legal guide to doing business in colombia · title: legal guide to doing business in colombia issn...

Legal Guide to Doing Business in Colombia

ISSN 2027-9140

Legal Guide to Doing Business in Colombia

Title: Legal Guide to Doing Business in ColombiaISSN 2027-9140Volume I – No. 3July 2011Bogotá D.C.

Publisher:Fiducoldex - Fideicomiso Proexport ColombiaForeign Investment [email protected]

Editors:Foreign Direct Investment Legal DivisionPhone: +57 (1) 5600100 - Fax: +57 (1) 3415689

Brigard & Urrutia Abogados S.A.Phone: + 57 (1) 3462011 - Fax: +57 (1) 3100609

Carlos Fradique-Mé[email protected]

Andrés Vá[email protected]

Robert Samir [email protected]

Brigard & Castro S.A.Phone: +57 (1) 7442200 - Fax: +57 (1) 7442200

Design:Marketing Team Brigard & Urrutia • Brigard & CastroPicture on the Cover: Brigard & UrrutiaInside pictures: Brigard & Urrutia

Printed by: Offset Gráfico Editores S.A.Printed in Bogotá D.C., Colombia - July, 2011

The digital version of this document can be found at:www.investincolombia.com.cowww.bu.com.co and www.bc.com.co

No part of this publication may be copied, reproduced or distributed in any fashion or by any means without the prior written permission of the editors. All rights reserved.

The main purpose of this document, which was prepared jointly by Proexport, Brigard & Urrutia and Brigard & Castro, is to inform the reader in a summarized way about the most relevant legal matters that relate to foreign investment in Colombia. We hope this summary is useful for those interested in doing business in Colombia.

The contents of this document were updated in June 2011 and the same are based upon the information available at the time.

It is worth noting that (i) the investment amounts required for a person to be eligible to claim Free Trade Zone benefits have been stated in minimum legal monthly wages (SMMLV for the Spanish initials), (ii) all the information stated in US dollars has been converted into that currency at a rate of 1,900 COP to the US dollar, (iii) the statutory minimum wage in Colombia is COP $535,600 per month (USD 282), and the foreign exchange rate varies daily depending upon market demand and supply.

Finally, it should be noted that this document does not constitute any type of professional advice whatsoever. Should any person intend to act based upon the information included herein, that person will have to seek help from an expert professional which is a specialist in the relevant matters and obtain advice that includes more detailed information in accordance with the person’s own particular situation. Therefore, neither Proexport nor Brigard & Urrutia or Brigard & Castro shall assume any type of responsibility whatsoever for any decisions made by any person that relies solely on the information contained herein, without previously consulting with an expert professional specialized in the relevant matters.

