income equals or
days salary. (Article 306, Labor Code). For labor exceeds ten minimum monthly salaries may choose
settlement purposes, the legal premium pay is not to be remunerated through this system (Article 132,
deemed as a salary. Labor Code).
4.10 Transportations allowance The integral salary system includes the base salary
and the fringe benefits, which shall not be less than
Employees earning up to two (2) minimum monthly thirty percent (30%) of the base salary. The
wages are entitled to a transit subsidy benefit resulting amount is equivalent to thirteen (13)
equivalent to COP $61,500 per month minimum monthly salaries. All legal benefits, except
(approximately USD $30.75) in 2010 (Decree 4966 vacation, are included with the monthly salary
of 2007). payment (Article 132, Labor Code).
26
In general terms, there are two (2) pension systems
the base salary, which shall not be less than the in Colombia: One is Medium Premium with Definite
minimum monthly legal wage. Eight point five Benefit or pay-as-you-go, which the one is assumed
percent (8.5%) of this sum has to be paid by the by the ISS (Social Security Institute). The other is
worker and four percent (4%) by the employee. the Individuals Savings with Solidarity, which
consists in the contribution that is made to a
4.17 Pension Regime pension fund previously selected by the employee.
It is worth mentioning that Government employees
Pensions in Colombia cover old age, disability by and employees of the private sector that so wish it,
ordinary risk (that is, not related to work accident or belong to the pay-as-you-go system.
disease) and death.
4.18 Old-Age Pension (OAP)
Article 15, item 2 of Law 100 of 1993 sets forth that
foreigners who remain in the country under an Medium Premium Regime (Pay-as-you-go)
employment agreement, must be enrolled in the
social security system for pensions, provided they In order to have access to the old age pension it is
are not protected by another regime in their country necessary to be 55 years of age (women) and 60
of origin. Accordingly, any foreign worker who has (men) and one thousand one hundred and fifty
this risk covered does not require to be enrolled. (1,150) weeks of contributions to the ISS up to the
year 2009. In addition, the number of weeks of
Employees enrolled in the General Pension System contributions will increase in January of each year
may choose the pension fund they prefer. Once the by 25 per year until one thousand three hundred
initial selection is made, they can only change funds (1.300) are reached in 2015.
once every five (5) years, counted as of the initial
selection. After January 29, 2004, the employee The monthly amount for the old age pension will be
enrolled cannot change pension fund when ten (10) from 55% to 65% of the income basis of pension
or more years remain until he has the age to be calculation. However, as of 2005, the percentage
entitled to old age pension. will increase one point five percent (1.5%) of the
income basis of calculation for every fifty (50)
The contribution rate is of 16% of the base income; weeks in addition o the minimum number required,
the employee assumes 4% and the employer 12% reaching a maximum pension from eighty percent
of the contribution. (80%) and seventy point five percent (70.5%) of
said income.
Employees who earn more than four (4) minimum
monthly legal salaries must pay one percent (1%) Voluntary Savings Regime
additional on their salary for the solidarity fund. And
the contribution to the fund increases if the salary is The member enrolled in this plan may be pensioned
higher, as follows: at any age up to 60 for women and 62 for men,
provided he has enough capital accumulated in his
account to obtain a pension of one hundred and ten
4 to 16 minimum monthly wages: 1%
percent (110%) of the minimum monthly legal wage
then in effect. Depending on the level of savings the
16 to 17 minimum monthly wages: 1.2%
employee has, the system defines amounts
payable. If applicant fails to have an accrual that
17 to 18 minimum monthly wages: 1.4% suffices the minimum requirement to become
eligible for old-age pension, then applicant will be
18 to 19 minimum monthly wages: 1.6% entitled to a reimbursement of any credit balance
he/she may have in his/her pension account, or
19 to 20 minimum monthly wages: 1.8% otherwise, be awarded a substituting
indemnification.
Over 20 minimum monthly wages: 2.0%
27
4.19 Disability Pension 4.20 Survivor’s Pension
Disability due to illness – Member must have Survivor‟s pensions will only be granted to
contributed fifty (50) weeks within the three years employee‟s beneficiaries (eligibility is further
immediately preceding the pension structuring date described below). If no beneficiaries exist, then no
and twenty percent (20%) fidelity from the time that survivor‟s pension will be granted.
he turned 20 years of age and the date of first
classification of the disability condition. Beneficiaries – The following individuals will be
entitled to a survivor‟s pension:
Disability due to accident – Member must have
contributed fifty (50) weeks during the three-year
period prior to the occurrence of the event that The members of the family group of the
individual pensioned for old age or disability for
caused the disability.
ordinary risk who dies, and
28
payments increase to seventy-five percent (75%) of If the employer is an entity, certificate of
base income. In the case of survivor‟s pension, existence and legal representation, issued not
payable amount will be equivalent to seventy-five more than three (3) months before and, if
percent (75%) of base income for settlement. necessary, copies of the Company‟ balance
sheets.
4.22 Temporary Work Visas / Visas for
Employment Agreement (Decree 4000 of If the employer is an individual, he most
2004) evidences his monthly income in excess of
thirty (30) minimum monthly legal wages in
Visas for employment agreement are available to effect.
foreigners who perform professional and
specialized work for private and government entities A certificate issued by the Ministry of Social
or for individuals, board of directors‟ members, Protection, stating that the proportionality
technicians, administrative personnel of foreign between local and foreign workers is fulfilled.
companies or industrial companies that must be
transferred to Colombia for a specific task, as well Authenticated photocopy of the professional
as for foreigners appointed in an organization or degree, duly legalized and homologated, or
government entity. evidence of experience. Engineers,
accountants and technicians, among others
These visas are issued by the Ministry of Foreign have special requirements.
Affairs or the Colombian Consulates.
4.24 Business Visas (Decree 4000 of 2004,
A visa for employment agreement is issued for up Resolution 4700 of 2009)
to two (2) years and is voided if the holder leaves
the country during any period of six (6) continuous Business visas are granted to tradesmen,
months. The holders of visas for employment industrialists, executives and businesspeople
agreement must register at the Foreign Affairs wishing to enter Colombia for business purposes.
Division of the Administrative Department of Business visas are granted for a maximum of four
Security – DAS within sixty (60) days following their (4) years, and entitle the holder to travel back and
arrival to Colombia, and then apply for their alien forth to Colombia, with maximum stays of six (6)
card. To register foreigners must present a valid months each.
passport and the additional information required by
the DAS. Business visa holders may neither establish their
residence in Colombian territory nor earn
4.23 Temporary Work Visas / Eligibility professional fees or salaries in Colombia. Any
Requirements (Resolution 255 of 2005) breach to said regulations may result in the holder‟s
deportation and the enforcement of penalties upon
To receive a visa for employment agreement, the his/her employer.
applicant must present the following documents:
To be granted a business visa, applicant shall ask
Original employment agreement, his/her employer to undersign and file a request on
administrative act or hiring agreement, as the behalf of the prospect employee. If employer is a
case may be. In the case of the foreigner that company, the note must be undersigned by the
is transferred from the home office to the company‟s legal representative and shall include as
affiliate, he shall present a note from the entity an attachment, a certificate of good standing and
specifying the position to be held. incumbency, or an equivalent document. Likewise,
the applicant must forward a note explaining the
Letter from the Colombian employer reasons for his/her visiting Colombia, as well as
expressing his commitment to bear all evidence of financial good standing or a
employee´s repatriation expenses and, if commitment note by his/her Colombian sponsor
applicable, of his family, to the country of origin whereby the latter accepts to take liability for the
or last place of residence, if the employment applicant‟s good conduct while in the country.
agreement terminates or if the employee is
deported or expelled from the country.
29
Applications must be submitted before a Colombian
consulate official, or forwarded to the Visas Division
of the Ministry of Foreign Affairs. Depending on the
applicant‟s nationality, proceedings may require
payment.
30
5. Environment Aspects
5. ENVIRONMENT ASPECTS
31
amounts of up to twenty (20) legal minimum 2. Mining sector: Exploitation of coal, construction
monthly wages (approximately, USD $5,150).9 materials, and metals and gemstones, as well
as extraction of other minerals.
As for the observance of international
environmental regulations, Colombia ratified the 3. Construction of dams and reservoirs with
Montreal Protocol on Substances that Deplete the capacities exceeding 200 million cubic meters
Ozone Layer, agreed on September 16, 1987, as of water. For dams and reservoirs of smaller
adjusted and/or amended in London (June 29, capacity, applicants shall be granted an
1990), Nairobi (June 21, 1991), and Copenhagen environmental license by the corresponding
(November 25, 1992). Also, Colombia is party to the Regional Autonomous Corporation.
