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Hiring in Colombia
Colombia, officially known as the Republic of Colombia, is a country in South America. Bogota is the capital. Colombia is rich in natural resources, whereby some of its main exports are oils, distillation products, mineral fuels and agricultural products. Its main trading partners are the United States, China, the European Union and some Latin American countries. Global PEO or Employer of Record (EOR) play a pivotal role in providing companies with services related to hiring employees, and ensuring compliance with Colombia’s legal and tax regulations. Employment regulations including probation, holidays and termination are covered by the Labor Code. The Labor Code stipulates that employees are entitled to 15 days of paid annual leave for each year of service. Residents are taxed on their worldwide income, whereby non-residents are taxed on their Colombian source income. Global PEO’s facilitate companies by ensuring compliance with Colombia’s labor code and tax laws.
statutory labor requirements
Probation Period
- The maximum term of a probationary contract is two months.
Annual Leave
- Employers are required to provide 15 paid working days of annual leave for each year of service.
Public Holidays
- New Year’s Day (1st January)
- Epiphany (Three Kings Day) (6th January)
- Saint Joseph’s Day (23rd March)
- Maundy Thursday (9th April)
- Good Friday (10th April)
- Labor Day (1st May)
- Ascension (25th May)
- Corpus Christi (15th June)
- Sacred Heart (22nd June)
- Feast of Saints Peter and Paul (29th June)
- Independence Day (20th July)
- Battle of Boyacá Day (7th August)
- Assumption of Mary (17th August)
- Columbus Day (12th October)
- All Saints' Day (2nd November)
- Cartagena Independence Day (16th November)
- Feast of the Immaculate Conception (8th December)
- Christmas Day (25th December)
Maternity Leave
- Mothers are entitled to 14 weeks of paid maternity leave, two weeks before the birth and twelve after.
Paternity Leave
- Fathers are entitled to eight working days of paid paternity leave.
Sick Leave
- Employees are entitled to 2/3rd of their salary for the first two days they miss due to illness.
- From the third day and up to 180 days they get the same amount but from the social security system.
- If an employee is injured on the job, he/she is eligible for 100% of salary for the duration of his/her absence.
Work Hours
- In general, Colombia has a 48 hour working week.
- Depending on the business, people work five days for about 9.6 hours per day, typically Monday to Friday, or six days for eight hours a day, Monday to Saturday.
Overtime
- Overtime is limited to 2 hours per day and 12 hours per week.
- Overtime during the day is paid at a rate of 25% on top of the ordinary hourly rate.
- The working night is from 9:00 pm to 6:00 am; workers who ordinarily work during these hours must be paid 35% on top of the ordinary hourly rate.
- Overtime pay for night work is equivalent to 75% on top of the ordinary hourly rate.
Notice Period
- At least 15 days' written notice is required in cases of poor performance.
- In cases of misconduct or termination without cause, no notice is required, and such terminations can be effective immediately.
- For employees with a fixed term agreement, written notice is required at least 30 days prior to the agreement’s expiration.
Severance
- Unilateral termination without cause is lawful but will trigger severance obligations.
- For employees with an indefinite term agreement, such indemnification would be calculated as follows:
- For employees earning less than 10 minimum legal monthly wages (in 2020 COP$8,778,030), the compensation is 30 days of salary for the first year of service and 20 days of salary for each additional year of service (proportional to the fraction of a year)
- For employees earning 10 minimum legal wages or more, the compensation is 20 days of salary for the first year of service and 15 days of salary for each additional year of service (proportional to the fraction of a year)
- For employees with a fixed-term agreement, the severance would be equal to the salary owed to the employee until the term of the agreement expires.
- In no case can severance be less than 15 days of salary.
13th / 14th Month Pay
- Yes (Mandatory)
- There is a statutory requirement to pay the 13th month salary.
- 50% is paid in June and 50% is paid in December.
- Employees may receive an integral salary instead of the 13th month, that includes: fringe benefits and potential surcharges, such as overtime for evening hours, Sunday hours, public holiday hours, and extra-legal bonuses.
income tax
- Residents are subject to tax on their worldwide income.
