How to Set Up an Entity in Colombia

Setting up a legal entity in Colombia gives you direct access to one of Latin America’s largest markets. A local company lets you sign contracts, open bank accounts, invoice in Colombian pesos, and hire employees under local law.

The entity setup process is bureaucratic but manageable: documents must be in Spanish and you must stay on top of tax and labor compliance. In return, the popular Simplified Stock Company (SAS) structure offers limited liability, flexible governance, and no minimum capital requirement.

Disclaimer: This content is for informational purposes only and does not constitute legal, tax, or financial advice. Always consult official sources before acting.

What does “opening an entity” mean in Colombia?

Opening an entity means incorporating a local company (usually a Simplified Stock Company (SAS) ), registering it with the Chamber of Commerce, obtaining a Tax ID (NIT) and tax registration (RUT) from DIAN (the tax authority), and completing social security and municipal registrations. Once these are done, the company can operate legally in Colombia.

Entity overview in Colombia

Step-by-step guide: How to open an entity in Croatia

Step 1: Choose the right structure

Most foreign companies choose an SAS because it:

• Allows a single shareholder.
• Has no minimum capital.
• Can operate with simple governance (no board required by default).

Alternatives like a Limited Liability Company (Ltda.), a Corporation (S.A.), or a branch may fit special cases but usually involve more requirements.

Step 2: Check and reserve the business name

• Use the RUES (Registro Único Empresarial y Social) search to confirm your desired name is not already registered or confusingly similar.
• The name must include the company type (e.g. “S.A.S.”).
• You can usually reserve the name for a short period so it is held while you finalize documents.

Step 3: Prepare incorporation documents (estatutos)

Draft the company’s bylaws (estatutos) and other required documents. The bylaws are the foundation of the SAS and must be written in Spanish, detailing the company name, purpose, legal address, share capital, shareholder information, management structure, and any special provisions (such as restrictions on share transfers or arbitration clauses).

As well, prepare your Chamber of Commerce forms, listing the company’s legal representatives and their acceptance of the role, and the Single Business Registration (RUES) form.

For a standard SAS funded with cash:

• Incorporation can typically be done by private document (no public deed), which simplifies the process.
• Powers of attorney may be needed if shareholders are abroad.
• Foreign documents (e.g. certificates of good standing, powers of attorney) must normally be apostilled and translated into Spanish.

Step 4: Register the company with the Chamber of Commerce

File the signed bylaws and forms with the Chamber of Commerce in your chosen cityThis filing can often be done online via the VUE portal or in person at the Chamber. Once approved, the Chamber issues a Certificate of Incorporation / Legal Existence and Representation confirming the SAS is formed.

In many cities, your company details are sent to DIAN (the tax authority) to speed up tax registration.

Step 5: Obtain the company Tax ID (RUT / NIT) from DIAN

After the commercial registration, the company must be registered with the DIAN (Dirección de Impuestos y Aduanas Nacionales), Colombia’s tax authority, to obtain its tax identification number. The tax number, called NIT (Número de Identificación Tributaria), is essentially the company’s tax ID and is issued along with a RUT (Registro Único Tributario) which is the tax registration certificate.

The NIT must appear on invoices and tax filings. Foreign shareholders and legal representatives may also need individual Colombian tax IDs.

Step 6: Open a corporate bank account

With your company officially formed and tax-registered, you will likely want to open a corporate bank account in Colombia to manage local finances. Banks usually request:

• Certificate of Incorporation from the Chamber of Commerce.
• RUT showing the company’s NIT.
• Identification and tax IDs of the legal representative and account signers.
• Additional KYC information for foreign shareholders/directors.

Once open, the account can receive capital contributions and pay local expenses, suppliers, and payroll.

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Post-registration obligations

After your Colombian entity is set up, there are several ongoing obligations and next steps to keep the company in good standing:

Municipal registrations

Depending on location and activity, you may need to:

• Register for local business taxes such as Impuesto de Industria y Comercio (ICA) with the city tax office.
• Obtain any municipal operating permits for physical premises.

Social security and payroll

Before hiring employees, your company must enroll in the social security system. This involves signing up with a pension fund, a health insurance fund (EPS), an occupational risk administrator (ARL), and a family compensation fund (Caja de Compensación). These are typically private or semi-private entities. You will use the integrated PILA system or payroll software to contribute monthly social security contributions and withhold and pay employees’ contributions.

Colombian law also requires:

• A 13th-month bonus (paid in two installments).
• Statutory vacation (usually 15 working days per year).
• Other mandatory benefits depending on salary level and sector.

