Our guide to Payroll in Colombia

Doing Business in Colombia

Investing in Colombia

The Government of Colombia encourages foreign investment, and the country is becoming one of the best markets in Latin America to invest. The country has positive indicators, and its macroeconomic policies have been highlighted as positive by observers of the macroeconomic situation as stated by the English magazine The Economist in its December 2024 edition, which highlights it as the sixth economic model worldwide, among the countries that are part of the Organization for Economic Cooperation and Development (OECD). However, domestically, there is some political uncertainty largely due to the country's first progressive leftist government in its history and because, among other things, the country is highly dependent on its natural resources (including oil, coffee and coal), its cost-competitive labor force and a booming tourism sector.

Colombia has the advantage of being the only country in South America with coastlines on both the Pacific and Atlantic oceans, which contributes to its improved access to the global market. Although Spanish is the official language of Colombia, English is also widely spoken, especially in the larger cities such as Bogotá and Medellín.

Basic Facts about Colombia

Full name: Republic of Colombia

Population: 53 million (World Bank, 2024)

Capital City: Bogotá

Main exports: Crude oil and coal briquettes, coffee and spices, gems and precious materials, plastics, fruits and nuts.

Main language: Spanish

Currency unit: Colombian Peso

Internet domain: .co

International phone prefix: +57

How to say:

Hello: Hola

Good morning: Buenos días

Good evening: Buenas noches

Do you speak English? ¿Habla usted Inglés?

Goodbye: Adiós

Thank you: Muchas gracias

See you later: Hasta luego

Dates and numbers

Dates are usually written following the sequence of day, month and year. For example, 1 April 2020 or 01/04/2020. Roman numerals are often used to represent the month. For example, 01/IV/2020.

Numbers are written with a period to denote thousands and a comma to denote fractions. For example, $3.000,50

Registrations and Establishing an Entity

A company must have a legal entity established in order to process a payroll

The most common types of entities in Colombia are:

• Limited Liability Companies (LTDA)
• Corporations (SA)
• Simplified Joint Stock Companies (SAS)

Limited Liability Companies (LTDA)

The company must normally be constituted by public deed and must have a minimum of two shareholders with a maximum of 25 shareholders. It is not mandatory for a Limited Liability Company to have a board of directors, but the corporate purpose of the company must be clearly defined. The capital of the company must be fully paid up at the time of incorporation.

Necessary documentation:

• Bylaws approved by resolution of the Board of Directors
• Legalized and apostilled copies of the shareholders' governing documents.
• PoA

Local registries required:

• Notary's office
• Local Chamber of Commerce
• National Tax Authority
• Municipal tax authority

Corporations (SA)

The corporation must be incorporated by public deed and must have a minimum of five shareholders, each shareholder is liable for the amount of the capital contribution represented by negotiable shares.

Required documentation:

• Bylaws approved by resolution of the Board of Directors
• PoA

Local registries required:

• Notary's office
• Local Chamber of Commerce
• National Tax Authority
• Municipal Tax Authority

Simplified Joint Stock Companies (SAS)

The SAS is the most popular type of entity in Colombia and is particularly popular among large and small companies. The company can be incorporated by public deed or private document and only one shareholder is required. Unlike the two mentioned above, SAS is not required to declare the corporate purpose of its entity, which leaves the company free to carry out any lawful business activity.

Necessary documentation:

• Bylaws approved by resolution of the Board of Directors.
• PoA

Local registrations required:

• Local Chamber of Commerce
• National Tax Authority
• Municipal Tax Authority

Banking

It is mandatory to make payments to both employees and authorities from a bank account in the country.

Banks are generally open to the public from 09:00 to 16:00 from Monday to Friday in Bogotá and from 08:00 to 11:30 and from 14:00 to 16:30 in the rest of the country. Banks close at noon on the last working day of the month. Some banks are open from 9:00 to 12:00 on Saturdays.

Working Week

By law, the maximum time that a person can work in Colombia is:

1. July 2025 to June 2026: 44 hours per week.
2. From July 2026 onwards 42: hours per week.

These hours may be distributed over 5 or 6 days, as long as the rest of the day is respected. If an employee must work between 22:00 and 06:00, the remuneration must be 35% higher than the equivalent daytime wage. If agreed between the employee and the employer, the employee may have flexible working hours. No more than 10 hours must be worked in a day, four of which must be during the day.

Employment Law

Vacation Accrual / Calculations

In Colombia, an employee is entitled to 15 days of paid vacation per year once he/she has completed one year of service. In the event of resignation or dismissal, the number of days to which the employee is entitled must be calculated and paid (to the nearest whole number).

Example

3 months = 15 x 90/360 = 3.75 4 vacation days

6 months = 15 x 180/360 = 7.5 8 vacation days

9 months and 10 days = 15 x 280/360 = 11.6 12 vacation days

In Colombia there are 18 public holidays per year, anyone working on an official holiday will receive overtime compensation.

Maternity

Female employees are entitled to 18 weeks of paid maternity leave. The mother is entitled to one week's leave before childbirth and 17 weeks after childbirth.

Paternity

Employees are entitled to 2 weeks of paid paternity leave when their spouse or partner gives birth to or adopts a child.

The father may opt for shared leave in which the mother's leave time is partially carried over.

Sickness

The employee is entitled to 100% of his / her salary during the first two days of absence due to illness. After the third day, the employer may claim reimbursement from Social Security. It is necessary to obtain a medical authorization from a Colombian social security entity in order for the employee to collect sick leave.

If an employee is injured while working, he/she is entitled to 100% of his/her salary for the duration of his/her absence.

Tax & Social Security

The tax year runs from January 1 to December 31.