1. FOREIGN INVESTMENT PROTECTIONS 12

1.1. Legal stability contracts 12

1.2. International investment agreements 13

1.3. Double taxation agreements executed by Colombia 15

1.4. Trade agreements, BITs and double taxation agreements concluded or under

negotiation by Colombia 16

2. FOREIGN EXCHANGE REGIME 22

2.1. International investment 22

2.2. Foreign indebtedness 25

2.3. Import of goods 26

2.4. Export of goods 26

2.5. Guarantees and collateral structures in foreign currency 26

2.6. Derivatives 28

2.7. Compensation accounts 28

3. CORPORATE ISSUES 34

3.1. Most common legal vehicles for channeling foreign investment 34

3.2. General characteristics of corporations 34

3.3. Foreign company branch 37

3.4. Comparative analysis of the entities from a legal and business perspective 40

4. CUSTOMS AND FOREIGN TRADE REGIMES 50

4.1. Foreign trade procedures 50

4.2. Special import and export programs – Vallejo Plan 52

4.3. Free trade zones 54

4.4. Highly exporting users (ALTEX) 60

4.5. Permanent customs users (UAP) 60

Table of Content

4.6. Authorized customs warehouses 61

4.7. Colombia and the World Trade Organization (WTO) 61

4.8. Tariff preferences 61

5. LABOR REGIME 66

5.1. Overview 66

5.2. Labor agreements 66

5.3. Payments from the employment relationship 67

5.4. Working hours 70

5.5. Special obligations of the employer 70

5.6. Regulations 71

5.7. Termination of the employment agreement 71

5.8. Reinforced stability 72

5.9. Collective rights 73

5.10. Several alternatives for hiring personnel 73

6. IMMIGRATION LAW – VISAS 78

6.1. Regulations 78

6.2. Government entities responsible for the Colombian immigration practice 79

6.3. Classification of visas 79

6.4. Registration with the sub directorate of immigration of the DAS 83

7. TAX REGIME 88

7.1. Income and capital gains tax 88

7.2. Rates and tax base 89

7.3. Non-taxable income 90

7.4. Costs, deductible expenses and other special deductions 90

7.5. Transfer pricing 94

7.6. Capital gains tax 95

7.7. Withholding taxes 96

7.8. Equity tax 96

7.9. Value added tax (VAT) 97

7.10. Debit tax or financial transactions tax (GMF) 99

7.11. Industry and trade tax and the supplementary tax of billboards 99

7.12. Real estate tax 100

7.13. Registry tax 100

8. ENVIRONMENTAL REGIME 104

8.1. Main environmental authorities 104

8.2. Types of control 104

8.3. Citizen participation 106

8.4. Natural resources and protected areas 106

8.5. Compensatory fees and costs of obtaining an environmental license 107

8.6. Main environmental international treaties ratified by Colombia 107

8.7. Sanctions 107

9. INTELLECTUAL PROPERTY 112

9.1. Industrial property 112

9.2. Copyright 116

10. REAL ESTATE 122

10.1. Real estate acquisition 122

10.2. Use of real estate properties 123

10.3. Lease agreements 123

10.4. Urban regulations 123

10.5. Regulation for the development of property in any territory 124

10.6. Special payments that affect real estate property 125

11. GOVERNMENT CONTRACTING 130

11.1. General aspects 130

11.2. Scope of application of government contracting laws 130

11.3. Parties in state contracts 130

11.4. Grounds for incompatibility or ineligibility 131

11.5. Single proponents registry 131

11.6. Government contracting principles 132

11.7. Modes of contractor selection 132

11.8. Contracting by electronic means 135

11.9. Content of the state contract 135

11.10. Types of state contracts 137

11.11. Residential public utilities 138

Foreign investment protections

Five things an investor should know about foreign investment in Colombia:

Foreign investment is freely permitted in all sectors of the economy with the exception of 1. national defense and security and processing, disposition and disposal of toxic, hazardous or radioactive waste not originating in the country.

Law 963 of 2005 introduced the concept of legal stability contracts to protect investors with 2. respect to potential changes in Colombian law that may adversely affect their investments.

To encourage foreign investment, the Colombian government has signed various International 3. Investment Agreements which include the Bilateral Investment Treaties.

The country’s commitment to free trade is demonstrated by the number of Free Trade 4. Agreements which Colombia has ratified.

Colombia is party to numerous Double Taxation Agreements to prevent investors from being 5. subjected to double taxation.

Foreign investment protections

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Foreign investment protections 1.

The Colombian Constitution states that foreign nationals and citizens have identical rights, thereby permitting, with some limited exceptions, foreign investment in all sectors of the economy. Likewise, under the principle of equal treatment, foreign investors are entitled to access any benefits or incentives established by the Government.

Equal treatment

For all purposes, foreign investment is subjected to the same treatment as investments made by Colombian nationals. Therefore, the imposition of any conditions on foreign investors, whether discriminatory or favorable, are not permitted.

Universality

Foreign investment is allowed in all sectors of the economy with the exception of the following:

Activities related to defense and national security; and1.

Processing, disposition and disposal of toxic, hazardous or radioactive waste not originating in 2. the country.

It is important to note that there are certain legal restrictions with respect to entities operating open television services, pursuant to which any foreign investment cannot exceed 40% of the company’s capital. Additionally, certain activities in the areas of private security and surveillance can only be provided by entities whose equity holders are Colombian natural persons.

Automaticity

Generally, foreign investments in Colombia do not require prior authorization, except for investments in the mining and hydrocarbons, and the insurance and finance sectors, which may require prior authorization or recognition by the relevant authorities (i.e. Ministry of Mines and Energy or the Superintendence of Finance).

Stability

Subject to proper registration with the Central Bank, the conditions which were in effect at the date of registration of foreign investment may not be modified in a manner that adversely affects the foreign investor with respect to the repatriation of the foreign investment and the remittance of profits associated with it. However, the conditions for repatriation and remittance of profits in connection with foreign investment and the rights conferred by the proper registration of such foreign investment may be temporarily suspended to the extent the country’s international reserves are equal to less than three months of imports.

Legal stability contracts 1.1.

The conditions that must be satisfied to enter into a legal stability contract are the following:

The new investment or expansion of an existing investment must exceed 7,500 minimum monthly legal ūwages, approximately U.S. $2,114,210

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Only those investments conducted after the execution of the legal stability contract will be deemed as ūnew investments and thus may be subject to stability.

The investor must submit to the Committee on Legal Stability a study which provides a description of ū(i) the origin of the resources of the investment, (ii) a detailed description of the activity, together with any feasibility studies, plans and technical studies and (iii) an estimate of the number of jobs that the investment project expects to create.

The investor must identify the rules whose stability it is claiming, citing reasons that prove the impact of ūthose rules on the project.

The payment to the Colombian government of a fee as a consideration for the execution of the stability ūcontract. Pursuant to Act 1450, 2011, such fee shall be determined based on the tax benefits that have been stabilized and by applying the methodology that will be issued by the Colombian Government for such purpose.

The following matters are excluded from the reach of legal stability contracts, i.e. regulatory and legal ūchanges in these areas will not violate the terms of any legal stability contracts between Colombia and any foreign investors during the term of such contract:

Social security �

Indirect taxes �

Laws declared unconstitutional or illegal �

Preventive financial regulations �

Tariff regime of public services �

Obligation to declare and pay taxes �

Obligatory investments that the government decrees during a state of emergency �

Legal stability contracts must be consistent with the rights, guarantees and duties enshrined in the Constitution and any international treaties ratified by Colombia.

international investment agreements 1.2.

