COLOMBIA: Emerging Opportunities

Transcription

1 COLOMBIA: Emerging Opportunities The Legal Standpoint GUTIERREZ MARQUEZ ASESORES Legal Accounting Finance 2011

2 1. Foreign investment 2. Immigration 3. Corporations and taxes 4. Property ownership 5. Money transfer 6. Running a business in Colombia

3 Increase of macroeconomical credibility Tremendous improvement of security conditions Tourists tripled between 2002 and 2009 (1.7 million). Since 2000 international flights to Colombia increased 120% In the last 10 years the GDP per capital has grown more than 140%. Foreign investment has multiplied by 4 in 6 years. From 2007 to 2011, Colombia jumped 40 positions in the Doing Business Index and is currently 39 out of 181.

4 1. Foreign investment 2. Immigration 3. Corporations and taxes 4. Property ownership 5. Money transfer 6. Running a business in Colombia

5 Types: foreign direct investment (FDI) and portfolio investment. FDI constitutes (among others): Real estate purchase as well as any contribution that represents capital on a Colombian company. Foreign investor: any individual or corporation person holding an FDI or portfolio investment in Colombia, who also meets the requirement of being a non resident, Non Resident: any foreign company or any foreign individual whose permanence in Colombia hasn t exceeded 180 days, continiously or discontinuously, during a period of 12 months.

6 FDI does not require of governmental authorization, however, it must be registered upon Colombia s Central Bank as a necessary condition for the foreign investor to obtain foreign investment rights, such as the rights to: Reinvest profits Remit abroad profits generated by the investment Remit abroad any proceeds of the investment s reduction or liquidation

7 According to the Doing Business Report, 2011, Colombia is ranked 6th in the world and 1st in Latin America in the Investor Protection index. Principles of Equal Treatment and Stability.

8 1. Foreign investment 2. Immigration 3. Corporations and taxes 4. Property ownership 5. Money transfer 6. Running a business in Colombia

9 Colombia offers a broad array of migratory benefits from which INVESTORS and RETIREES can elect, depending on their circumstances. All visas are renewable as long as their fundaments are maintained. VISA TYPE CATEGORY BUSINESS WORK VISA TEMPORARY SPECIAL INVESTMENT VISA SPECIAL PENSIONER VISA SPECIAL CAPITALIST VISA RESIDENT INVESTMENT VISA

10 Allows multiple entrances for up to 4 years. Granted to: Legal representatives, directors, managers or executives of foreign companies that share an economic bond with local companies or foreign companies already establised in Colombia and that pretend to develop business related activities. Merchants, manufacturers, or businessmen with the purpose of establishing commercial presence in the country.

11 Allows multiple entrances for a period that can go from 1 to 2 years. Granted to foreigners that pretend to work in Colombia and are effectively hired by Colombian companies to perform a job that requires a professional expertise or to provide technical training.

12 Allows multiple entrances for a period up to 1 year. Granted to foreigners who receive a monthly pension provided by a competent authority, Government or private/public company, in a quantity equivalent to at least 3 monthly minimum Colombian wages (around USD 900).

13 Allows multiple entrances for a period up to 1 year. Granted to foreigners who receive a monthly rent of no less than 10 monthly minimum Colombian wages (around USD 2.800), certified by the public entity, financial institution, insurance or private company that pays the rent.

14 Allows multiple entrances for an indefinite period (a verification of the visa s fundament is done after 3 years). Granted to foreigners that perform: A real estate investment for USD or more A capital contribution to a Colombian corporation for USD or more

15 Allows multiple entrances for a period that can go from 1 to 2 years. Granted to foreigners that perform: A real estate investment for USD or more A capital contribution to a Colombian corporation for at least 100 Colombian Minimum Wages (around USD )

16 1. Foreign investment 2. Immigration 3. Corporations and taxes 4. Property ownership 5. Money transfer 6. Running a business in Colombia

17 CORPORATIONS are the most popular investment vehicles in Colombia. BRANCHES of foreign companies and FIDUCIARY SCHEMES are other commonly constituted vehicles. Benefits of incorporating: anonimity, liability limitation, continuity.

18 The most popular type of corporation in Colombia is the S.A.S. It is prefered by businessmen and investors due to the flexibility with which its internal structure can be designed: 1 shareholder is enough Unlimited term and indefinite object No need of Board of Directors Constituted by private document (no need of Notary)

19 Incorporating is a matter of: Defining company bylaws: name, internal rules, capital structure, domicile and managers Registering at the Chamber of Commerce (takes 1 day) Obtaining a bank account (takes 1 hour) Capitalizing the company and starting business endeavors.

