By Craig Dempsey
Nobody expected a worldwide pandemic during the first half of this fiscal year. And as countries around the world grapple with the impact of restrictions designed to slow the spread of the virus, the future of global business is unsure. Particularly here in Colombia with its closed borders, new temporary trade and restrictive travel policies.
Here are eight challenges and actionable solutions for those who, despite the difficult conditions, want to continue business in Colombia.
Opening a bank account
Despite the novel coronavirus pandemic, companies are still able to open a corporate bank account in Colombia, but it does depend on the bank.
Solution: Banks are working towards implementing fully online procedures to open a corporate bank account in Colombia. Many banks now accept digital copies of required documents to open a corporate account. Banks like Bancolombia, Banco de Bogotá, Itaú, AV Villas, Davivienda and BBVA, accept digital signatures for documents and online processes.
Minimizing costs & outstanding payments
It’s a crucial time for companies and entrepreneurs to do everything they can to manage business risks by minimising costs and receiving outstanding cash payments.
Solution: Try to negotiate rent, utilities, printing and cleaning contracts, and any other regular expenses you may be incurring that your company is not utilising or is unable to utilise at this time. Based on current observations in Colombia, companies may be able to negotiate between a 10-30% discount on these expenses.
Be persistent in following up on outstanding payments. Your legal representative can send a letter of demand to those who owe money to the company. Note that in Colombia, it is difficult to enforce contracts that are not written in Spanish. If needed, prepare English and Spanish versions of contracts.
Avoiding visa costs
Colombia’s decision to close its borders means that individuals doing business in Colombia on temporary visas are unable to leave, even though their visa may be expiring. Normally, people who stay in Colombia for more than 183 days must start paying taxes.
Solution: People stuck inside the country due to these unforeseen circumstances (force majeure) can apply to extend their visas through a residency waiver. This ‘residency waiver’ stops visitors from becoming eligible to pay tax. Waivers can be obtained on a case-by-case basis through a request to the DIAN.
Keep in mind that Decree 941 gives Colombian authorities 35 working days to respond to requests of this nature. Find out as soon as possible if you or your staff are eligible for this waiver and apply as far in advance as possible.
With Colombia’s borders closed until June 30, companies cannot obtain working visas for foreign nationals currently outside of the country. This is challenging for companies in the middle of their hiring process. There are two ways to tackle this challenge and continue doing business in Colombia.
Solutions – Option 1: First, companies doing business in Colombia can choose to try and find local staff under their own initiative. However, for those facing a language barrier, or with little knowledge of the local workforce and expectations from employees and the government, this can prove difficult.
In addition, if you haven’t yet incorporated your business in Colombia to hire your own employees, this first option is not possible. Under the current circumstances, companies cannot incorporate in Colombia.
Likewise, nobody can request a tax identification number – a crucial element of the company incorporation process in Colombia, also known as a RUT – before the National Tax Authority, DIAN (Dirección de Impuestos y Aduanas Nacionales). The DIAN is not accepting requests for a RUT during this time.
Solutions – Option 2: Companies may hire local talent through a Professional Employer Organization (PEO) based in Colombia. This eliminates any need to travel to Colombia for hiring purposes.
A PEO in Colombia can support companies by hiring locally and alleviating language and bureaucratic burdens for the employer. By partnering with a PEO through a ‘co-employment model,’ the PEO becomes the ‘Employer of Record’ for the hired personnel in the eyes of the Colombian government.
The PEO can hire staff on behalf of the company and can also ensure the hiring company is fully compliant with local employment regulations for that employee. A PEO in Colombia will handle the relevant paperwork and manage payroll and social contributions for a company’s employees in Colombia. A PEO can be the best option to help your company continue business in Colombia remotely.
Forecasting cash flow
The Colombian peso (COP) has depreciated significantly. With a fluctuating currency, companies cannot easily forecast their cash flow and run the risk of generating lower income amounts.
Solution: To prevent unpredictable cash flow and avoid any further volatility of the peso, it is best to create a compensation account. This is a corporate account established in Panama, in which companies can receive and hold US Dollars. Though the account technically sits in Panama, the compensation account is considered to be Colombian for administrative purposes.
Additionally, be aware that companies may review exchange rates set in a contract if the rate fluctuates by more than 20% of the agreed amount.
Renewing your commercial license
Companies that continue business in Colombia must renew their commercial license each year. Due to the pandemic, these renewal deadlines have changed.
Solution: Due to current restrictions on business and government institutions running at low capacity, the Chamber of Commerce extended the deadline for companies to renew their commercial license from 31 March to 3 June.
Tax declaration deadlines have also been extended. These extended deadlines differ for each company depending on their tax identification number. Information about the deadlines specific to your company’s identification is available on the DIAN website.
Notice that companies can also carry out their General Shareholder Meeting online in order to fulfill their annual obligation.
Changing administrative processes
Public Notaries, which play a big part in company incorporation, liquidation, and other procedures, may require physical presence from the company owner/legal representative.
Solution: Despite the possibility of a few administrative processes requiring a physical presence, many of the mandatory procedures set by the Chamber of Commerce can be carried out online.
Government institutions are implementing online and digital processes in order to improve the ease of doing business in Colombia. The country is investing in technology and innovation to achieve this. The company’s legal representative, with appropriate credentials, can fulfil most of the administrative needs of the company online.
Dealing with delays
Dealing with institutions can be hard, especially during a worldwide pandemic. Be patient, expect some delay during this time, and where necessary, operate with a local legal representative to avoid further setbacks.
Yes, it is possible to continue business in Colombia
Despite the COVID-19’s interruption to the economy, there are solutions to avoid it fully halting your business operations. Whether you are having trouble hiring staff, opening a bank account, forecasting your cash flow, minimizing costs & outstanding payments, renewing your commercial license, avoiding visa costs, or changing administrative processes, there are solutions.
The post about “Worried about your business in Colombia during the pandemic? Here’s what you need to know" first appeared on the Bogota Post website.
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