In order to create and maintain a favorable investment climate for foreign investors, Colombia has implemented a policy of negotiation and ratification of International Investment Agreements (IIAs) which include Bilateral Investment Treaties (BITs), as well as Free Trade Agreements (FTAs) with chapters on investment and Double Taxation Agreements (DTAs).

This policy implements the strategy of economic integration embodied in the Colombian Constitution and in the three most recent national development plans.

Such International Investment Agreements aim to create a transparent regulatory framework, with predictable rules to reduce non-commercial risks for foreign investors. In particular, BITs have the purpose of securing foreign

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investment. To achieve this, these agreements (i) define the assets that are protected, (ii) provide protection standards that are reflected in concepts such as equal treatment, fair and equitable treatment, full security and guarantees, and (iii) provide a forum for resolving jurisdictional disputes through international arbitration.

It is important to remember that International Investment Agreements do not limit the government’s regulatory authority. On the contrary, both BITs and FTAs restrict the level of protection offered to investors, to substantial adverse effects on their rights. For this reason, the possible effects of regulatory changes do not necessarily constitute violations of such agreements.

colombia and international conventions for the protection of Foreign investment 1.2.1.

In order to protect foreign investment, Colombia is party to various international agreements; the Multilateral Investment Guarantee Agency (MIGA), the International Centre for Settlement of Investment Disputes (ICSID), the Overseas Private Investment Corporation (OPIC) and the Agreement of Cooperation for Emerging Markets (PSOM).

MIGA is a multilateral institution that provides protections to foreign investors in member countries against non-commercial risks such as riots and civil wars, currency transfer restrictions and discriminatory expropriations. Additionally, MIGA provides information regarding member countries to support the investment process from its earliest stage.

The agreement with the International Centre for Settlement of Investment Disputes, ICSID, provides foreign investors in Colombia with the option to submit disputes to international arbitration, and ICSID is specialized in disputes between investors and governments.

The Overseas Private Investment Corporation’s, OPIC, main objective is the promotion of U.S. investments in developing countries. To this end, OPIC provides financing and guarantees to support investment projects and protects them against risks such as political instability and currency transfer restrictions.

The Agreement on Cooperation for Emerging Countries (PSOM) supports projects developed jointly by Colombian companies and The Netherlands to promote the development of the private sector. Pursuant to the terms of this agreement, such joint projects are entitled to funding of up to 60% of the project’s costs.

overview of the iiAs executed by colombia 1.2.2.

In general, BITs and FTAs executed by Colombia generally contain the following types of clauses that grant protections to foreign investors:

National treatment

Under this principle, each country shall accord to foreign investors a treatment no less favorable than it accords, in like circumstances, to its own citizens.

Most favored nation treatment

Under this principle, each party shall accord to foreign investors a treatment no less favorable than it accords, in similar circumstances, to investors of any other country.

Fair and equitable treatment

This concept is derived from the international principle of good faith to protect against arbitrariness. It mainly addresses the issue of access to justice and compliance with the rules of due process.

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Prohibition on illegal expropriation

This principle limits the state’s ability with respect to discriminatory expropriation or expropriation without just cause, only permitting expropriation when it (i) occurs for reasons of public utility or in furtherance of the social interest, (ii) respects the rules of due process, (iii) is non-discriminatory, (iv) is made in good faith and (v) is conditioned upon payment of prior, prompt, adequate and effective compensation.

Reducing barriers to investment

This principle generally aims at reduction of barriers to entry of foreign investment.

Dispute resolution

BITs, as well as most of the investment chapters of FTAs signed by Colombia, include legal mechanisms for resolving disputes arising between foreign investors and the Colombian state. These mechanisms allow investors to file claims against the state before international investment arbitration tribunals in connection with potential violations of the protections provided by these types of treaties.

Double taxation agreements executed by colombia1.3.

Colombia has been promoting the negotiation of international agreements to avoid double taxation and prevent tax evasion, particularly in cross-border commercial transactions.

Agreements for the avoidance of double taxation are used to delineate the powers of taxation of two countries. This is accomplished through the settlement of tax matters between the two countries to determine the scope of taxation of each state. Generally, double taxation agreements contain rules to prevent discrimination between citizens and non-citizens and dispute resolution mechanisms between the states. Double taxation agreements also regulate the international cooperation between tax authorities to combat tax evasion and tax fraud.

Double taxation agreements negotiated by Colombia are in accordance with international standards and include the principle of non-discrimination. According to this principle, the terms of a double taxation agreement cannot be more burdensome for taxpayers than those provided for in national legislation. This principle is based on the respect for equality of conditions among residents of a State and is expressed in the event that the national standard provides for something more beneficial to taxpayers than what was settled in the Agreement.

In these agreements, Colombia has negotiated income tax and supplementary income. Indirect taxes such as sales taxes (IVA) are beyond the reach of double taxation agreements. Regional taxes such as the Tax of Industry and Commerce are also excluded from the reach of these types of agreements.

In addition to avoiding double taxation and preventing tax evasion, double taxation agreements seek to eliminate barriers to the flow of capital, goods, technology and people between the signatory countries.

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trade agreements, Bits and double taxation agreements concluded or 1.4. under negotiation by colombia

trade agreements ratified or under negotiation1.4.1.