Income Taxes

Income Tax for Natural Persons

Residents in Colombia are taxed on worldwide income regardless of where it is generated. An individual is considered resident in Colombia if he/she spends more than 180 days in the country during the tax year. The first COP$6,000,000 approximately that a person earns is considered tax free although from COP$3,200,000 onwards he/she is obliged to file a tax return for this tax.>

Non-residents are only taxed on their income from Colombia. An individual is considered a non-resident if he/she spends less than 180 days in Colombia during the fiscal year.

Corporate income tax (ISR by its acronym in Spanish).

Companies incorporated in Colombia are taxed on their income worldwide. At present, the ISR rate for the fiscal year 2025 and subsequent years is 35%; a tax reform was in process for 2024, but it was not completed before the Congress of the Republic.

Social Security

Colombia has a mandatory social security system, both employers and employees are obliged to contribute to the system. Employers in Colombia must register with different entities that are part of the social security system. The following is a description of the entities and the contributions paid by the worker and the employer:

*The percentages may decrease depending on the characteristics of the company

** As of July 2025, the pension contribution will be distributed to the Public Fund (up to 2.3 SMMLV of income) and to the Private Fund the excess of the contribution.

Payroll

For the year 2026, the Statutory Monthly Minimum Wage (SMLMV) in Colombia was set at COP $1,750,905. Including the transport allowance of COP $249,095, the total base income for employees amounts to COP $2,000,000. This value applies to full-time working schedules from 1 January 2026.

In Colombia, it is legally acceptable to provide employees with online payrolls.

Reports

Payroll reports must be kept for a minimum of 20 years.

Payslip Example

New Employees

When a new employee is hired, the employer formalizes a written contract, after which the employee will be registered with the Social Security. The employee will choose among several health insurance plans and pension entities and must be enrolled in an occupational risk entity for professional and workers' risk insurance. The last step is for the employer to enroll the employee in the pension entity.

The above may seem simple, however, this is where the complexity of hiring a new start begins. All the above enrollments must be completed on the same day the new employee starts working for the company. All documents must be signed in person and on paper, no digital signatures are allowed when submitting the documents to the Social Security office.

In the case of foreign employees, they must be notified in the government systems: Ministry of Labor and Administrative Unit of Migration Colombia (RUTEC and SIREC by their acronyms in Spanish).

In addition to the above, the employee must undergo a mandatory medical examination by a physician (provided by the company) three days before starting work.

Colombia is somewhat open to hiring foreign employees and they have the same rights as Colombian employees. The Colombian immigration policy promotes the entry of foreign employees with capabilities to contribute to the development of economic, scientific, cultural or educational activities that may benefit the country.

If you are an employer and wish to hire a foreigner, you must follow the following steps:

• The employee must acquire a visa that allows him/her to develop the authorized activity, occupation or trade.
• Obtain the Foreigner identification card when their stay is equal to or exceeds three months.
• Inform the Administrative Unit of Migration Colombia and the Ministry of Labor about the hiring or admission and its withdrawal or termination of the contract, within 15 calendar days following the initiation or termination of work.

It is important to take into account that in the country there are some regulated professions that require a Special Temporary Registration granted by the Professional Councils for the exercise of the profession in each area of knowledge.

The employer or contractor must assume the return expenses of the foreign worker and his / her family or beneficiaries as long as the foreign worker is hired abroad to develop an activity in Colombia.

Dismissals / termination of employment

Severance payments must be made within 10 consecutive days following the employees’ last day of work. In the case of an indefinite term contract, payment must be made no later than the business day following the last day worked.

The employer may terminate the employment relationship without just cause. The employee terminated without just cause must be notified in advance. If the employee is paid weekly or at shorter intervals, 8 days' notice must be given. If the employee is paid less than once a week or has been with the company for more than one year, a minimum of 30 days is required, plus 3 days for each additional year of service in the company up to 90 days' notice.

During the notice period, employees may take paid leave of up to two hours per day. If the employer does not give the required notice, the employee is entitled to receive his normal salary during the required notice period.

Dismissal for just cause does not require prior notice.

Dismissals must be notified to the authorities.

Employee Benefits

Expenses

General expenses, fuel, performance bonuses, food bonuses, health bonuses, among others, can be managed as direct payment from the company or as a payment to the employee. Only extraordinary payments that do not exceed 40% of all payments made to the employee should be verified.

Visas & Work Permits

To work in Colombia, all business visitors must obtain a work visa. There are three visa options available:

Visitor's visa type “V”: for the visitor who is seeking to enter the country without permanent establishment.

Migrant visa type “M”: For those who are seeking to enter the country and live there on a temporary basis

Resident visa type “R”: For those who are seeking to settle in Colombia on a permanent basis.

Only M or R visa holders are allowed to work in Colombia and the visas are relatively easy to obtain once the person has accepted a job offer from a local employer.

Once the worker has signed a contract, the application process can begin. To apply for a visa, the following documents are required:

• Summary of the employment contract. Visa authorities may ask for the original if they need more information.
• Letter of motivation from the employer.
• Six months of bank statements.
• Photocopy of the first page of the applicant's passport. Passport photo with white background 3 cm wide and 4 cm high.

Key changes in labor law 2026

• The night shift now starts at 7:00 p.m
• 35% surcharge on ordinary hourly rate
• Progressive increase of the Sunday holiday surcharge from July 2026: approximately 90%, up to 100% in 2027.
• The labor reform incorporates new paid leave for workers (according to Law 2466 of 2025).The Colombian Ministry of Labor has intensified unannounced inspection, surveillance and control visits to verify compliance with the labor reform (Law 2466 of 2025)

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.