United Nations Framework Convention on Climatic
Change (UNFCCC), agreed in New York, on May 9, 4. Electrical energy sector: Construction of
1992. electrical power plants generating energy in
excess of 100,000 kilowatts; project
5.2 Environmental Licenses exploration and use of alternate sources of
energy; and, expansion or installation of the
Environmental licenses are authorizations granted National electric network system. For power
by the Colombian environmental authorities to plants of smaller capacity, applicants shall be
entities willing to perform projects, civil works, or granted an environmental license by a
any other activity that might endanger the country‟s Regional Autonomous Entity with jurisdiction.
landscape or renewable natural resources.
Furthermore, environmental licenses may specify 5. Nuclear energy projects.
requisites whereby the licensees may be required
to prevent, mitigate, correct, compensate, and 6. Port, Sea, Land and Air sector: Construction of
manage environmental effects arising from the international airports and landing strips,
performance of activities or civil works included construction of docks and expansion of
therein. infrastructure for deep-draft vessels; port
dredging; and, construction of highways,
The Ministry of Housing, Land Development and tunnels and secondary roads.
the Environment, the Regional Autonomous
Corporations (CAR), the Sustainable Development 7. Construction of railways and expansion of the
Corporations, the Territorial Entities designated by national railway network.
the Autonomous Regional Corporations (CAR), and
some municipal governments are considered 8. Public fluvial works.
environmental authorities and would be in charge of
granting licenses depending of the importance,
location and impact of the project. 9. Construction and operation of irrigation
systems.
The Ministry of Housing, Land Development and
the Environment has restricted jurisdiction to grant 10. Importation or production of pesticides or any
licenses for large scale projects. According to toxic product used in agriculture.
Decree 1220 of 2005 a license granted by the
Ministry or by an Autonomous Regional Corporation 11. Any project that might have a negative impact
is necessary in order to carry out the following on Colombia‟s National Nature Reserve areas.
projects:
12. Any project developed on behalf of Regional
1. Hydrocarbons sector: Exploration, exploitation, Autonomous Entities, as appointed by section
perforation, transportation, delivery, 2, Sub-item 19 of article 31, Law 99 of 1993.
mobilization of liquid hydrocarbons, and
construction of warehouses, oil pipes, or 13. Entry of foreign animal or vegetable species to
hydrocarbon refineries. Colombian territory.
32
15. Any other project specified in articles 8 and 9 the government while performing all surveys and
of the aforementioned decree. verifications required in the process of granting,
renewing or following up on the effectiveness of the
In order to obtain a license, the applicant must granted license.
present an environmental impact study and the
means to prevent or control any damage that it may 5.3 “Green Taxes”
cause. The requirements for the license are
established by Law 99 of 1993 and since then by Any type of business, project, work, or activity
Law 491 of 1999. Currently, Decree 1220 of 2005 which directly or indirectly uses the Colombian
includes the regulation that must be obeyed in order atmosphere, waters or soils, or which disposes of
to obtain environmental licenses. To obtain a waste within country borders, will be subject to
license for considerable impact projects (according retributive charges.
to the definitions expressed in Decree 1220 of
2005), the interested party must present to the Compensatory and retributive tax charges are not
competent authority an environmental diagnosis of deemed as income or transactional taxes; pursuant
the alternatives accompanied by the ―¨National to Law 99 of 1993, the Colombian Ministry of
Environmental License Application Form¨ (Articles Housing, Land Development and the Environment
23 and 24 of Decree 1220 of 2005). It is important must fix a minimum payable fee, as well as certain
to bear in mind that no project or civil works will criteria to determine whether, in some specific
require more than one environmental license. cases, an additional sum is to be paid by the
interested parties, depending on the depreciation
Colombian environmental legislation has defined a level of the affected natural resource, the degree of
procedure that: enables competent authorities to social and environmental damage caused, and the
amend, grant, or suspend any environmental costs of renovating the affected resource.
license; specifies the liabilities to be undertaken by
the interested parties; and, describes the Compensatory taxes must be paid up by any user
surveillance powers granted to competent of the country‟s natural resources, as a means to
authorities as a means to supervise the adequate cover for all renovation costs involved. Similarly,
exercise of the granted license. retributive taxes are enforced as a means to
compensate for any damage caused by the
authorized users upon the country‟s natural
The so-called Environmental Guidelines (Guías resources.
Ambientales) are briefings issued by the Colombian
An example of green, retributive taxes currently in
Ministry of Housing, Land Development and the effect in Colombia is the regulatory framework
Environment, whereby technical contents governing the use of water sources in Colombia.
addressing specific production sectors are provided Any user or class of person who affects the
as an orientation for the proper performance of all country‟s water resources is required by law to
environmental operations and procedures during invest 1% of the project‟s equity in the preservation
the execution of the activities object of the and maintenance of water sources. Pursuant to
environmental license. Said guidelines are specified regulations in Decree 1900 of 2006, the Ministry of
in Resolution 1023 of 2005, and compliance the Environment shall see to it that such
therewith is deemed as a technical requirement for investments are effectively made, and shall further
the effective granting of an environmental license. enforce any applicable penalty upon non-
compliance with said requirement.
Currently, there are Environmental Guidelines
available for the following industrial sectors in In the case of taxes applicable to waste disposal,
Colombia: Hydrocarbons, Energy, Agriculture, such rate is intended to charge the user with the
Industrial Manufacturing, and Infrastructure and estimated amount an environmental authority would
Transportation. incur in, had it been the actual user and needed to
remove such waste. Calculation of this tax rate is
Pursuant to Laws 633 of 2000 and 344 of 1996, based on a number of variables, including regional
activities involved in the granting, renewing and factors, volumes and frequency of disposal efforts,
following-up on Environmental Licenses require as well as the amount of collateral damages arising
payment of certain taxes in Colombia. Such fees from substances being disposed.
are variable and depend on the costs incurred by
33
Additionally, a percentage of the yearly property tax The sale of national or imported equipment and
imposed upon Colombian taxpayers is allocated to supplies used to construct, install, assembly and/or
the regional environmental authorities called operate environmental monitoring and control
Autonomous Regional Corporations for the systems will be excluded from the value added tax
protection of renewable natural resources and the (VAT).
environment. Additionally, municipalities may
choose to charge a surtax that shall not be of less The imported equipment that is not manufactured in
than 1.5 per thousand, or in excess of 2.5 per Colombia and is used in recycling, treatment or
thousand on the appraisal of the goods that serve reprocessing of trash or waste, treatment of
as a basis to calculate the property taxes residual water, sewerage, cleaning of rivers or
environmental sanitation, to control and reduce CO2
5.4 Special Charges for the Energy Industry emissions or others harmful for the atmosphere, is
not subject to VAT.
According to Law 99 of 1993, which regulations
became effective by Decree 1933 of 1994, modified Deliveries of natural gas to domiciles, both in
in part by Decree 1729 of 2002, the electric sector cylinders and by pipelines, will not be taxed with the
must transfer a percentage of its gross sales value added tax.
according to the following:
Income from the sale of electric power, generated
1. Hydroelectric power generation plants must by wind, biomass or agricultural resources, as well
transfer three percent (3%) to the Regional as the income from the rendering of Ecotourism or
Autonomous Corporations, one and one half development of new forest platforms, are
percent (1.5%) to the municipalities and the considered exempt for income tax purposes.
districts of the hydrographic basin that supplies
the reservoir and another one and one half
percent (1.5%) for the districts where the
reservoir is located. For total of 6%.
34
6. Intellectual Property
6. INTELLECTUAOPERTY
6.1 Generalities
distinctive signs, industrial secrets, and new
In Colombia, intellectual property rights are divided creations. Distinctive signs include trademarks,
into two main categories: (i) Industrial property, slogans, commercial names and commercial
which covers new creations (patents), know how emblems. New creations include inventions,
(industrial secrets), and slogans; and, (ii) patents, utility model patents, industrial designs,
copyrights, which make reference to the protection and integrated circuit (IC) layout designs.
granted to artistic, scientific and literary works
susceptible of being reproduced or distributed in 6.3 Common Regime
any form, as well as to rights by artists, performers
and producers of audio recordings and owners of The common regime for industrial property is
copyrights on computer programs. Decision 486 of the Andean Community of Nations,
effective on December 1, 2000. In Colombia this
Colombian laws provide for criminal, commercial provision is regulated by Decree 2591 of December
and civil sanctions applicable to breaching parties 13, 2000 and regulatory Resolution of January 15,
as legal means to protect and call on the 2001.
enforcement of intellectual property rights.
6.4 International Treatments
6.2 Industrial Property
Colombia adopted the Paris Convention for the
As stated above, protection of the industrial Protection of Industrial Property (approved by Law
property is divided into three main categories: 178 of 1994), WTO TRIP (Trade Related Aspects of
35
Intellectual Property Rights of the World Trade and, a commercial emblem is a distinctive sign for a
Organization, approved by Law 170 of 1994 and the specific commercial establishment.