Agreement entry in to Force Approving Law status of the Agreement

Andean Community of Nations (Peru, Ecuador and Bolivia)

1993 Decision 324 Standing agreement

MERCOSUR(Argentina, Paraguay, Uruguay and Brazil)

1981 Law 45 of 1981 Standing agreement

FTA G2 (Mexico and Colombia) 1995 Law 172 of 1994

Standing agreementDecision of constitutionality C- 178 of 1995

FTA G2 (Mexico and Colombia)

2011 (provisionally) Law 1457 of 2011 Pending internal approval

FTA Chile May 8, 2009 Law 1189 of 2008Standing agreementDecision of constitutionality C- 031 of 2009

FTA Northern Triangle (Guatemala, El Salvador and Honduras)

Guatemala: November 12, 2009El Salvador: February 1, 2010Honduras:March 27, 2010

Law 1241 of 2008Standing agreement Decision of constitutionality C- 446 of 2009

FTA United StatesLaw 1143 of 2007(Amendment Protocol, Law 1166 of 2007)

Pending implementation

FTA EFTA(Iceland, Liechtenstein, Norway and Switzerland)

July 1, 2011 Law 1372 of 2010

Standing agreement forSwitzerland and LiechtensteinPending approval for Norway and Iceland.

FTA Canada August 15, 2011 Law 1363 of 2009 Standing agreement

FTA European Union Negotiated

FTA Panama Under negotiation

FTA South Korea Under negotiation

FTA Turkey Under negotiation

FTA Australia Under negotiation

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Bits under negotiation or ratified1.4.2.

Agreement entry in to Force Approving Law status of the Agreement

Chapter XVII of the FTA G2 (Mexico and Colombia) 1995 Law 172 of 1994

Standing agreementDecision of constitutionality C-178 of 1995

Chapter IX of the Chile FTA May 8, 2009 Law 1189 of 2008Standing agreementDecision of constitutionality C- 031 of 2009

Chapter XII of the Northern Triangle FTA(Guatemala, El Salvador and Honduras)

Guatemala: November 12, 2009El Salvador: February 1, 2010Honduras: March 27, 2010

Law 1241 of 2008Standing agreementDecision of constitutionality C- 446 of 2009

BIT Peru 2003Law 279 of 1996(Modifying Protocol Law 801 of 2003)

Standing agreementDecision of constitutionality C- 008 of 1997 and C-961 of 2003

BIT Spain September 22, 2007 Law 1069 of 2006Standing agreementDecision of constitutionality C- 309 of 2007

BIT Switzerland October 6, 2009 Law 1198 of 2008Standing agreementDecision of constitutionality C- 150 of 2009

Chapter X of the United States FTA

Law 1143 of 2007(Protocol of amendment Law 1166 of 2007)

Pending implementation

Chapter V of the EFTA FTA July 1, 2011 Law 1372 of 2010

Standing agreement forSwitzerland and Liechtenstein.Pending internal approval for Norway and Iceland

Chapter VIII of the Canadian FTA August 15, 2011 Law 1363 of 2009 Standing agreement.

BIT Peru (Broadened) Law 1342 of 2009 Pending internal approval

BIT China Law 1462 of 2011 Pending internal approval

BIT India Law 1449 of 2011 Pending internal approval

BIT United Kingdom Law 1464 of 2011 Pending internal approval

FTA European Union (it does not include the countries which have ratified FTAs with Colombia)

Pending internal approval

BIT South Korea Negotiated

BIT Kuwait Under negotiation

BIT Japan Under negotiation

BIT Australia Under negotiation

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Double taxation agreements ratified or under negotiation1.4.3.

DtA entry in to Force Approving Law status of the Agreement

Andean Community of Nations (Peru, Ecuador and Bolivia)

2004 Decision 578 Currently enforceable

DTA Spain January 1, 2009 Law 1082 of 2006 Currently enforceable

DTA Chile January 1, 2010 Law 1261 of 2008 Currently enforceable

DTA Switzerland Law 1344 of 2009 Pending Exchange of Notes

DTA Canada Project of Law 205 of 2009 Pending constitutional review by the Constitutional Court

DTA South Korea Subscribed on July 27, 2010 Pending internal approval

DTA Mexico Subscribed on August 29, 2010 Pending internal approval

DTA Portugal Pending internal approval

DTA India Pending internal approval

DTA Belgium Negotiated

DTA Czech Republic Negotiated

DTA France Negotiated

DTA United States Under negotiation

DTA Germany Under negotiation

DTA The Netherlands Under negotiation

DTA Australia Under negotiation

DTA Japan Under negotiation

FOREIGN EXCHANGE REGIME

Five things an investor should know about foreign exchange in Colombia:

The following foreign exchange transactions are regulated under Colombian law: foreign 1. investment in Colombia, investment of Colombian capital abroad, foreign indebtedness, import and export of goods, granting guarantees and collateral in foreign currency, and cross-border derivative transactions.

Only a duly registered foreign investment with the Colombian Central Bank allows the foreign 2. investor to implement its remittance rights.

Foreign loans granted to Colombian residents can only be granted by foreign financial 3. institutions duly registered with the Colombian Central Bank.