20 Ordinary corporate taxes and rates are: Income tax: Calculated as a depuration of brute income, minus costs, expenses and/or deductions. Filed once per year. Rate: 33%. Occasional earnings (Capital Gains): taxes income generated by the sale of a capital or fixed asset owned by a corporation for more than 2 years. Rate: 33%. Commerce and Industry Tax: Taxes the brute income of corporations. Rate: depends on the commercial or industrial activity, range from 0.2% to 1%. Sales tax: taxes the sales of goods, services and imports. Rate: depends on the nature of the good/services. Many exemptions apply. General rate is 16%.

21 Not starting a business? Don t discard incorporating just yet. Law 1429 of 2010: starting December 2010, small companies (those with less than 50 employees and less than Colombian minimum wages [1.4 million USD] worth of assets) shall pay Income Tax progressively as follows: For the first 2 years: 0% of the rate For the 3rd year: 25% For the 4th year: 50% For the 5th year: 75% For the 6th year on: full 100%

22 Taxes all income earned during the fiscal year that result in contributor s net increase of assets, provided that they have not been expressly excluded and considering the costs and expenses incurred to produce such income. There are 2 criteria that help determine when individuals (more precisely investors and retirees) are obligated to file/pay income tax in Colombia: a. Income obtention: individuals that obtain gross incomes for more than $ within a fiscal period (aprox USD) are obligated to file and pay income tax at a variable rate that goes from 1% to 30%. b. Asset acquisition: individuals with gross estate exceeding $110,498,000 (aprox USD) within a fiscal period are obligated to file taxes but not to pay. Payment is triggered when gross estate exceeds $ (aprox USD).

23 1. Foreign investment 2. Immigration 3. Corporations and taxes 4. Property ownership 5. Money transfer 6. Running a business in Colombia

24 Foreigners investing in real estate in Colombia can rest assure that: Our Constitution guarantees protection to private property. Property ownership/purchase does not require authorization. Foreigners are free to own real estate in Colombia. No discriminatory / preferential treatment applies in relation to nationals. Property rights entitle owners to: 1. Use the property according to its destination. 2. Enjoy the property and benefit from its profits. 3. Dispose of the property (destroy, modify, change, sell).

25 Purchasing Real Estate in Colombia is easy, fast, safe and inexpensive (Official fees!). The customary multi step process followed consists in: 1. No lien title study of the property 2. Promise of sales contract: Private contract between parties used to solidy the compromise prior to closing 3. Sales contract: Implies the signature of a public document (deed). Closing takes place at a Notary. 4. Registration: Sales deed must be registered upon the Public Instruments Office.

26 Real Estate purchase implies the following official fees: Notary fees: 0,5% of the property s fiscal value (deed value). Buyer and Seller customarily pay them by half. Departmental Rents: 1.2% of the property s fiscal value. Parties also pay it by half. This is a tax charged by the Department of Antioquia. Registration at the Public Register Office: 0.5% of the property s fiscal value. Only the Buyer pays it. Overall estimate for Buyer: 1.35% of property s fiscal value

27 1. Foreign investment 2. Immigration 3. Corporations and taxes 4. Property ownership 5. Money transfer 6. Running a business in Colombia

28 Entering and exiting money into and from Colombia is simple. However specific knowledge is required. A strict although transparent multi step process needs to be followed to successfully complete a money transfer from a foreign destination

29 1. Create a landing account: Banks and securites brokers are the best institutions to work with. No Colombian ID needed! 2. Wire transfer the funds from abroad. 3. Convert the dollars into pesos. Mind the exchange rate. Conversion fees apply (More funds = less fees). 4. Deliver a currency exchange form: the type of form depends on the destination of the transferred funds. 5. Obtain clearance: for the converted funds to be credited to the landing account the client needs to prove their legal origin. Ordinary proofs are: copy of tax return, copy of bank statements, labor/accountant certificate.

30 1. Foreign investment 2. Immigration 3. Corporations and taxes 4. Property ownership 5. Money transfer 6. Running a business in Colombia

31 Vacation period: 15 working days per year. Maximum working hours: 8 ordinary hours + 2 extras per day. Both nationals and foreigners employed in Colombia are obligated to affiliate to the social security system. A rough illustration of its cost for employers: Concept Percentage Salary 100% Transport subsidy 11.92% (When salary < 2 C.M.W ) Health system 8.5% Pension system 12% Professional risks system 0.522% Comfama 9% Service Premium 8.33% Layoffs 8.33% Layoffs interests 1% Total 159.6%

32 As in many other aspects, idiosyncracies also differ in this regard. Given the Government s conception of how taxes should be collected, company interaction with Government differs from those of other countries. Apart from the annual income tax declaration, companies are expected to present a monthly withholdings declaration and a Sales Tax declaration every two months. That means 19 interactions and therefore more accounting responsibilities. Professional advice is recommended.

33 GUTIERREZ MARQUEZ ASESORES Legal Accounting Finance Address: Calle 7 Sur No Office Medellín, Colombia. Tel: (57-4) Fax: (57-4) juandgutierrez@gutierrezmarquez.com