External Indebtedness: Most Common Mistakes

As I have mentioned on previous occasions, the Colombian exchange regime is strict and requires compliance with certain obligations whenever money enters or leaves the country. However, there are obligations that are often overlooked due to the urgency in receiving or sending foreign currencies.

In a context of increasing globalization, many Colombian companies are considering receiving or making international investments, contracting or providing services outside the country, or receiving financing from or to the outside, which involves not only strategic and commercial decisions but also the determining role of the Colombian exchange regime.

External credits are a mechanism to obtain financing from abroad, and they involve complying with some obligations.

What is meant by external indebtedness?

According to Articles 44 and 45 of External Resolution 1 of 2018 (R.E.) from the Bank of the Republic (BR), credits between residents or intermediaries of the exchange market (IMC) and non-residents are considered external credits. This also applies to credits granted by IMCs to residents or other IMCs in foreign currency. These credits can be stipulated, disbursed, and paid in either legal or foreign currency, as agreed upon by the parties.

Do these credits need to be reported to the BR?

As a general rule, residents must report to the BR, but there are certain credits that do not need to be reported, according to Chapter VII of Regulatory Circular DCIP-83 of 2023. These include credits related to credit card usage, overdrafts, or credits obtained to finance the import or export of goods.

When should they be reported?

They must always be reported before the first disbursement. This is the most common mistake: usually, the registration is done after the first disbursement, which would make the registration late.

How should they be registered?

Through the IMC, an «External Credit Report Granted to Residents» is submitted, previously known as «Form No. 6», along with a letter requesting registration. With this registration, the BR will assign a credit code. In some cases, the IMC generates a commission.

How can I receive disbursements?

Disbursements should be received through the IMC or the compensation account (CC). The declaration of exchange for external credit (formerly Form No. 3) must be presented, indicating the credit code. Here another common mistake occurs: many times, the foreign exchange is not funneled through an IMC or CC, but the creditor sends the foreign currency, for example, from abroad already in Colombian pesos, omitting the process of channeling through these two authorized routes.

What happens if there is an amendment to the contract?

Modifications to the credit must also be reported to the BR through the IMC by resubmitting the «External Credit Report Granted to Residents». This is another common mistake, as the modification is often not registered in a timely manner.

Knowing these obligations can make the difference between a successful internationalization and financing or a headache with the BR, the DIAN, or the Superintendency of Companies.

Written by: Maria Jose Hernandez