The guarantees granted by and in favor of Colombian residents must be analyzed on a case-by-4. case basis and may be subject to registration.

The obligations derived from operations subject to registration cannot be compensated with 5. each other or with any other type of obligation.

FOREIGN EXCHANGE REGIME

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FOREIGN EXCHANGE REGIME 2.

Colombia has a Foreign Exchange Regime strictly regulated by the Central Bank. Compliance is jointly supervised by the Superintendence of Companies, the Superintendence of Finance and the Tax Authority.

The Foreign Exchange Regime makes a distinction between two different markets: i) the Foreign Exchange Market and ii) the Free Market.

Foreign exchange market

The foreign exchange market is strictly regulated and consists of all foreign currencies or foreign exchange transactions that must be completed through (i) authorized foreign exchange intermediaries and (ii) compensation accounts.

Pursuant to Article 7 of Resolution 8 of 2000 issued by the Colombian Central Bank, the following foreign exchange transactions must be completed through the Foreign Exchange Market:

Import and export of goods ū

Foreign debt operations ū

Investment of foreign capital in Colombia ū

Investment of Colombian capital abroad ū

Granting of guarantees and collateral in foreign currency ū

Foreign derivative transactions ū

Free market

The free market consists of foreign exchange transactions that could be completed voluntarily through the foreign exchange market, such as payments for services in foreign currency and transfer of foreign currency for other types of transactions, such as donations. These types of transactions do not have to be reported to the Central Bank.

Colombian residents are permitted to open and hold bank accounts at foreign banks. Free market bank accounts may be used in connection with transactions that need not be mandatorily traded through the foreign exchange market.

International investment 2.1.

In accordance with the Foreign Exchange Regime, foreign investors in Colombia and Colombian residents that invest abroad must register their investments with the Colombian Central Bank. In essence, this obligation allows the Colombian Central Bank to collect information on investment flows for statistical purposes.

The foreign exchange regime distinguishes between foreign direct investment and portfolio investment.

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Remittance rights2.1.1.

Foreign investments duly registered with the Central Bank confer on foreign investors the following rights:

To transfer abroad dividends resulting from the investment ū

To reinvest dividends and income derived from the disposal of such investment ū

To transfer abroad any income derived from: (i) the sale of the investment within the country (ii) the ūliquidation (winding up) of the company or portfolio or (iii) the reduction of the company’s capital

Foreign direct investment2.1.2.

The following are considered types of foreign direct investment:

A company’s capital contribution by means of the acquisition of shares, quotas in limited liability ūcompanies, or convertible bonds.

The acquisition of rights in trust agreements with trust companies under the inspection and surveillance ūof the Colombian Superintendence of Finance.

The acquisition of real estate, directly or by means of a trust agreement, or securities issued in ūconnection with a real estate securitization or REIT.

The contributions by investors in respect of joint ventures and concessions, among others, when they ūdo not represent a company’s capital contributions and the income obtained is related to the business’ properties.

Supplementary investment to the assigned capital of branches ū

Participation of non-residents in local private investment funds ū

In order to register the foreign investment with the Colombian Central Bank, the investor must complete the remittance of funds through the foreign exchange market by means of filing an Exchange Form No. 4 “Exchange Declaration for Foreign Investments”. In general, the investment will be automatically registered with the Central Bank upon the filing of the Exchange Form No. 4.

In the case of contributions in kind and investment amounts with drawing rights (sumas con derecho a giro), the foreign exchange regime requires that within 12 months of the transaction or the accounting of the operation, foreign investors file with the Colombian Central Bank an Exchange Form No. 11 “Register of International Investment”, along with other documents that might be required.

The substitution of foreign investment should be recorded by the investor or his agent before the International Exchange Department of the Colombian Central Bank, with the filing of a formal request, within a period of 12 months from the date of the relevant transaction.

Substitution means a change of owners of the foreign investment by other foreign investors, as well as the change in the destination or the company receiving the investment.

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Cancellation of foreign direct investment2.1.3.

The cancellation, total or partial, of a foreign investment must be reported by the investor or his agent to the International Exchange Department of the Colombian Central Bank within a period of 12 months from the date of cancellation of such investment.

Portfolio investment2.1.4.

The Foreign Exchange Regime regulates the registrations relating to the various forms of portfolio investments, defined as those that have a speculative character.

In the case of portfolio investments, local administrators (e.g. stock brokerage firms, trust companies and investment management companies, also known as “sociedades administradoras de inversión”) must be appointed as representatives of foreign portfolio investors, who then are required to carry out the applicable registration requirements.

The Foreign Exchange Regime regulates the following special registration procedures:

Foreign capital portfolio investments carried out under the framework of agreements between stock ūexchanges under any existing integration programs

Certificates representing depositary receipts programs (ADRs/ GDRs) ū

Exchange Traded Funds (ETFs), including stock funds that replicate national indexes, international ūindexes and foreign pooled funds

Special foreign exchange regime2.1.5.

Pursuant to Colombian foreign exchange regulations, there is a special regime applicable to branches of foreign companies that engage in activities related to the exploration and exploitation of petroleum, natural gas, carbon, ferronickel, and uranium or which provide services that are exclusive to the oil and gas sector.