- Nonresidents are subject to tax on their Colombian source income only.
- Foreigners are considered residents for tax purposes if they remain in Colombia for more than 183 continuous or discontinuous days during a consecutive 365-day period.
- Colombian citizens are also deemed to be tax residents if they meet additional conditions.
- Colombian-source income includes employment income attributable to services rendered in Colombia, regardless of where the payment is made.
- The following are the types of income included in the general income basket:
-
- Employment income: Income received for services performed in Colombia, no matter where the payment was received, salaries, wages, fringe benefits, commissions, and all income arising from the labor relationship.
- Capital income: Includes interest, financial income, royalties, rentals, and intellectual property (IP) income.
- Non-employment income: All type of income that cannot be classified in other baskets.
- There are no local taxes on individual income in Colombia.
|
Taxable income |
Marginal rate (%) |
Tax liability |
|
|
Over |
Not over |
||
|
0 |
1,090 |
0 |
0 |
|
1,090 |
1,700 |
19 |
(Taxable income or taxable occasional gain translated into TVU less TVU 1,090) x 19% |
|
1,700 |
4,100 |
28 |
(Taxable income or taxable occasional gain translated into TVU less TVU 1,700) x 28% + TVU 116 |
|
4,100 |
8,670 |
33 |
(Taxable income or taxable occasional gain translated into TVU less TVU 4,100) x 33% + TVU 788 |
|
8,670 |
18,970 |
35 |
(Taxable income translated into TVU less TVU 8,670) x 35% + TVU 2,296 |
|
18,970 |
31,000 |
37 |
(Taxable income translated into TVU less TVU 18,970) x 37% + TVU 5,901 |
|
31,000 |
And up |
39 |
(Taxable income translated into TVU less TVU 31,000) x 39% + TVU 10,352 |
deductible expenses
- Employees are not entitled to deduct business-related expenses from their employment income.
Personal Deductions
- Some donations are allowed as discounts, provided they are made to certain institutions dedicated to development of health, education, culture, religion, sports, scientific and technological research, ecology and the protection of the environment, or to social development programs of general interest. Most of these donations are limited with respect to their deduction.
- For mortgage interest paid in Colombia, up to a maximum of COP 42,728,000 for FY 2020 (TVU 1,200) is deductible annually.
- Healthcare payments (i.e. payments to companies who offer prepaid health and are monitored by the national health superintendent, payments for health insurance to insurance companies that are monitored by the financial superintendent) for the taxpayer, spouse, and children are deductible up to a maximum of COP 570,000 (TVU 16) monthly, an equivalent of COP 6,837,000 annually.
- For dependent deduction, the deductible limit is 10% of gross labor income until a maximum of COP 1,139,000 (TVU 32) monthly, an equivalent of COP 13,673,000 annually.
- Dependents are defined as:
- Children of the taxpayer until 18 years old.
- Children of the taxpayer between 18 and 23 years’ old who are studying in education institutions.
- Children of the taxpayer older than 23 years who have psychological and physical dependence.
- Spouse or living partner who has a psychological, physical, or economic dependence.
- Parents or siblings of the taxpayer who have a psychological, physical, or economic dependence.
|
Personal Deductions |
|
|
Charitable contributions |
Some donations are allowed as discounts, provided they are made to certain institutions dedicated to development of health, education, culture, religion, sports, scientific and technological research, ecology and the protection of the environment, or to social development programs of general interest |
|
Mortgage interest deduction |
For mortgage interest paid in Colombia, up to a maximum of COP 42,728,000 for FY 2020 (TVU 1,200) is deductible annually |
|
Healthcare expenses |
Healthcare payments for the taxpayer, spouse, and children are deductible up to a maximum of COP 570,000 (TVU 16) monthly, an equivalent of COP 6,837,000 annually. |
|
Dependent deduction |
For dependent deduction, the deductible limit is 10% of gross labor income until a maximum of COP 1,139,000 (TVU 32) monthly, an equivalent of COP 13,673,000 annually. |
immigration
- A Visitor Visa is granted to a foreigner who wants to visit Colombia several times or remain temporarily there without establishing himself or herself in Colombia.