Patents Cooperation Treaty – PCT – (approved by
Law 463 of 1998) among others. Rights Granted
Local legislation:
Registration
36
It is possible to claim as filing date of a of common use or a generic word (thus losing its
trademark registration application: The date on distinction capacity – Article 169).
which a trademark has distinguished goods or
services in a fair or show official recognized Likewise, it is possible to request the cancellation of
and carried out in any country, provided that a trademark registration when the same is
when the registration is requested within the confusingly similar to a recognized trademark
following six (6) months counted as of the date (Article 235).
on which those goods or services are shown
for the first time under said trademark (Article Collective Trademarks
141, Decision 486).
A collective trademark is a distinctive sign that
Licenses and Transfers differentiates the origin or any other characteristic
common to various goods or services from different
Any trademark already granted, or trademark companies that use such distinctive sign under the
registration request in progress, may only be control of a single owner (Article 180, Decision
transferred or assigned through a written 486).
instrument, and the resulting agreement shall be
filed before the Trademark Bureau (Article 161, Certification Trademarks
Decision 486).
A certification trademark is a sign applied to
Trademark emblems may only be transferred, products or services to indicate that said products
assigned or licensed in conjunction with their or services meet certain quality standards or alike
related trademarks. which have been duly certified by the trademark
owner (Article 185, Decision 486).
Cancellation of trademark registration
6.7 Commercial Names and Emblems
Cancellation actions based on the use of a
registered trademark may be filed against the Pursuant to Article 611 of the Colombian Code of
registration of trademarks that have not been used Commerce, all regulations regarding commercial
during the three (3) years prior to the date on which names will be applicable to commercial emblems.
the cancellation action was filed. The action may
also be used as a defense against opposition Legal Framework
processes filed on the basis of the non use of
trademarks (Article 165, Decision 486). Colombian Commerce Code (Articles 603 and
611).
It is possible to request the partial cancellation of a
trademark registration when the trademark has not Andean Community Decision 486 (Articles 190
been in use in some of the products for which it has to 199).
been registered (Article 165, Decision 486).
Decree 2591 of 2000 (Articles 17 and 18).
The person that obtains a favorable resolution will
be entitled to a preferential right on the registration. Resolution 210-2001 (Articles 22 and 23).
Said right may be invoked as of the presentation of
the request for cancellation and up to three months Definitions
following the date in which the resolution of
cancellation may be enforced (non appealable) The term “commercial name” defines any distinctive
(Article 168). sign that specifically identifies a certain economic
activity, company or trading establishment. Any
It is also possible to request the cancellation of the company or establishment may have more than one
registration of a trademark when it becomes a sign commercial name. Among others, the corporate
name, the corporate purpose, or any other name
filed as part of any registration of persons or
37
partnerships procedure may be used as the 6.8 Denominations of Origin
commercial name of a company or trading
establishment (Article 190, Decision 486). Legal Framework
Rights on commercial names are granted to the first Decree 2591 of 2000 (Articles 19 to 21)
historical use of the distinctive sign for commercial
purposes. Registration of commercial names is not Definition
mandatory, but might be used by the interested
party as evidence in potential disputes over first As denomination of origin is understood a
historical use (Article 603, Commerce Code; Article geographic indication consisting of the
190, Decision 486). denomination of a country, of a region or of a
specific place, or consisting of the denomination
Registration of commercial name grants no right on that without being that of a country, a region or a
such distinctive sign. First historical use will be certain place, refers to a specified geographic zone,
presumed as that which is initially recorded after the used to designate a product originating in it and
date of registration (Article 605, Commerce Code). which quality, reputation and other characteristics
are due exclusively or essentially to the geographic
The owner of a commercial name may deter any medium in which it is produced, including natural
third party from commercially using an identical or and human factors (Article 201, Decision 486).
similar distinctive sign, or one that causes confusion
or the risk of associating a third-party company, Declaration of protection for a denomination of
products or services to the owner‟s own company, origin
products or services (Article 192, Decision 486).
The declaration of protection for a denomination of
Registration of a commercial name is effective for a origin will be granted officially at the request of
period of ten (10) years, and may be renewed for whoever may evidence to have a legitimate interest,
successive ten-year periods (Article 196, Decision it being understood that these are individuals or
486). legal entities, engaged in the extraction, production
or manufacture of the product or products that they
Renewal of a registration of commercial name shall seek to protect by the denomination of origin, as
be requested to a Trademark Bureau within six (6) well as associations of producers. The state,
months prior to the registration‟s date of expiration, department, province or municipal authorities are
or within six-month grace period granted after also considered to be interested parties, when they
actual expiration. Authorities may request evidence refer to denomination of origin of their respective
of use as a requisite for further renewals (Article circumscriptions (Article 203, Decision 203).
198, Decision 486).
The authorization for the use of a denomination of
Licenses and Transfers origin legally protected will be granted for a period
of ten (10) years, renewable for similar periods
Transfer and licenses of registered or deposited (Article 210, Decision 486).
trade names shall be registered at the competent
national offices in accordance with the procedure Component national offices shall recognize the
applicable to transfer and licenses (Article 199, denominations of origin or geographic indications
Decision 486). protected in third countries, provided in any event
that it is contemplated in a convention to which the
member country is a party. To request said
protection, the denominations of origin shall have
been declared as such in their respective countries
of origin (Article 219, Decision 486).
38
6.9 Integrated Circuit Layout Design characteristics such as novelty, inventive steps, and
industrial applicability (Article 14, Decision 486).
Legal Framework
The following shall not be considered as inventions:
Decision 486 (Articles 86 to 112). discoveries, scientific theories, and mathematical
methods; any living thing – either partial or
Decree 2591 of 2000 (Article 12). complete – as found in nature, natural biological
processes, biological material as found in nature, or
Resolution 210 of 2001 (Article 15). material that may be isolated, including the genome
or germplasm of any living thing; literary or artistic
Definition works, or any other aesthetic work protected by
copyrights; blueprints, guidelines and methods as
An integrated circuit is a product, in its final or required to perform intellectual activities, play
intermediate form, of which at least one element is games, or carry out economic and business
an active element, and all of whose activities; computer programs (software), as such;
interconnections constitute an integral part of the and, methods to present information (Article 15 of
body or surface of a piece of material which is Decision 486).
intended to perform an electronic function. On the
other hand, the layout design is the three- An invention shall be deemed new when not a part
dimensional arrangement of the elements, of the state of the art (Article 16 of Decision 486).
regardless of form, of which at least one is an active
element, and their interconnections into an Patent rights are granted for a term of twenty (20)
integrated circuit, as well as said three-dimensional years, counted as of the filing date of the
arrangement is prepared to be used in an corresponding application (Article 50 of Decision
integrated circuit to be manufactured. (Article 86, 486).
Decision 486).
Effective patents grant their owners the right to
Layout designs shall be protected only if they are prevent third parties not previously authorized from
original designs (Article 87). any of the following acts: a) Where the subject
matter of the patent is a product: (i) manufacturing
6.10 Patents the product; (ii) offering for sale, selling, or using the
product, or otherwise importing it for these or any
Legal Framework other purposes; and, b) Where the subject matter of
the patent is a process: (i) using the process; or, (ii)
Decision 486 (Articles 14 to 80). performing any of the acts referred to above, in
paragraph a) with respect to any product obtained
Decree 2591 of 2000 (Articles 6 to 11). directly from the process (Article 52 of Decision
486).
Law 463 of 1998 whereby the Patent
Cooperation Treaty (PCT) was adopted. Owners of the patent shall be under the obligation
to exploit their patented invention in any Member
Resolution 210 of 2001 (Articles 10 to 14). Country, either directly or through any person duly
authorized. Upon expiration of a three-year period,
Single Circular by the Superintendence of counted as of the granting date of the patent, or of a
Industry and Commerce. Title X. four-year period, counted as of the filing date of the
patent‟s application, whichever is longer, the
Rights Granted and Other Legal Aspects competent national office may grant a compulsory
license for the industrial manufacturing of the
Patents for inventions of any product or process product covered by the patent, or for the
should be granted to new creations featuring comprehensive use of the process covered by the
patent, if at the time the application is filed, the
patent has not been exploited under the terms
specified in Articles 59 and 60, in the Member
Country in which the license is requested; or, if the
exploitation of the invention has been suspended
for more than one (1) year. Compulsory licenses
39
will not be granted if the owner of the patent is able dimensional external shape, line, profile,
to justify his failure to act with a valid reason, such configuration, texture, or material, without the utility
as force majeure or act of God, in accordance with or purpose of said product being thereby changed,
local provisions in effect in each Member Country. shall be deemed as an industrial design. (Article
Compulsory licenses shall be granted only if, prior 113, Decision 486).
to the filing of their application, the requesting
parties had made efforts to be granted a contractual Protection is granted for a period of ten (10) years,
license from the patent owner under reasonable counted as of the filing date of the application.
commercial terms and conditions, and such efforts
had not been successful for a reasonable period of 6.13 Plant Variety Protection
time (Articles 59 and 61 of Decision 486).