The rules of the special regulations shall prevail over the general exchange regulations in relation to branches of the special regime.

Access to the special foreign exchange regime provides certain benefits to the branches that belong to it, among others (i) the ability to make payments in foreign currency in the country, (ii) receive payments from sales of the branch abroad, and (iii) some advantages in transfers from the parent company in favor of the branch.

Investments by Colombian residents abroad2.1.6.

This mode of outward-bound investment is defined by the Foreign Exchange Regime as (i) the link of Colombian assets to foreign companies, securities and/or assets located or issued abroad, or (ii) the reinvestment or capitalization of funds abroad that otherwise may be repatriated, like interest payments, royalties, premiums and other payments for technical services.

Registration of foreign investment abroad gives the Colombian investors the right to repatriate, through the foreign exchange market, dividends generated by the foreign company as well as any other income derived from the sale or disposal of the company.

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In general, to register the investments of Colombian residents abroad with the Colombian Central Bank, the investor must undertake the remittance of funds through the foreign exchange market by means of filing of an Exchange Form No. 4 “Exchange Declaration for Foreign Investments”.

In the specific case of investments through contributions in-kind or other funds of compulsory remittance through the foreign exchange market, the investor must file with the Colombian Central Bank an Exchange Form No. 11 together with a certificate of the corporation’s legal representative, within twelve months of the date of the investment, to conclude the procedure.

Substitution2.1.7.

The substitution of Colombian direct investments abroad must be registered by the investor or its authorized agent before the International Exchange Department of the Colombian Central Bank, with the presentation of a communication, within a period of twelve months from the date of completion of the substitution. Regarding the financial investments and investments in assets abroad, the replacement shall be reported within a period of one month from the substitution.

Substitution means a change of ownership of the Colombian investment by other foreign investors with the change in the destination or the company receiving the investment.

Cancellation 2.1.8.

The cancellation, in whole or in part, of Colombian investment abroad must be reported by the investor or his agent to the International Exchange Department of the Colombian Central Bank through a notice that must be submitted within a period of twelve months from the date of cancellation of the investment.

Foreign indebtedness2.2.

Colombian residents can only obtain loans in foreign currency from foreign financial entities registered with the Colombian Central Bank, from foreign exchange intermediaries, or by placing bonds in foreign stock markets. According to this restriction, neither subsidiaries nor branches are able to obtain loans from their parent companies located abroad. On the other hand, the Foreign Exchange Regime allows Colombian residents to grant loans to foreign residents.

Entry and exit of foreign currency in connection with foreign indebtedness must be made through the foreign exchange market. Lack of compliance with this obligation, mainly by credits granted to residents, may be considered a violation of the Foreign Exchange Regime, unless the lack of compliance is justified by an act of God, force majeure or inexistence or unenforceability of an obligation.

Credit granted to residents2.2.1.

Foreign loans must be reported to the Colombian Central Bank by means of filing an Exchange Form No. 6 “Report of Foreign Investment Granted to Residents”. Additionally, a copy of the relevant loan agreement has to be submitted. Disbursement of the loan may be registered through Form No. 6, if the registration of the loan and the disbursement takes place at the same time. Otherwise, the disbursement of the loan must be registered by means of filing an Exchange Form No. 3 “Foreign Indebtedness Exchange Declaration”.

Exit of foreign currency to pay for debt must be reported to the Colombian Central Bank by means of filing an Exchange Form No. 3.

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Credit granted to non-residents2.2.2.

The credit must be reported to the Colombian Central Bank by means of filing an Exchange Form No. 7 “Report of Foreign Investment Granted to Non-Residents” upon exit of the funds from Colombia. Additionally, a copy of the relevant loan agreement has to be submitted. Disbursement of the loan may be registered by filing of Form No. 7 “Report of Foreign Investment Granted to Non-Residents” if the registration of the loan and the disbursement takes place at the same time. Nonetheless, if disbursement is made after the registration of the loan, it must be reported by filing an Exchange Form No. 3 “Foreign Indebtedness Exchange Declaration”.

Furthermore, the entry of foreign currency to pay for the credit must also be reported to the Colombian Central Bank by filing of Exchange Form No. 3.

Import of goods2.3.

The payment for the import of goods must be conducted through the foreign exchange market, regardless of the payment method that is used (bank transfer, credit card, etc.) or the channel of import (postal traffic, ordinary importation, etc.).

Colombian residents must channel, through the foreign exchange market, payments to pay the cost of their imports. For these purposes, they must submit an Exchange Form No. 1 “Exchange Declaration for Imports of Goods” using in each case the corresponding exchange numeral.

In the case of imports paid with international credit cards, importers must submit an Exchange Form No. 1 “Exchange Declaration for Imports of Goods” when making the payment to the exchange market intermediary or channeling it abroad through a compensation account.

In Chapter 4, “Customs and Foreign Trade Regime”, there is a detailed explanation of the obligations related to the import of goods.

Export of goods2.4.

The export of goods is an activity that must be conducted through the foreing exchange market, and for this purpose an Exchange Form No. 2 “Declaration of Exchange for the Exportation of Goods” must be filed.

