Colombia

Registrations and Establishing an Entity

All companies must establish a legal entity to employ staff and process payroll. The three main entity types are:

• Limited Liability Company (LTDA) – 2 to 25 shareholders, full capital at incorporation
  
  
• Corporation (SA) – at least 5 shareholders, public deed required
  
  
• Simplified Joint Stock Company (SAS) – only one shareholder needed, no corporate purpose declaration required
  
  

Registration involves submitting bylaws, legal documentation, and obtaining approval from the Chamber of Commerce, Tax Authority, and relevant municipal bodies.

Banking

An in-country bank account is mandatory for payroll and tax purposes. Banks typically operate Monday to Friday from 09:00 to 16:00. In some regions, afternoon hours and Saturday mornings are common.

Working Week

Working hours in Colombia are being progressively reduced:

• Up to June 2025: 46 hours/week
  
  
• July 2025 – June 2026: 44 hours/week
  
  
• From July 2026: 42 hours/week
  
  

Work can be distributed over 5 or 6 days. Night shifts (22:00–06:00) are paid at a 35% premium. Flexible and part-day schedules are allowed, provided they do not exceed 10 hours per day.

Employment Law

Holiday Accrual
Employees are entitled to 15 paid vacation days after one year of service. Pro-rata entitlement is calculated at termination. Colombia also observes 18 paid public holidays per year.

Maternity Leave
Female employees receive 18 weeks of paid maternity leave (1 week pre-birth, 17 post-birth).

Paternity Leave
Fathers receive 2 weeks of paid leave, with options for shared parental leave where part of the mother’s entitlement is transferred.

Sick Leave
Employees receive two-thirds pay during the first two days. From day three onward, employers may reclaim salary from social security. Work-related injuries receive 100% salary compensation.

National Service
There is no mandatory military or national service in Colombia.

Tax & Social Security

The tax year runs from 1 January to 31 December.

Income Tax
Residents pay tax on global income. A person is considered a resident if they spend more than 180 days in Colombia during the fiscal year. Non-residents are taxed on Colombian-sourced income only. Personal income is subject to progressive tax rates, and filing is required for earnings above the local threshold.

Social Security Contributions

Employers must register with all relevant authorities and remit payments monthly.

Payroll

Online payslips are permitted in Colombia. Employers must retain payroll records for a minimum of 20 years.

Payslip Example

Reports

Monthly and annual payroll reports must be submitted to tax, health, and pension entities. Social security enrolment is mandatory on the first day of employment.

Reporting

Authorities must receive monthly payroll and tax declarations. Employers are also responsible for reporting employee joins and exits.

New Employees

Employees must be hired under a written contract, registered for social security, and assigned to a pension fund and health provider. A mandatory medical exam is required three days before the start date. For foreign hires, registration with government systems (RUTEC and SIREC) is compulsory.

Leavers

Final pay must be issued within 10 calendar days of the termination date. Dismissal without cause requires prior notice or equivalent payment in lieu. Authorities must be informed of all terminations.

Employee Benefits

Additional benefits like performance bonuses, transport, meals, and healthcare contributions are common. However, variable payments should not exceed 40% of total compensation unless structured as part of the formal salary.

Expenses

Expenses are either paid directly by the company or reimbursed to the employee. Valid documentation is required for tax compliance.

To work in Colombia, foreign nationals must obtain a visa aligned with their intended activity:

• Visitor Visa (V) – For short-term business without permanent establishment
  
  
• Migrant Visa (M) – For long-term temporary residents
  
  
• Resident Visa (R) – For permanent stays
  
  

Only holders of M or R visas may work legally. Applications require a job offer and submission of supporting documents, including employment contract, passport, bank statements, and photos. A foreigner's ID card is required for stays longer than three months. Employers must also report all foreign hires and leavers to the immigration and labour authorities.

Employment terms such as notice periods and occupational risk insurance vary depending on employment type and location. Regulated professions may require additional licensing or registration. Employers hiring from abroad must assume repatriation costs for the employee and family.

Further Information

For more information, or assistance with Colombia Tax inquiries please contact: gi@activpayroll.com

About This Payroll and Tax Overview

Please note that this document gives general guidance only and should not be regarded as an authoritative or complete statement of the law, regulations or tax position in any country. You should always seek specific advice for each specific situation. This document should not be relied upon as professional advice and activpayroll accepts no liability for reliance on its contents.