Legal Framework
Colombia is a party to the Patent Cooperation
Treaty (PCT) as of year 2001. International Union for the Protection of New
Varieties of Plants (UPOV) 1978.
6.11 Utility Model
Andean Community Decision 345.
Legal Framework
Decree 533 of 1994.
Decision 486 (Articles 81 to 85).
Definitions and Entitlements
Decree 2591 of 2000 (Article 12).
Any person who has created varieties of plants,
Definition and Entitlements when such varieties are new, uniform, distinctive
and stable, and when a generic name has been
Any new shape, configuration, or arrangement of given thereto, may apply for a Breeder‟s certificate
components of any device, tool, instrument, before the Plant Varieties Office (in Colombia, the
mechanism or other object, or any part thereof, Colombian Institute of Agriculture – ICA [for its
which enhances or differentiates the operation, use, acronym in Spanish]).
or manufacturing of the object incorporating it, or
which endows it with any utility, advantage, or Certified breeders may then prevent third parties
technical effect said object previously did not have from using the protected plant variety, as well as all
shall be deemed as a utility model (Article 81, products derived thereof.
Decision 486).
Breaches to any right granted by the breeder‟s
Utility models shall be protected by patents certificate will be subject to legal actions as
(Article 81). provided by law.
Protection will be granted for a non-renewable Protection will be granted for a term of twenty-five
term of ten (10) years. (Article 81). (25) years for grapevines, fruits, and foresting trees,
and of twenty (20) years for other species, counted
6.12 Industrial Designs as of the granting date of the certificate.
Decision 486 (Articles 113 to 133). Protection granted to artistic, scientific, and literary
works that may be reproduced or disclosed in any
Decree 2591 of 2000 (Articles 13 and 14). known way, as well as any right granted to any
artist, performer and producer of audio recordings,
Resolution 210 of 2001 (Article 16). or to the intellectual owner of any computer
program shall be deemed as copyrights.
Definitions and Entitlements
40
Legal Framework Computer Programs (Software)
Berne Convention for the Protection of Literary Copyright provisions deem computer programs as
and Artistic Works (Approved by Law 33 of literary works. Protection covers operative and
1987). applicative programs, either in source code or
object code. Both, authors and holders of copyright
Rome Convention for the Protection of may authorize changes into the programs for proper
Performers, Producers of Phonograms and use. Users of computer programs legally available
Broadcasting Organizations (Approved by Law may copy and adapt same, provided said copies or
48 of 1975). adaptations are essential for the programs to run
properly, or are intended to be used as back-up;
WTO-TRIPS [Trade-Related Aspects of that is, to replace the legitimate copy legally
Intellectual Property Rights] (Approved by Law purchased, if the latter can no longer be used, due
170 of 1994). to damages or loss.
WIPO-WCT (Approved by Law 565 of 1999) Reproduction of any computer program, even for
and WIPO-WPPT (Approved by Law 545 of personal use, requires an authorization by the
1999). owner or bearer of copyright thereto, except for
backup copies.
Andean Community Decision 351.
The licenses and transfer of software must be
Law 23 of 1982. registered at the National Authority of Copyrights.
In Colombia, the registration of copyrights is not Likewise, acts of unfair competition (Law 256 of
necessary for the purposes of their enforcement, so 1996 and Decision 486) and enforceability of legal
the lack of registration of the fact of not registering actions (Decision 486) are specified by Colombian
any of those works does not prevent them from laws to protect industrial property rights.
being protected. However, registration with the
National Direction of Copyrights is highly
recommended, since it is an effective tool against
unauthorized copies and it is efficient evidence to
prove the rights which facilitates their negotiation
and defense at the courts.
Term
41
7. Tax Matters
7.
Colombian Source Income and Foreign Source In general terms, foreign source income includes
Income any revenues arising from the transfer or
exploitation of tangible and intangible goods located
In general terms, the following are deemed as outside of Colombia, and the rendering of services
Colombian source income: abroad. Furthermore, income generated upon
certain foreign loans and certain leasing
1. Transfer or exploitation of tangible and
intangible goods located within Colombian agreements with foreign entities are not deemed as
territory. local source income.
4. Rendering of technical services, technical 1. Colombian companies and entities are subject
assistance and consulting, and the to income tax on their worldwide income. In
undersigning of turn-key jobs, inside and contrast, branches of foreign corporations are
outside Colombia. subject to income tax only on Colombian
source income.
5. Earning of profits by Colombian companies.
2. In general, Colombian companies and foreign
companies domiciled in Colombia, such as
joint stock corporations, limited liability
42
companies, de facto corporations, industrial 9. Taxes of foreign companies and entities
and commercial companies of the State, mixed without branch in Colombia, that have no
economy companies, branches of foreign obligation to file income tax returns, are
companies, etc. are subject to income tax at a charged through withholding income taxes.
rate of thirty-three percent (33%) on the net Said withholding is calculated usually on the
taxable income. value of the price, at a rate of thirty-three
percent (33%) corresponding to income tax.
3. Dividends of Colombian companies, paid from Certain services of a technological nature have
the profits that have been taxed at the rates equivalent to ten percent (10%) and for
corporate level, are not subject to taxes in the computer software licenses, twenty-six point
name of the partners or shareholders who are four percent (26.4%). Payments made to tax
individuals resident in the country and local heavens as defined by the Government, are
companies. If those dividends are paid out of subject to the rate of thirty-three percent
the profits that have not been taxed at a (33%), regardless of the type of service paid.
company level, they are taxed at the rate of However the Goverment, has not yet defined
thirty-three percent (33%). what jurisdictions are considered tax heavens.
4. Dividends of Colombian companies, paid from 10. For the substitution of a foreign investor, the
the profits obtained as of 2007 that have been holder has to file an income tax return with the
taxed at the corporate level, are not subject to assessment and payment of the tax generated
taxes in the name of partners or shareholders by the respective transaction, within the month
who are individuals not resident in the country following the closing of the transaction.
or foreign companies without branches in
Colombia. 11. As of 2004, the transfer pricing rules entered
into force in Colombia. By virtue of the latter,
5. According to the reform contained in Law 1111 the taxpayers of income tax who perform
of 2006, dividends of Colombian companies, transactions with related parties located
paid from the profits obtained up to December abroad, have the obligation to consider for the
31, 2006, that have been taxed at the determination of the income, costs, deductions,
corporate level, will be subject to income tax at assets and liabilities, the prices or margins that
the rate of seven percent (7%), in the name of they would have obtained in similar
partners or shareholders who are individuals transactions between independent parties, or
not resident in the country or foreign at arm‟s length. For this purpose, any of the
companies without branches in Colombia. This following methods may be used: comparable
tax is not payable if the profits are reinvested in uncontrolled price method, resale price
Colombia for at least five (5) years. method, cost plus method, profit split method,
residual profit split method, and the
6. Profits distributed to funds by Colombian transactional net margin method of the
companies, which have not been taxed at operation. Taxpayers may enter into previous
corporate level in the distributing company, are transfer pricing agreements with the Tax
subject to an income tax of thirty-three percent Authority, in order to agree on the terms under
(33%) at partner/shareholder level (non- which they will comply with the obligation of
resident natural persons or foreign having prices or profit margins as those that
corporations with no branches in Colombia). would have been established between
independent parties.
7. In general, Colombian companies, branches of
foreign corporations, and, under special 12. In respect to formal obligations, the Colombian
circumstances, foreign corporations with no transfer pricing regimen requires taxpayers to
branches in Colombia, are all required to file an annual transfer pricing informative
submit an annual income tax return. return, and to keep supporting documentation
for each type of operation for a five-year
8. In general, foreign corporations with no period, beginning on January 1st of the year
branches in Colombia are not required to following the fiscal year in which the return is
submit said annual income tax return. prepared, issued or received. This obligation is
applicable to taxpayers with a gross equity
equal or exceeding one-hundred thousand
43
(100,000) UVTs10, or income equal to or to the partners or shareholders of the
exceeding sixty-one thousand (61,000) UVTs. Company.