Residents in Colombia must channel foreign currency received from their exports through the foreign exchange market, including cash received directly from the foreign buyer, within six months from the date of receipt. This applies to export payments made and those received as advances for future exports of goods. Foreign currency payments are considered as an advance when they are channeled through the foreign exchange market before the shipment of the goods.

In Chapter 4 of this “Legal Guide to Doing Business in Colombia 2011” on customs procedures, there is a detailed explanation of the obligations relating to the export of goods.

Guarantees and collateral structures in foreign currency2.5.

The Foreign Exchange Regime establishes different procedures and restrictions for the granting of guarantees and collateral in foreign currency, depending on whether or not the grantor is a Colombian resident.

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Guarantees and collaterals granted by Colombian residents2.5.1.

Colombian residents are permitted to provide guarantees in foreign currencies to back-up any obligations that may be incurred outside Colombia.

In case that the guarantee or collateral becomes effective, to sale foreign currency a foreign exchange declaration must be presented through the same type of form as the one used for the principal guaranteed operation and with the certification from the guarantor covering the obligation. If the principal obligation guaranteed relates to a transaction between non-residents, an Exchange Form No. 5 “Exchange Declaration of Changes in Services, Transfers and Other Concepts” must be filed. Negotiation of foreign currency will result in the cancellation of the obligation guaranteed abroad.

Guarantees and collaterals granted by non-residents2.5.2.

Foreign residents are allowed to endorse and guarantee the compliance of obligations related to foreign exchange transactions and domestic transactions.

These guarantees and collateral must be registered through a foreign exchange intermediary with the Colombian Central Bank prior to the total or partial expiration of the obligation guaranteed. In order to complete the registration, an Exchange Form No. 8 “Registration of Guarantees and Collaterals in Foreign Currency” must be filed with the Colombian Central Bank, together with a copy of the document of the guarantee.

Furthermore, an Exchange Form No. 3 “Exchange Declaration for Foreign Indebtedness” must be submitted at the moment of receipt of the disbursement of the amount guaranteed, and/or at the moment of remittance abroad of funds owed to the grantor.

For guarantees issued to support the fulfillment of transactions that must be reported to the Colombian Central Bank (e.g. external indebtedness operations for working capital or financing of imports), the guarantee will be considered reported by the non-resident, through the presentation of the document which evidences the granting of the guarantee, along with Exchange Form No. 6 “External Debt Information Given to Residents”. Purchases or sales of foreign exchange generated by this operation will be done using an Exchange Form No. 3 “Exchange Declaration of Changes in External Debt”, which will indicate the number assigned by the foreign exchange intermediary to the guaranteed debt.

Guarantees and collateral granted and paid in foreign currency by foreign 2.5.3. exchange intermediaries

The foreign exchange regime regulates the procedure to transfer foreign currencies through the exchange market, which are related to collateral and guarantees granted by foreign exchange intermediaries, to endorse operations such as bid bonds for public or private bids, obligations derived from export of goods or services (other than financial services) and obligations of foreign residents.

The foreign exchange regime also regulates the procedure to transfer foreign currencies through the exchange market, which are related to collateral and guarantees granted to cover the fulfillment of residents’ obligations in foreign currency, in connection with the acquisition of locally produced crude oil and natural gas by local branches and subsidiaries of foreign companies that pertain to the oil and gas sector. Hence, branches of foreign companies regulated by the special exchange regime can order and also benefit from the foreign currency collateral and guarantees issued by the intermediaries from the exchange market. The funds received in foreign currencies from the execution and payment of the collaterals or guarantees must be received and paid through free market accounts or accounts of the parent company abroad.

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Derivatives2.6.

A financial instrument will be considered a derivative instrument if it meets the following two main characteristics:

Its fair value depends on or results from one or more underlying assets �

Its settlement and liquidation is made at a time after the date of the derivatives contract �

As stated in Section I of this Chapter, derivative transactions with authorized foreign agents are considered foreign exchange transactions and, therefore, are subject to registration with the Colombian Central Bank.

Authorization to enter into derivative transactions2.6.1.

According to Colombian foreign exchange regulations, Colombian residents and foreign exchange intermediaries may enter into financial derivative transactions over interest rates, exchange rates, and stock exchange indexes with foreign exchange intermediaries and foreign agents authorized to professionally enter into derivative transactions.

Colombian residents other than foreign exchange intermediaries may enter into derivative transactions with respect to commodities with foreign agents authorized to professionally enter into derivative transactions.

In general, Colombian residents are not allowed to enter into credit derivatives. Nonetheless, entities subject to the supervision of the Superintendence of Finance may enter into credit default swaps with foreign agents authorized to professionally enter into derivative transactions, provided that such operations meet certain conditions which are set forth in the respective foreign exchange regulations.

Settlement of derivative transactions2.6.2.

The method pursuant to which derivative transactions must be settled depends on the parties involved and the specific characteristics of each transaction. The following are some basic guidelines:

Colombian Peso – Foreign Currency transactions entered into by and between residents and foreign ūauthorized agents must, as a general rule, be settled non-delivery and paid in a foreign currency. In the case of Foreign Currency – Foreign Currency derivatives, the transaction may be either non-delivery or delivery in the agreed currency.

