Managing payroll in Colombia can be challenging – especially with labor laws, taxes, and payroll changes each year. Many businesses choose to expand into Colombia by incorporation instead of opening a branch office. A Simplified Share Company (SAS) is a common entity choice for many companies, as it is easy to establish and begin operations.
The corporate tax rate is 33%, and the tax year follows the calendar year from January 1 – December 31st. Foreign-owned companies are only taxed on Colombian-generated income, but tax reform has required private equity firms to be taxed on global income earnings. Deadlines to file taxes are set yearly and depend on the type of taxpayer and tax ID number, but deadlines usually fall between April and May.
Payroll and Labor Considerations
- Employees can be hired for indefinite, fixed, or project-based contracts, and must receive pay monthly or every 2 weeks
- Collective Bargaining Agreements are formed company-wide, but only 4% of the labor force in Colombia uses collective bargaining. If more than 33% of the company employees belong to a trade union, the collective bargaining agreement of the union protects every employee of the company
- Companies have a mandatory pension contribution required that is submitted as part of the social security filing
- Foreign workers require a M-5 visa to work, and must provide a variety of employment documents including work contracts, bank statements
- The Unique Registry of Foreign Workers in Colombia (RUTEC) tracks labor immigration. This database must be used for all companies hiring foreign employees. Reporting to the Foreigner Information and Reporting System (SIRE) is also required
There are flexible funding options for payroll in Colombia. Blue Marble provides money movement services so you can fund payroll in USD and settle in the local currency (Colombian peso). If you have a local bank account, you can send funds in the local currency to the in-country provider for salary and statutory payments or pay employees directly from the account. Employers must pay employee income tax and corporate taxes directly.
Some of the year-end payroll reporting includes income tax certificates for each employee, payroll information sent to tax authorities, income tax deduction updates for each employee, and unemployment fund allocation for payment in February each year.
Blue Marble has simplified payroll in Colombia with one cloud-based platform to manage employees. View payroll costs in real-time with our customized reporting features, and our hybrid service model provides a dedicated US team and in-country experts in Colombia to help when questions come up. Let us help you simplify payroll and compliance in Colombia – click here to learn more.