13. Taxpayers of income tax who carry out 17. As of year 2010, companies investing in the
transactions with related parties resident or acquisition of productive fixed assets may
domiciled in jurisdictions classified by the deduct, for income tax purposes, thirty percent
national government as tax heavens, are (30%) of the investment value, as long as the
subject to the presumption (unless evidence to investment is related to the income-generating
the contrary is presented), according to which activity. Additionally, pursuant to Law 1370 of
they carry out transactions with related parties, 2009, companies acting as free trade zone
in which the prices or profit margins have not users and, consequently, applying a fifteen
been agreed, as would have been made by percent (15%) rate, may not concurrently apply
independent parties in comparable for the aforementioned 30% benefit.
transactions. These taxpayers are subject to
the above mentioned formal obligations, Taxation of Individuals
regardless of the limits of equity or income
mentioned above. However, the government The following are the main applicable aspects:
has not defined yet what jurisdictions are
1. Taxation of individuals in Colombia depends
considered as tax heavens.
on the source of their income, their nationality
and on whether or not they are Colombian
14. The non-fulfillment of the determination of residents. According to the Tax Code,
prices and profit margins as would have been residence is the continuous stay in the country
done by independent parties, constitutes for over six (6) months in the year or that are
inaccuracy, which is penalized with fines of up completed within the year, or the discontinuous
to one hundred and sixty percent (160%) of the stay for over six (6) months in the year.
lower tax or balance payable, or of the higher
balance in favor of the taxpayer. In addition, 2. National individuals residing in the country are
the late filing or the failure to file the return, as subject to income tax on their income both of
well as incurring in errors in the supporting national and foreign source. Foreigners
documentation or in the informative return, are residing in Colombia, are subject to income tax
in respect to their local source income, and on
susceptible of being penalized with fines of up
their foreign source income as of the fifth (5th)
to thirty-nine thousand (39,000) UVT and in
year of continuous or discontinuous residence
certain cases, with the rejection of the costs
in Colombia.
and deductions.
44
healthcare, among others), and rates from Registration Fees
twenty percent (20%) to thirty-five percent
(35%) for vehicles. Games of chance are All acts or contracts, or any other legal
subject to VAT at a rate of five percent (5%) instruments required by law to be registered
and mobile telephone services are subject to a before an office of public instruments registry
rate of twenty percent (20%). or a chamber of commerce in Colombia, cause
this tax to be levied at the time of registration.
2. Exports of goods and services are VAT
exempt. Registration fees are defined within the ranges
described below:
3. Certain goods and services are exempt from
value added tax, specifically medical services,
transportation services (under certain Acts, contracts or legal operations for an
conditions), educational services, interests, undetermined sum and subject to registration
at the office of registration of public
public utilities (electric power, water sewage,
instruments, vary from zero point five percent
sanitation, gas), and certain food products,
to one percent (0.5% - 1%).
among others.
3. Although the full value of this tax is to be Documents subject to registration fees are not
reported in year 2011, tax payment will be levied with stamp tax.
divided into eight (8) identical installments
payable in fiscal years 2011 through 2014. Registration fees may not be deducted for
income tax purposes.
7.4 Stamp Tax
1. The stamp tax is a national tax applicable to 7.5 Levy on Financial Transactions
private or public documents which certify the
specification, amendment, or termination of
1. The levy on financial transactions is a national
any obligation in effect. Stamp tax is only
tax.
applicable to documents with a contractual
value equal to or exceeding six thousand
2. This tax is assesses at the time of a disposal
(6.000) UVTs.
of funds subject of the financial transaction, at
a rate of zero point four percent (0.4%). The
2. As of year 2010, the applicable stamp tax rate
twenty-five percent of this tax paid during the
is zero percent (0%). Stamp tax may not be tax year, may be deducted for income tax
deducted for income tax purposes. purposes.
45
Main Exemptions 3. The Industry and Commerce Tax paid
throughout the fiscal year is fully (100%)
1. Saving account withdrawals not exceeding deductible for income tax purposes.
three-hundred fifty (350) UVTs.
7.7 Property Tax
2. Loan disbursements through account
payments or issuance of checks by credit 1. This is a municipal and district tax applicable to
institutions or other financial entities. any real estate property located in the
corresponding municipality or district. Tax rate
3. Cashier‟s checks issued against the applicant‟s is based on the formal valuation of the
loan or savings account in same financial taxpayer‟s real estate property.
institution.
2. Each municipality or district can define its own
4. Transfers between savings and checking applicable tax rate, which may vary from zero
accounts of same holder in same financial point one percent to one point six percent
institution. (0.1% - 1.6%) of the property value, as
valuated in terms of economic status and
5. National treasury operations performed directly destination of the property. In the case of
or through executing organizations. undeveloped lands, developed lands with no
buildings, and lands with development
6. Financial transactions carried out with social potential, the property tax rate may be higher,
security funds for healthcare, pensions and but never exceeding a three-percent (3%) limit.
professional risks.
3. The Property Tax paid throughout the fiscal
7. Purchase and sale operations in foreign year is fully (100%) deductible for income tax
currencies by exchange market brokers purposes.
through deposit accounts at the Colombian
Central Bank, or any checking account. 7.8 Transfer Pricing Rules
9. Offset and settlement operations via offset and Pursuant to transfer pricing rules in force, taxpayers
settlement systems managed by authorized subject to income tax who perform transactions with
entities. foreign parties or any of their economically-related
parties are required to take prices and margins from
7.6 Industry and Commerce Tax comparable transactions by independent parties
into account while calculating their ordinary and
1. This is a municipal and district tax applicable to extraordinary income, costs, and deductions, for
any operating and non-operating income of income tax purposes.
individuals or entities performing industrial or
commercial activities, or rendering services in The aforementioned rule is also applicable to the
any Colombian municipality or special district. calculation of assets and liabilities involved in
Certain exceptions are applicable to sales of operations with foreign economically-related
fixed assets and exports. parties. Unless evidenced otherwise and pursuant
to transfer pricing rules, any transaction performed
2. Each municipality or district can define its own by taxpayer with persons or entities residing or
applicable tax rate, as long as such rate falls domiciled in areas defined by the Colombian
within the following ranges provided by law: National Government as tax havens, will be
deemed as a transaction performed between
- In Bogotá: 0.2% - 3% economically-related parties and consequently, will
be subject to transfer pricing rules.
- Other municipalities and districts
(industrial activities): 0.2% - 0.7% Application of transfer pricing rules generates two
formal obligations by taxpayers: i) filing of the
- Other municipalities and districts transfer pricing informative return, and ii)
(commercial activities): 0.2% - 1% preparation of the transfer pricing study; however,
46
the assumptions to comply with these obligations Penalty for correction
are different, as follows:
The penalty will be equivalent to one percent (1%)
Transfer Pricing Informative Return of the values corrected not exceeding 39,000 UVT
(COP $957.645.000). If the correction is voluntary it
Taxpayers who are subject to income tax, and who, may reduced to 2% of the fine for late filing. On the
on the last day of the fiscal year or taxable period, other hand, when the correction is not voluntary,
report a gross net worth equal to or greater of 20% of the operations or 10% of the income or the
100,000 UVTs (COP $2,455,500,000), or gross equity.
income equal to or in excess of 61,000 UVTs (COP
$1,497,855,000), are required by law to file a Transfer Pricing Supporting Documentation
transfer pricing informative return.
One percent (1%) of the total value of transactions
Transfer Pricing Supporting Documentation performed with economically-related parties
throughout the year, if information included in
Taxpayers of income tax who on the last day of the supporting documentation was submitted late, or
year or taxable period have an equity equal to or in was misstated or irrelevant, or if it prevented tax
excess of 100,000 UVT (COP $2,455.500.000) or authorities from verifying the proper application of
whose gross income for the respective year is equal transfer pricing rules.
to or in excess of 61,000 UVT
(COP$1,497.855.000) have the obligation to If the aforementioned value cannot be defined, the
present transfer pricing supporting documentation, penalty will be equal to zero point five percent
provided that the accumulated amounts by type of (0.5%) of the taxpayer‟s income or net worth, but
operation exceed the amount of 10,000 UVT never exceeding 28,000 UVTs (COP$687,540,000).
(COP $245.550.000).
One percent (1%) of the total value of transactions
On the other hand, taxpayers or residents in performed with economically-related parties
Colombia who perform operations with taxpayers or throughout the year, if taxpayer failed to submit the
residents in tax heavens, have the obligation to information included in the supporting
present this documentation, provided that the total documentation. If the aforementioned value cannot
of operations exceed the amount of 10,000 UVT be defined, the penalty will be equal to zero point
(COP $245.550.000). five percent (0.5%) of the taxpayer‟s income or net
worth, but never exceeding 39,000 UVTs (COP
Penalization Regime $957,645,000).
