Foreign Exchange Law in Colombia.

Frequently asked questions

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• 01

  What is the foreign exchange regime in Colombia?

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  It is the set of rules governing operations in foreign currency. Colombia's foreign exchange regime is made up of the foreign currency that must be channeled mandatorily through Foreign Exchange Market Intermediaries (IMCs) or through compensation accounts, and of the foreign currency that—although not subject to mandatory channeling—is channeled voluntarily.
• 02

  What does it mean for an operation to be subject to mandatory channeling or to be part of the free market?

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  Mandatorily channeled operations are those whose negotiation or transfer of foreign currency must be carried out through the IMCs or through compensation accounts. The Banco de la República sets out the operations that must be channeled through the foreign exchange market: (a) import and export of goods; (b) external debt operations; (c) foreign investment in Colombia or Colombian investment abroad, as well as the returns associated with them; (d) sureties and guarantees in foreign currency; and (e) derivatives operations. Free-market operations, in turn, are those not subject to mandatory channeling—meaning that foreign currency need not be traded through the foreign exchange market, although it may be done voluntarily, for example when receiving or paying foreign currency through a commercial bank.
• 03

  What is an internal operation?

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  These are operations between residents for foreign exchange purposes. Such operations must be paid in Colombian pesos, unless they are paid through compensation accounts.
• 04

  Can foreign exchange residents in Colombia hold accounts abroad?

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  Yes. However, if these accounts have inflows or outflows arising from operations subject to mandatory channeling, or from the payment of obligations derived from internal operations between residents in a currency other than the Colombian peso, the account must be registered as a compensation account before the Banco de la República.
• 05

  What is a compensation account?

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  These are bank accounts that residents hold abroad for foreign exchange purposes, through which mandatorily channeled exchange operations and internal operations paid in foreign currency are channeled. Once a transfer is received for a mandatorily channeled operation or for the payment of an internal operation in foreign currency, the account becomes a compensation account and, from then on, all movements must be reported to the Banco de la República on a monthly basis, even if they are free-market operations.
• 06

  How is foreign direct investment in a company registered before the Banco de la República?

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  Once the investor sends the foreign currency, the exchange rate must be agreed with the company's commercial bank, and a form for registering the shareholder's foreign investment with the “Companies” purpose must be submitted, stating the number of shares being paid for, together with a letter requesting the credit to the account. These documents are sent by the commercial bank directly to the Banco de la República, and this exchange declaration serves as the foreign investment registration declaration. If the funds are sent to a foreign account of the Colombian company, the exchange declaration is made by submitting the movements report; or, if the account has not been registered as a compensation account, the term to register it as such begins at that moment.
• 07

  Can a Colombian company receive a loan from a foreign company or bank?

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  Yes. However, this constitutes external debt that must be reported to the Banco de la República before the first disbursement, through the Report of External Credit Granted to Residents. Disbursements may only be made once the Banco de la República assigns the credit code. Disbursements and payments must be channeled through the foreign exchange market, except in specific cases.
• 08

  Are service operations with clients abroad subject to mandatory channeling?

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  This is a free-market operation and does not need to be channeled through the foreign exchange market; however, it may be channeled voluntarily. To do so, the resident negotiating the foreign currency must file the exchange declaration for services, transfers and other concepts (formerly Form No. 5).
• 09

  What penalties apply for breaches of the foreign exchange regime?

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  Regarding international investments and external debt, the sanctioning regime is handled by the Superintendence of Companies (Superintendencia de Sociedades), which may impose penalties of up to two hundred percent (200%) of the improperly channeled amount. The Tax and Customs Authority (DIAN), in turn, handles investigations into foreign exchange infractions related to imports, exports, external debt (related to foreign trade), compensation accounts, guarantees, derivatives and other concepts, and the penalty amount will depend on each type of infraction.