Accounting and bookkeeping

• Keep accounting records in Spanish and in Colombian pesos.
• Apply Colombian accounting standards aligned with IFRS.
• Prepare at least annual financial statements (balance sheet, income statement, notes, etc.).

Many companies hire a local accounting firm to handle bookkeeping, tax filings, and correspondence with DIAN.

Annual renewal and corporate obligations

Each year, companies must:

• Renew the commercial registration with the Chamber of Commerce (fee based on company assets; usually due by March 31).
• Hold at least one Annual General Meeting of Shareholders to:
  • Approve financial statements.
  • Decide on profit distribution.
  • Appoint or confirm the legal representative and any statutory auditor.
• File required tax returns (corporate income tax and others) by the deadlines set by DIAN.

Changes to shareholders, directors, or bylaws must be registered with the Chamber of Commerce.

Foreign investment registration

If the company has foreign shareholders or receives capital from abroad:

• The foreign investment must be registered with the Banco de la República (Central Bank)
• This is typically done via Form No. 4 “Declaration of International Investment” submitted through the local bank

Taxes and financial considerations

Corporate income tax

• The general corporate income tax rate is 35% on taxable profits for local companies.
• Tax is calculated on accounting profits adjusted for tax purposes.
• Certain sectors and Free Trade Zone users may qualify for lower rates.
• Dividends to non-resident shareholders are generally subject to withholding tax in addition to corporate tax.

VAT (IVA)

• Standard rate: 19% on most goods and services.
• Some goods/services are taxed at 5% or 0% (including many exports).

Payroll taxes and social contributions

Approximate employer costs (in addition to gross salary):

• Around 20–22% for social security (pension, health, labor risk).
• Around 9% for other payroll contributions (training and welfare funds, compensation funds, etc.).

Total employer burden is roughly 29%–30% of payroll, plus:

• Mandatory bonuses.
• Vacation pay.
• Possible severance or other statutory benefits depending on contracts and terminations.

Accounting standards and audits

• Colombian companies are required to keep accounting records and prepare financial statements in line with International Financial Reporting Standards (IFRS).
• Some companies must file financial statements with regulators or the Chamber of Commerce.

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Expand internationally with Deel

Whether you’re hiring through an EOR or establishing your own local entity, Deel’s all-in-one platform gives you everything you need to expand into Colombia—quickly, compliantly, and with confidence. From market entry to ongoing operations, Deel helps you hire, onboard, and manage teams seamlessly from day one.

With Deel, you can:

• Test new regions using Deel’s local entities through our Employer of Record service—hire employees compliantly, delegate payroll and taxes, and access localized employment contracts.
• Open entities with Deel Entity Setup, where our team manages everything—from incorporation and tax registration to coordination with local experts.
• Centralize your compliance and records with Deel Entity Management, including automated filings, calendar reminders, and visibility across all entities.
• Integrate with Deel Payroll and Deel HR for compliant payments, benefits, and workforce oversight—all in one platform.

For companies transitioning from the EOR model to owned entities, Deel ensures a smooth handover and consistent compliance every step of the way. Enter new markets, onboard talent, and manage your global workforce—all through one unified platform.

FAQs

How long does it take to open an entity in Colombia?
Roughly 1–2 weeks from submitting complete documents, assuming timely apostilles/translations and no issues with name or documentation.

What is the minimum capital required for an SAS?
There is no legal minimum capital. Legally you can start with a symbolic amount, but most founders choose a more realistic capital level to cover initial costs and show substance.

Can foreign companies own 100% of a Colombian entity?
Yes. Colombia allows 100% foreign ownership in most sectors.

Do I need a local director or representative?
No, the legal representative can be a foreigner. They will need a Colombian tax ID and, if residing in Colombia, an appropriate visa. Some companies still appoint a local representative for convenience.

Can I hire employees before the entity is fully registered?
Not directly. To put employees on your own payroll, you need the entity, NIT, and social security registrations. However, you may use an Employer of Record service (such as Deel’s EOR) to hire talent in Colombia immediately, even while your entity setup is in progress. The EOR would employ the workers on your behalf, so you can start operations without waiting for the entity to be ready.

Can Deel help me open an entity in Colombia?
Yes. Deel Entity Setup manages the end-to-end process — from incorporation and registration to ensuring ongoing payroll compliance — in over 100 countries (Colombia included). Deel’s local experts handle the paperwork, filings, and legal requirements on your behalf, keeping you informed at every step.

Can I switch from Deel’s EOR to my own entity later?
Yes. Many companies start hiring through Deel’s EOR and later transition to their own entity. Deel supports seamless transitions when you’re ready to move employees onto your own payroll.