- The validity of this visa can extend up to two years.
Visitor Visa for temporary services
- The Visitor Visa for temporary services is issued to the foreigners who wish to enter the country in order to provide temporary services such as specialized technical assistance, with or without an employment contract.
- The validity of this visa is 180 days, with multiple entries. An individual can request a visa for a shorter period if his or her activity in Colombia will be for a shorter period.
- It can be renewable.
- The relatives of a holder of this type of visa may apply for a beneficiary visa.
Visitor Visa for business purposes
- The Visitor Visa for business purposes is granted to a foreigner who intends to enter Colombia to conduct trade and business, promote economic exchange, make investments and create business.
- This visa is valid for up to three years with multiple entries, but the holder of this type of visa can stay only up to 180 continuous or discontinuous days per year in Colombia.
- An individual can request a visa for a shorter period if his or her activity in Colombia will be for a shorter period.
- The individual’s activities cannot generate the payment of wages in Colombia. It can be renewable.
- The relatives of a holder of this type of visa may not apply for a beneficiary visa.
Migrant Visa for Work
- The Migrant Visa for work may be granted to a foreigner who intends to enter Colombia under an employment relationship or civil contract to provide services to an individual or a corporation established in Colombia or to arts, sports or cultural groups entering Colombia for the purpose of providing public performances.
- For regulated professions (for example, engineering, accounting and business administration), foreigners must request special permits or licenses from the competent Professional Councils to exercise their professions in Colombia.
- To obtain these permits, they must provide their diplomas, legalized or apostilled with an official translation to Spanish.
- This type of visa is granted for the entire term of the contractual relationship.
- Therefore, the validity of the visa depends on this relationship, and its duration cannot exceed three years. It can be renewable.
- It allows multiple entries and the engagement in study activities by the holder
A Resident Visa
- It will be granted to a foreigner who wants to enter and/or remain in Colombia to establish himself or herself permanently in Colombia or establish his or her domicile in Colombia.
- This visa is granted for five years.
- A foreigner who holds a Resident Visa and leaves Colombia for two or more continuous years loses his or her visa.
- A foreigner can stay in Colombia for the entire term of the visa.
- A Resident Visa holder can perform any legal activity, including activities under an employment relationship or civil contract to provide services to an individual or corporation domiciled in Colombia.
- A resident visa is granted to the following individuals: -
- Returning Colombian
- A father or mother of a Colombian national by birth
- Has held a migrant (M) visa category 1 to 3 visa continuously and uninterrupted for two years
- Has continuously and uninterruptedly held for five years a M visa in category 4 to 11, which includes retirement, work and student visas
- Investment of over 650 times the minimum monthly wage in Colombia.
|
Type of Visa/ Permit |
Documentation |
Validity |
Eligibility |
|
Visitor Visa for temporary services |
|
180 days |
|
|
Visitor Visa for business purposes |
|
3 years |
|
|
Migrant Visa for Work |
|
Maximum 3 years |
|
value added tax
- The standard VAT rate for Colombia is 19%, with a reduced rate for basic foodstuffs; health services and insurance, a nil VAT rate for some goods.
- Exports of goods or services; tourism services for non-residents; some financial services and insurance; some agriculture supplies; electricity and natural gas supplies; medicines are all exempt.
|
VAT |
|
|
Standard Rate |
19% |
|
Reduced Rate |
5% |
|
Zero Rate |
0% |
withholding tax
Dividends
- Dividends received by a foreign entity or a nonresident individual from profits that were not taxed at the corporate level will be taxed at the general income tax rate, plus a special rate of 7.5%.
- If the dividends are paid out of profits that were taxed at the corporate level will be subject only to the 7.5% rate.
- Dividends received by a resident individual from profits that were not taxes at the corporate level will be taxed at the general income tax rate, plus a special rate of 0% to 15%, depending on their amount. If the dividends are paid out of profits that were taxed at the corporate level, they will be subject to the 0% to 15% rate.