47
8. Foreign Matters
Colombia is in a privileged position to have access Agreements (FTAs) (2004); the Colombia-Chile
to international markets, through trade and tariff FTA (2009); and, the North Triangle (TN-CA) FTA
preference agreements that guarantee better (El Salvador, Guatemala and Honduras; 2010). As
conditions of access to Colombian products. for the FTA undersigned with Canada in 2008, it
should be noted that it is now pending for approval
7.9 Tariff Benefits by the Canadian Parliament.
Unilateral Benefits Granted to Colombia: Colombia has also undersigned other relevant Free
Trade Agreements (FTAs) with the United States of
U.S.‟ Andean Trade Promotion and Drug America (in 2006) and the European Free Trade
Eradication Act (ATPDEA), and EU‟s Stability and Association (EFTA) (in 2008), both of which are
Growth Pact (SGP) grant certain Colombian waiting to be ratified by the U.S. Congress and
products a preferential treatment to access two of Iceland and Norway, respectively. Furthermore,
the top markets worldwide. Colombia has entered the so-called “Multiparty
Agreement” („Acuerdo Multipartito‟) with the
Regional, bilateral and multilateral agreements European Union (EU), which was formally endorsed
executed by Colombia: on May 19, 2010, and is now pending to be
undersigned and ratified by the Colombian
Colombia is party to various significant commercial Congress and the European Parliament, prior to be
agreements by Latin American countries, including finally subject to previous control by the Colombian
the Andean Community of Nations (Colombia, Constitutional Court.
Ecuador, Peru and Bolivia); the group of nations
formerly called TLC-G3 (Colombia, Mexico and Likewise, with the purpose to provide favorable
Venezuela) and currently called TLC-G2 (Colombia conditions to foreign investors, Colombia has
and México, after Venezuela‟s departure in April, entered into several Agreements on Reciprocal
2006); the CAN-MERCOSUR Free Trade Promotion and Protection of Investments (ARPPIs)
with Peru (2003), Spain (2007), Switzerland (2006),
China (2008), and Belgium (2009), the first two of
them already in effect. Concurrently, Colombia has
further entered into Double Taxation Agreements
48
(DTAs) under the Andean Pact (Decision 578, in full Import Regime
force as of 2004) with Switzerland (2007), Chile
(2007 – in force) with Spain (2005 – in force), Imports of goods in Colombia can be carried out in
Canada (2008), Mexico (2009) and Portugal (2010). various ways, depending on the fiscal treatment or
Finally, Colombia has given full support to the use to be given to the goods object of the
Investments chapters included in the FTAs importation procedure. Below you will find the most
endorsed with the United States, Chile, Canada, the widely used modalities of importation in Colombia:
TN-CA, and the EFTA.
Ordinary Importation: Importer receives the
7.10 Foreign Trade in Colombia goods for his free disposal within the country,
once he has completed several customs
In order to centralize the different administrative procedures, including payment of all applicable
procedures related to the obtaining of previous customs duties (tariffs and VAT).
permits and import or export licenses, certificates of
origin and registration of technology import or Short Term Temporary Importation for Re-
service export agreements, Colombia has since exportation in the Same Condition:
2005, an Internet-based technological tool to carry Importation with suspension of customs duties
out those processes, called Single Foreign Trade for certain goods that, at the end of a six (6)
Window – VUCE (for its initials in Spanish) month period, must be exported in the same
managed by the Ministry of Trade, Industry and condition as they came into Colombia‟s National
Tourism. User of the foreign trade service must customs territory.
register previously as importers, as importers of
goods or exporters of services, in the Single Tax Long Term Temporary Importation for Re-
Register (RUT) at the Colombian Taxes and exportation in the Same Condition:
Customs Authority (DIAN). Importation with a maximum stay term of five (5)
years. Customs duties are deferred in semi-
Exports Regime annual payments, in amounts proportional to
the time the imported goods stay in Colombian
Exportation of goods from the National customs territory.
territory with destination to the rest of the world or a
free trade zone is now a simple, quick procedure in Temporary Importation under Special
Colombia, since most goods need no special Import-Export Systems (commonly known
permits, and the exportations procedure is as “Plan Vallejo”): This modality of importation
performed via an online technology tool called allows the receipt of raw materials, with total or
MUISCA (acronym in Spanish for Single Model for partial suspension of customs duties, destined
Automated Revenue, Service and Control), a to be used in the production of exportable
system designed and controlled by the Colombian goods, as well as machinery and equipment for
Taxes and Customs Authority (DIAN). the exportation of agricultural goods or services.
The average export times for goods vary from one Other modalities of importation used in
(1) to three (3) days, counted as of the filing date of Colombia include the following:
the Shipping Permit for the goods to be exported in
the automated system referred to above.
- Import with franchise.
Currently, the National Government is promoting
- Re-import by passive perfecting.
the Simultaneous Inspection program by which
public entities involved in the inspection of goods
- Re-import in the same condition.
(Custom officials and antinarcotics police, among
others) which enter or exit the country, must see to - Import in fulfillment of warranty.
it that the inspection process is carried out in
coordinated and simultaneous fashion, thus - Temporary import for re-export in the same
reducing user costs and optimizing time cycles condition.
across the logistics chain.
- Temporary import for active perfecting.
49
- Temporary import in performance of special and VAT) of the goods‟ value, as declared before
import-export systems.
custom authorities.
According to their modality of importation, imported The customs tariff rates are set forth in Decree
goods will become of the importer‟s free or 4580 of 2006 containing the Customs Tariff and the
restricted disposal. Except for the “travelers” VAT rates in the Tax Code.
modality, all importation modalities will be subject to
customs impositions applicable to ordinary imports. Taxable Base
The importer is responsible for selecting the The taxable base on which the customs tariffs are
modality of importation applicable to the imported applied is the customs value of the goods, which
goods, based on the nature and conditions of the must be determined pursuant to the methodology
importation operation. established in the Value Agreement of the World
Trade Organization and Decision 571 of the
It should be noted that, pursuant to regulations Andean Community of Nations.
specified in Decree 111 of 2010, official prices,
indicators and estimates that were defined through The taxable base on which the value added tax is
administrative acts by the customs authorities, to be calculated will be the same as the one taken into
used as control mechanisms applicable to FOB consideration to calculate the customs tariff, added
prices declared for imported goods whenever with the value of this tax.
disputes on the goods value were to arise, were
effectively eliminated. Supporting Documents of the import
declaration
Instead, any doubt about the declared value of any
imported good or component thereof by a customs The filer of declaration has the obligation to obtain,
official shall only be admitted in any of the following prior to the presentation and acceptance of the
cases:
declaration and to keep for a period of five (5) years
counted as of that date, the original of the following
i) If goods appear to be underpriced, according
documents that he must make available to the
to the indicators specified in the DIAN‟s Risk
customs authority whenever the latter may require
Administration System.
it:
ii) If goods appear to be overtly underpriced,
indicating a possible fraud, as provided for in
item 3 of article 54, Community Regulations, Import registration or license covering the
as adopted by Resolution 846 of the Andean imported goods, if necessary.
Community of Nations.
iii) If any reasonable doubt arises in regard to the Commercial invoice, if necessary.
value declared before customs authorities, on
the basis of any submitted document or any Transport document.
other objective and quantifiable information.
Certificate of origin, where required for tariff
Customs Duties waiver purposes.
Customs duties caused by importation of goods into Health certificate and other documents
National territory are stated as a percentage (tariff required by special regulations, if necessary.
50
Packing list, if necessary. - Car homologation.
Upon fulfillment of the legal requirements, the Those which are not required by law to carry
customs authority authorizes the disposal of the out money drafts to other countries (non-
goods to the interested party through the customs refundable).
clearance authorization in the import declaration;
therefore, the goods will remain freely or restrictedly Those requesting tariff exemptions.
available, depending on the import modality to
which the goods were submitted. Those covering used defective, repaired,
reconstructed, refurbished, substandard,
Previous Permits remanufactured, or leftover goods.
Most of the tariff categories of the harmonized Those using the annual licensing system
system do not require approval of registration or (mining and oil sector).
license prior to the import by the Ministry of Trade,
Industry and Tourism. Those by public entities, except for gasoline,
urea, and other types of fuels.
Nevertheless, the import registration with the
Ministry of Trade, Industry and Tourism will be Customs Procedures
mandatory exclusively for imports of freely imported
goods that need the requirement, permit or The process for the import of goods into the country
authorization. is very easy and expeditious, since it is carried out
through an Internet-based technological tool called
MUISCA (Single Automated Model of Income,
As requirement, permit or authorization is
Services and Control) designed and controlled by
understood, the previous processes required by the
the National Tax and Customs Direction (DIAN).
competent authorities for the approval of the
requests of import registration of:
The average time for the import of a good may take
from one (1) to three (3) days counted as of the
Fishing resources. acceptance of the import declaration through the
MUISCA system.
Private security and surveillance equipment.
Currently, the national government is promoting the
Radioactive isotopes and materials. program of Simultaneous Inspection, whereby
public entities that participate in the inspection
Garments of exclusive use by Colombia‟s process of goods that enter or leave the country
Armed Forces. must guarantee that the same is made in a
simultaneous and coordinated way avoiding
Hydrocarbons and fuel. additional costs to the users and optimizing the
times in the logistics chain.