- Dividends received by a resident entity that were not taxed at the corporate level will be taxed at the general income tax rate, plus a special rate of 7.5% if the dividends are paid out of profits that were taxed at the corporate level, they will be subject only to the 7.5% rate
- Dividends paid out of profits generated in 2016 and prior years are subject to different rules
Interest
- Interest paid to a nonresident is subject to a 20% withholding tax, unless the interest is related to a loan with a term of one or more years, in which case a 15% rate will apply.
- Interest payments made to a foreign entity on loans granted for the development of infrastructure programs that meet certain requirement are subject to a reduced withholding tax of 5%
Royalties
- Royalties paid to a nonresident company generally are subject to a final withholding tax of 20%
Technical Service Fee
- The withholding tax rate on technical service fees is 20%
Branch Remittance Tax
- Profits remitted abroad by a branch of a foreign company that have not been subject to tax at the branch level are subject to the general income tax rate for that year, plus a special rate of 7.5%.
- Only the 7.5% rate applies to profit remittances that have been taxed at the branch level.
- Special rules apply regarding profits generated in 2016 and prior years.
|
WHT |
|
|
Dividends |
|
|
Interest |
|
|
Royalties |
|
|
Technical Service Fee |
|
|
Branch Remittance Tax |
|
termination
- An employer may terminate their employment relationship with an employee without incurring liability if any of the justified causes established by law exist, which are mostly based on misconduct or poor performance.
- A disciplinary process should be conducted before any termination with cause.
- Terminations without cause are also valid but will trigger severance obligations.
- In a dismissal not for cause no notice is required, but the employee will be entitled to compensation (indemnification) for unilateral termination
- There are special cases where it is not possible to terminate an employment agreement without the authorization of the Ministry of Labor or a Labor Judge, even with just cause:
- Employees who are pregnant or on maternity leave (this protection extends to a father/domestic partner who is an employee when the mother is unemployed and included as her beneficiary with the social security authorities)
- Employees who are on health leave or have restrictions that substantially limit them to comply with their labor duties
- Employees who are less than 3 years away from complying with the requirements to obtain a retirement pension
- Also, union leaders cannot not be terminated unless a labor judge authorizes it and only for the just causes established in Colombian Labor Code and the company's policies and/or procedures
- At least 15 days' written notice is required in cases of poor performance.
- In cases of misconduct or termination without cause, no notice is required, and such terminations can be effective immediately.
- For employees with a fixed term agreement, written notice is required at least 30 days prior to the agreement’s expiration.
statutory benefits
- These are benefits as postulated by law
- These include probationary period, public holidays, annual leave, sick leave, maternity leave, paternity leave, overtime pay, notice period, severance pay, and 13th month pay
- Statutory benefits also include social security benefits
|
Statutory Benefits |
|
Probationary Period |
|
Public Holidays |
|
Annual Leave |
|
Sick Leave |
|
Maternity Leave |
|
Paternity Leave |
|
Overtime Pay |
|
Notice Period |
|
Severance Pay |
|
13th month pay |
|
Social Security Benefits |
payments and invoicing
- The tax year is the calendar year.
- Each year, the Colombian government establishes deadlines for filing income tax returns through the issuance of an Official Decree.
- The tax-filing dates for individuals are between August and October of each year, according to the last two digits of the Colombian tax identification number.
- Income tax liability on local employment income is generally satisfied by employers’ withholding of tax based on gross salary.
- However, income tax returns for 2019 must be filed by employees or self-employed professionals if their gross assets exceed UVT4,500 or if their annual gross income exceeds UVT1,400.
- Nonresidents do not need to file tax returns if tax is withheld from all income received during the year at nonresident tax rates.
- If nonresidents receive income from which tax is not withheld, they must file tax returns and meet the filing deadlines.
- The annual tax rate for nonresidents required to file a return is 35%.
- Individuals who are required to file tax returns must calculate and pay advance tax for the following tax year in accordance with the applicable rules under specific circumstances.
- Married individuals are taxed separately, not jointly, on all types of income.
ease of doing business
- The ease of doing business index is an index created by Simeon Djankov, an economist at the Central and Eastern Europe sector of the World Bank Group.
- Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights.
- According to the World Bank Colombia ranked 67th in the World in 2019 in terms of ease of doing business.
employee accruals
| Christmas Bonus% |
It is based on 50% of the salary of December |
| Christmas Bonus Over Vacations % |
0% |
| Severance per Year % |
Employees are entitled to severance pay equal to one month's pay after completion of one year of employment (8.33% of annual salary) |
| Vacations % | Employers are required to provide 15 paid working days of annual leave for each year of service (4.12% of annual salary) |
| Notice % |
Employees are entitled to 15 days of notice period for one year of service or more (4.28%) |
| Christmas Bonus Over Notifications% | 0% |
| Vacations Plus% | It is based on 50% of the salary of June 4.16% |
| Total percentage of Salary (yearly) | The total employment accruals as a percentage of salary per anum are equal to 24.89% |
employer accruals
Additional information (Country Accruals)
| Pension |
16.00% |
| Health Insurance Contribution |
12.50% |
| Solidarity pension fund |
2.00% |
| Maternity |
1.00% |
| Professional Risks |
8.70% |
| Christmas Bonus |
8.33% |
| Employers must pay the following social contributions for 2018: | |
| Pension Plan |
12 percent x monthly payroll |
| Medical Plan |
8.5 percent x monthly payroll |
| Family welfare fund |
9 percent of monthly payroll. It is important to clarify that employers who were subject to the income tax for equity CREE (for its acronym in Spanish. This tax was eliminated from FY2017), are not subject to this contribution for the employees whose monthly salary is lower than 10 monthly minimum wages (COP8,281,160, for FY19.) |
Employer Accruals Additional information
| Employment Accruals | ||
| Annual Leave | Employers are required to provide 15 paid working days of annual leave for each year of service. | This equals 4.1% (15/365 days) of annual income |
| Maternity Leave | Mothers are entitled to 14 weeks of paid maternity leave, two weeks before the birth and twelve after. | This equals 26.9% (14/52 weeks) of annual income |
| Paternity Leave | Fathers are entitled to eight working days of paid paternity leave. | This equals 2.2% (8/365 days) of annual income |
| Sick Leave | Employees are entitled to 2/3rd of their salary for the first two days they miss due to illness. From the third day and up to 180 days they get the same amount but from the social security system. If an employee is injured on the job, he/she is eligible for 100% of salary for the duration of his/her absence. |
This equals 66.6% of 0.55% of annual income |
| Overtime | Overtime is limited to 2 hours per day and 12 hours per week. Overtime during the day is paid at a rate of 25% on top of the ordinary hourly rate. The working night is from 9:00 pm to 6:00 am; workers who ordinarily work during these hours must be paid 35% on top of the ordinary hourly rate. Overtime pay for night work is equivalent to 75% on top of the ordinary hourly rate. |
Normal hourly rate is around 29,312.5. Overtime during the day is paid at an additional 7,328.125 COP. |
| Severance | For employees with an indefinite term agreement, such indemnification would be calculated as follows: • For employees earning less than 10 minimum legal monthly wages (in 2020 COP$8,778,030), the compensation is 30 days of salary for the first year of service and 20 days of salary for each additional year of service (proportional to the fraction of a year) • For employees earning 10 minimum legal wages or more, the compensation is 20 days of salary for the first year of service and 15 days of salary for each additional year of service (proportional to the fraction of a year) • For employees with a fixed-term agreement, the severance would be equal to the salary owed to the employee until the term of the agreement expires. • In no case can severance be less than 15 days of salary. |
This equals 8.22% (30/365 days) of annual income |
| 13th Month Pay | Employers are required to pay a “prima” or 13th-month salary to all employees in two installments; the first on the last day of June and the second within the first 20 days of December. The total of this payment is equivalent to a month’s salary. |
This equals 8.33% (1/12 months) of annual income |
| Social Security | Employers must make the following social security contributions: - Pension Plan 12%; Medical Plan 8.5%; Family Welfare Fund 9% | Average Salary is around 4,690,000 COP per month or 56,280,000 COP per anum |