And, any product subject to:
Transactions in excess of USD $1,000 FOB value
must be made through a Customs Agent, who must
- Health controls intended to preserve be authorized by the DIAN to act on behalf of
human, vegetable and animal health. importers and exporters. However, the customs
regulations permits some importers and exporters
- Compliance with technical bylaws. to act directly if the FOB value is lower than the one
indicated or in the case of individuals or legal
- Emissions certificate for dynamic testing. persons who are classified as Permanent Customs
51
Users (UAP, for its initials in Spanish), Highly within the perimeter of a free trade zone:
Exporter Users (ALTEX), imports made by logistics, transportation, handling, distribution,
diplomats or international organizations, goods packaging, labeling, and other production- and
imported through Postal Traffic, Travelers, among
merchandising-related services; also, any
others.
service inherent to telecommunications, data
capturing systems, tourism, information
All shipments that enter the country must be sent to
technology, scientific and technological
deposit warehouses where they will be under
customs controls until their import process is research, healthcare, auditing, consulting, and
completed. Also, they may be sent to a Free Trade brokerage.
Zone, where they may remain indefinitely.
4. Commercial users: Legal entities authorized
Goods may remain in deposit for a maximum of one to perform marketing, merchandising, and
(1) month from the date of arrival of the goods to warehousing activities and others, within the
the country, while the customs shipment is made. perimeter of any free trade zone.
This initial period may be extended for one month
but, after the expiration of this extension, the goods Tax Benefits derived from the Free Trade Zones
will be declared abandoned by the Customs Regime
authorities, in which case they will become the
property of the Nation.
Income Tax: Law 1004 of 2005 established an
income tax rate of 15% on the taxable income for
operator and industrial users of goods and services,
7.11 Free Trade Zones at a difference from the 33% that rules for the rest
of the residents of the country.
On December 30, 2005, the Colombian government
enacted Law 1004, whereby the Free Trade Zone An income tax rate of 33% is applicable to
Regime was modified mainly in respect of its commercial users.
investment incentives.
Value Added Tax: Purchases of raw materials,
This Law establishes that the purpose of these parts, supplies and finished goods to suppliers
zones is to be an instrument for the generation of located in other geographical region of Colombia
employment and attraction of new capital are exempt from the value added tax. However, to
investments, serving as a development zone become eligible for such an exemption, transactions
through the promotion of competitiveness of the shall be any of those specified as part of the user‟s
regions where they are located. These are spaces corporate purpose. Additionally, the VAT exemption
within the national territory intended, in addition to is extensive to transactions between free trade
the development of highly productive and zone users.
competitive industrial processes, promotion of
generation of scale economies and ―simplification Foreign Trade Benefits
of procedures for the trade of goods and services,
in order to facilitate their sale. 1. The delivery of goods from abroad into free
trade zones is not deemed as an import, and,
In addition, the Law establishes four types of free therefore, is exempt from custom taxes
trade zone users: (customs duty and VAT) while the goods
remain in the free trade zone. Taxes are only
1. User Operators: Legal entities authorized to caused when the goods are further introduced
manage, supervise, promote and develop free into the Colombian territory.
trade zones, as well as to qualify other types of
users. 2. Any kind of goods of foreign origin may be
stored indefinitely in the free trade zones in
2. Industrial users of goods: Legal entities Colombia.
installed within the perimeter of a free trade
zone authorized to produce, transform or 3. The delivery of goods to users of the free trade
assemble goods through the processing of raw zones will be authorized by the user operator
materials or semi-finished goods. without having to go through any restrictive
procedure implemented by Colombian customs
3. Industrial users of services: Legal entities
authorized to perform the following activities
52
at warehouses located outside the perimeter of metallurgy extraction, generation and transmission
the free trade zones. of electric power, and obtaining purification and
conduction of hydrogen oxide, are not subject to
4. Quick and simplified delivery procedures. value added tax.
5. Consequently, custom taxes will be caused Entities carrying out temporary imports of heavy
exclusively for goods bound to the Colombian machinery for basic industries must be granted a
market, and only until such goods are certificate by the Director‟s Office of the Colombian
permanently withdrawn from the free trade Ministry of Commerce, Industry and Tourism,
zone. In contrast, all goods which are stored in whereby imported goods are classified as foreign
Colombian free trade zones and are bound to heavy machinery for basic industries.
other countries are exempt from custom taxes.
At the end of the specified period for the temporary
7.12 VAT Benefits from Imports of Machinery import, and if the heavy machinery is going to
and Equipment remain in Colombia, the VAT will then be applied,
unless the equipment is to be further reexported .
The Colombian Foreign Trade Regime specifies
multiple alternatives to promote industrialization in Imports of Equipment and Elements for the
the country, including benefits to any person or Protection of the Environment
entity who imports machinery and equipment.
Below you will find a brief description of each of Imports of equipment and items intended to be
said alternatives: used in the following activities will be exempt from
value added tax:
Ordinary Import of industrial machinery not
produced in the country by Highly Exporter Construction, installation and monitoring of
Users control systems, and environmental monitoring.
Ordinary importation of industrial machinery not Recycling and processing of waste and debris.
produced within the country by a legal entity
recognized by the Colombian National Taxes and Purification and treatment of waste waters,
Customs Authority (DIAN) as a Highly Exporter atmospheric emissions or solid residues under
User (ALTEX, for its acronym in Spanish) is exempt river recovery programs or basic sanitation
from value added tax. Industrial machinery is efforts intended to improve environmental
defined as that which transforms raw materials into conditions.
finished products.
Execution of projects or activities that are
For their recognition as Highly Exporter Users deemed as exporters of carbon emission
(ALTEX), legal entities must prove that the value of certificates, and which help to decrease
their total exports represents at least 30% of their emissions of greenhouse gases.
total sales during the twelve months prior to the
filing of the request. In order to obtain this benefit, it is necessary that
the Ministry of the Environment, Housing and
Additionally, importers are required to obtain a Territorial Development issues a certificate to the
certificate from the Colombian Ministry of effect that the goods meet the environmental
Commerce, Industry and Tourism by which protection objectives that are being shown.
imported goods are classified as industrial
machinery produced abroad and are imported with
the purpose of transforming raw materials into
finished products.
53
9. Investments in the Financial
Sector
54
2. Financial Corporations – Authorized to invest in to comply with an objective determined by the
the productive sector of the economy, they may trustor, in his own name or that of a third party
act as investment banks, operate term called beneficiary”.
certificates of deposit, savings accounts and The businesses carried out are grouped as follows:
lend money. investment trust – ordinary and special common
fund, real estate trust, guarantee trust, public trust
and securitization, among others.
3. Commercial Financing Companies - Specialized
in lending capital to promote the market of General Warehouses
goods and services. They perform financial
leasing operations and their funds proceed, to a The main purpose of general warehouses is to
large extent to term deposit certificates. deposit, preserve and guard, manage and
distribute, purchase and sell merchandise and
products of local and foreign origin, on behalf of
Financial Services their customers.
These are those financial entities that although Insurance Companies and Others
borrow funds from the public, their object is to
provide services related or complementary to the Insurance and Reinsurance Companies
financing activity.
Life Insurance Companies – Life insurance
Severance and Pension Funds companies sell life and supplementary insurance
products, as well as other offerings associated to
1. Companies Administrators of Severance – the social security system.
According to the Colombian labor legislation,
all employees must receive one month‟s salary
General Insurance Companies – General insurance
per year of service. Said sum of money must
companies sell general purpose insurance products
be deposited by the employer in the Severance
other than life insurance offerings.
Fund and it can only be withdrawn by the
employee at the termination of the employment
agreement. However, during the effective term Reinsurance Companies – Reinsurance companies
of the employment agreement, the employee sell reinsurance products by which they undertake
may make partial or total withdrawals for the risks that have already been insured by insurance
purchase of a home, home improvement or for companies.
education expenses of the children.
Insurance and Reinsurance Brokers
2. Companies Administrators of Pensions –
According to the Colombian labor legislation, Insurance brokers offer and promote insurance,
all employees must have pension plan for their acting as intermediaries between insurance
retirement, disability or death. To this effect, to companies and insured parties, and the
select between a public or private pension Reinsurance Brokers promote the placement of
fund. The contributions to the fund are made
reinsurance between insurance companies and
monthly and are discounted from the salary
reinsurance companies.
earned. Said sum is paid proportionately by the
employee and the employer in the proportion
established by the law. Companies for Capitalization of Savings
These companies also manage Voluntary Pension The main purpose of this kind of company is to
Funds. drive savings through the accrual in any form of
fixed amounts of capital, in exchange for one-time
or periodical disbursements. In certain cases,
Trust Companies saving customers are given the possibility to
receive reimbursements in advance, in the form of
These are companies which corporate object is, drawings, as defined by the specific plan under
exclusively, the conduction of trust business in their which said customers are enrolled.
different modalities. The commercial trust is defined
in the Colombian Commercial Code as “(…) a legal
business whereby a person, called trustor, transfers
one or more goods to another called trustee, who
agrees to administer them or transfer them in order
55
Foreign Exchange Agents monies arising from the enforcement of such
penalties will be accounted for as income by the
The Colombian foreign exchange market is made collective portfolio.
up of a wide diversity of exchange agents, including
money exchange offices. These legal entities Stepped collective portfolios: Those in which
perform specific exchange transactions, as subscribers are allowed to redeem their shares in
authorized by the Colombian Financial different occasions, based on the various terms
Superintendence. In order to carry out foreign previously agreed.
exchange operations legally, money exchange
offices are required to meet all minimum Closed collective portfolios: Those in which
requirements specified by Colombian laws. subscribers are not allowed to redeem their shares
during the period of validity, but rather at the end of
Other Mechanisms the collective portfolio‟s term.
A collective portfolio is a mechanism or vehicle of Institutions operating in the financial and insurance
fundraising or management of money or other sector and which, consequently, are subject to
assets, integrated via contributions of a plural surveillance by the Financial Superintendence, are
number of people. Resources must be managed in to be formally established only either as
a collective manner, in order to obtain collective corporations or as cooperative associations.
benefits.
Foreign investors may participate in the capital
Depending on the possibility of redemption of stock of financial institutions and insurance
subscriber‟s shares, collective portfolios are divided companies by subscribing or acquiring shares,
into three main categories: Open, closed, and bonds mandatorily convertible into shares or
stepped. corporate quotas of a cooperative nature, in any
proportion.
Open collective portfolios: Those in which
subscribers are allowed to redeem their shares at The Financial Superintendence of Colombia will
any time. However, according to the open collective make sure about the equity, professional and moral
portfolio‟s own set of rules, a minimum term of solvency of the foreign investor, as it does with local
engagement may be agreed on, in which case investors.
penalties will be applied to early withdrawals, and
56
There are minimum capital stock requirements – in required to open a representative office in
accordance with the type of institution – for the Colombia.
incorporation of these entities.
International financial organizations must establish
Both local and foreign investors are required to be a representation office in Colombia, which shall be
granted prior authorization by the Financial exercised by an individual, who has to take office
Superintendence in any of the following cases: before the Financial Superintendence. Said
condition can only be exercised in respect to a
In order to acquire 10% or more of the subscribed foreign organization and said person cannot be
shares, the capital or equity of any entity subject to either administrator, legal representative or
the monitoring by the Financial Superintendence of employee of insurance companies or insurance or
Colombia, whether carried out in one or several reinsurance brokers established in Colombia.
simultaneous or successive operations, whereby
said percentage in increased; failure to do so will 8.4 Authorities Governing Financial
result in penalty of nullity. Activities
Whoever wishes to own ten percent (10%) or more Banco de la República (Colombian Central
of the capital stock of an entity, must evidence that Bank) – As the country‟s central bank, Banco de la
he owns an equity equivalent to one point three República regulates the national currency
(1.3) times the capital said person has agreed to (Colombian Peso), foreign exchange activities, and
contribute to the new institution, including the latter, the credit industry: issues local currency; manages
and must evidence that at least one third (1/3) of the country‟s international reserves; acts as lender
the funds contributed are owned by him. of last resort; is the banker of credit establishments;
and, serves as the National Government‟s fiscal
To acquire directly or indirectly 5% or more of the agent. Banco de la República is a legal entity of
shares subscribed or of the bonds mandatorily public law and, being a fully independent agency by
convertible into shares of a state financial entity in a constitutional order, operates under its own
privatization process. The same authorization must regulatory system.
be obtained when, having a percentage equal to or
higher than the one indicated, the same can be Ministry of Finance and Public Credit – It
increased as a consequence of the operation. participates in the regulation of financial matters,
stock market, insurance and other matters related
In order to acquire, directly or indirectly, 5% or more to the management, development and investment
of the shares subscribed or of the bonds of funds borrowed from the public. To this effect, it
mandatorily convertible in shares of a state financial has been made responsible for establishing
entity. prudential regulations on financial matters, credit
limits and other limits related to the concentration of
Opening a Representative Office the credit risk.
57
with the follow up, monitoring and supervision in 8.6 Loan Institutions and Similar Entities
respect to the agents who act in said market in
order to protect the interest of investors and monitor Multibanking – Structure of Economic
the transparency of the market. Among the Conglomerates
essential tasks of the monitoring and supervision
carried out, we must emphasize the eventual As of the enactment of the provisions in Law 45 of
information that must be supplied to that entity 1990, the internal structure of the Colombian
when any transaction that affects the value of the Financial System runs on a multibanking (or
papers negotiated in the market, such as shares of “universal banking”) scheme, through economic
financial institutions, is to be carried out. conglomerates conformed by multiple financial
institutions that provide services as specified by
Guarantee Fund of Financial Institutions – law. Said structure allows and promotes strategic
FOGAFIN – Entity in charge of organizing and alliances of financial institutions (subject to the
developing the deposit insurance system. It helps to Financial Superintendence‟s supervision and
strengthen the equity of financial institutions and control), as well as merger, acquisition and
exercises a follow up of the liquidation processes of conversion processes involving financial
financial institutions and insurance companies. In institutions. Furthermore, economic conglomerates
this respect, it is important to emphasize that the have been legally acknowledged as groups of
salvage program of the financial sector, developed companies with certain bonds and relationships that
by the National Government through FOGAFIN, collectively operate under special legal conditions
permitted the control and suspension of financial (that is, consolidation of financial statements, or
risks that existed during the period 1998-1999, conditions under which the Colombian Financial
eliminating thus the potential crisis of the system to Superintendence may perform supervisory
which the national economy could have been activities).
subject. Currently, the support to financial
institutions is made through the design and Major Characteristics of the Financial System
implementation of mechanisms that cooperate with Supervision
the entities registered in the solution of solvency
problems that are recoverable either through capital The current situation of the Colombian financial
or with loans. system, in terms of financial supervision, is
described below:
8.5 Authorities Governing Investment
Operations Financial supervision is based on the different
risks to which financial institutions are
From the Perspective of Fund Transfers: exposed. Top risks financial institutions have to
deal with are: i) credit risks; ii) operational and
The Central Bank (Banco de la República): technological risks; iii) money laundering risks;
Regulates the Colombian Foreign Exchange iv) corporate governance risks; and, v) market
Regime. risks.
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About Preventive Regulation As of March, 2002, all credit establishments
are required to adopt an internal credit-risk
Preventive regulation allows new entities to detection system known as SARC (acronym in
enter the Colombian financial system, provided Spanish for Credit Risk Administration
such new entities comply with certain System).
requirements, in terms of their capital equity
and their capacity to perform. As of July, 2007, all financial institutions are
required to adopt an Operational Risk
Likewise, the Colombian Financial Administration System.
Superintendence (a public entity empowered to
authorize any person or entity to own a share As of April, 2007, the Colombian Financial
of the capital stock of any company subject to Superintendence instructs on the
its surveillance and control) thoroughly administration of money laundering and
assesses the financial soundness and good terrorism financing risks, defining the minimum
reputation of any potential new shareholder. parameters that financial institutions must
observe while deploying and implementing the
Loan institutions are required to have a SARLAFT (acronym in Spanish for Money
minimum solvency margin of nine-percent Laundering and Terrorism Financing Risk
(9%). Solvency margin is defined as a ratio Administration System).
(risk-weighted assets vs. technical equity)
applicable to loan institutions. Other 8.7 Essential Requirements for permanent
parameters apply to financial service and accompanying to the current or future
insurance companies. Investors by entities under supervision of
the Financial Superintendence of
Loans to natural persons shall not exceed ten Colombia.
percent (10%) of the technical equity, or
twenty-five percent (25%) of said equity,
whenever covered by admissible guarantees. Support in the transfer and
management of investment resources.
Preventive supervision is further applied to
cash availability, exchange rate, and interest Support and accompanying in obtaining
government authorization from
rate risk levels of financial institutions.
Financial Superintendent.
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Contacts
Pedro Sarmiento Diego Franco
Socio Director Tax & Legal Socio de Tax & Legal
psarmiento@deloitte.com dfranco@deloitte.com
Andrés Parra
Socio de Tax & Legal
aparra@deloitte.com
Deloitte Colombia
Carrera 7 No. 74 - 09, Tel: +57 (1) 54 61810 - 54 61815 Fax: +57 (1) 21 78088, Bogotá; Calle 76 No.
54 - 11 Of. 1101 Tel: +57 (5) 36 08306 Fax: +57 (5) 36 08309, Barranquilla; Calle 64N No. 5B - 146
Sector C. Piso 3, Tel: +57 (2) 52 47027 Fax: +57 (2) 52 44836, Cali; Calle 10 Sur No. 43A - 49, Tel:
+57 (4) 31 38899 Fax: +57 (4) 31 39343, Medellín.
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