Colombian Peso – Foreign Currency or Foreign Currency – Foreign currency transactions between ūresidents and foreign exchange intermediaries must, as a general rule, be settled non-delivery and paid in Colombian pesos.

Derivative transactions between foreign exchange intermediaries must, as a general rule, be settled ūnon-delivery and paid in Colombian pesos.

Compensation accounts2.7.

Compensation accounts are savings or checking accounts opened by Colombian residents at foreign banks. Compensation accounts are used to make and receive foreign-currency payments regarding transactions required by law to be traded through the foreign exchange market.

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Compensation accounts are subject to registration with the Colombian Central Bank and are subject to the following special report obligations:

Compensation accounts must be registered with the Colombian Central Bank though an �Exchange Form No. 9 “Registration of Compensation Accounts”

The registration of the account must be made within one month after the first foreign exchange �transaction is conducted through the account

The titleholder of the account is required to submit to the Colombian Central Bank on a monthly basis an exchange Form No. 10 “Compensation Account Transactions Balance”. The obligation to report the movements of the compensation accounts to the Department of International Exchange of the Colombian Central Bank is required until the date of cancellation of the registration of the account.

This information must also be submitted, on a quarterly basis, to the Tax Authority.

As a general rule, except for some very specific cases, payments in foreign currency between residents are forbidden, except for companies carrying out exploration and extraction of oil, natural gas, coal, iron-nickel and uranium, or engaging exclusively in the provision of services related to the oil and gas sector. As an exception to the general rule, special compensation accounts have been created for the payment in foreign currency of obligations arising from local operations among residents, which are not subject to special regimes (those related to the oil and gas sector, mining and services in connection with these industries).

CORPORATE ISSUES

Four things an investor should know about corporate regulations in Colombia:

Investors who engage in permanent business in Colombia must channel their investments 1. through a legal vehicle, such as a corporation or a foreign company branch.

Colombian corporate law is flexible and modern, and facilitates the establishment of businesses 2. in the country.

Corporate law allows for the incorporation of entities with a sole shareholder.3.

For the development of businesses in Colombia, foreign investors do not need a local partner or 4. shareholder. With few exceptions, the entire equity of a corporate entity can be foreign-owned and there are no legal restrictions with respect to its subsequent repatriation.

CORPORATE ISSUES

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CORPORATE ISSUES3.

In Colombia, constitutional principles such as the right of association, the right to equality, and the protection of free enterprise and private initiative allow the creation of entities that receive local and foreign investments. This chapter presents a summary of the main legal aspects of the most commonly used legal entity types in Colombia.

Most common legal vehicles for channeling foreign investment 3.1.

There are four legal entity types that are most widely used by foreign investors to channel their investments into Colombia: (i) simplified stock company, (ii) limited liability company, (iii) corporation, and (iv) foreign company branch.

The simplified stock company (“S.A.S.”) has been well-received by the business community since its creation in 2008, particularly because of its flexibility in terms of the incorporation process and the ample freedom its shareholders have to establish the terms and conditions for its functioning and internal structure (i.e. possibility of including an undetermined corporate purpose, having a sole shareholder, stating an undefined term of duration, among others). However, due to certain foreign exchange benefits, companies active in the mining and hydrocarbon sectors may prefer to establish a foreign company branch.

Below, some general comments on the corporations and foreign company branch regulation:

General characteristics of corporations 3.2.

Incorporation

Corporations in Colombia are created by execution of an agreement that regulates basic corporate matters, i.e. its bylaws (company name, place of business and purpose, corporate bodies and their meetings, legal representatives, officers, etc.).

For some corporations, the incorporation process entails the issuing of a public document while for others it is sufficient to authenticate a private document before a notary public. In addition, the previously mentioned documents must be filed with the Chamber of Commerce located in the domicile of the corporation.

The specific incorporation processes for each one of the corporate legal entity types are set forth in greater detail in the chart at the end of this chapter.

Power of attorney and other documents granted abroad

If the prospective partners or shareholders cannot be present or available in the country in order to attend the incorporation proceedings required by the relevant authorities, they must grant a written power of attorney for purposes of the establishment of the entity in Colombia.

All documents issued abroad, including the necessary powers of attorney, must satisfy the “chain of authentications,” that is, the seals and authentication of the notary public and the appropriate Colombian Consulate

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in the city of origin of the incorporator. In the absence of a notary public, the signatures on such documents issued abroad must be authenticated by the consul, and the consul’s signature must be certified by the Ministry of Foreign Affairs in Colombia. For countries that are signatories to the Hague Convention, it is sufficient to authenticate the documents with an Apostille.

Documents issued in another language must be submitted to the authorities in their original language, with an official translation prepared by a translator authorized by the Colombian Ministry of Foreign Affairs.

Bylaws and certifications

For the creation of a corporation, the corporation’s bylaws stating the basic information of the company and its operational guidelines must be submitted.

In addition, documentation certifying the good standing of each of the partners or shareholders must be provided, if they are legal entities. If they are individuals, it is sufficient to provide a photocopy of their passports or foreigner identification cards (if they are foreign), and a photocopy of their citizenship identification cards if they are Colombian citizens, without any additional requirements.

Public deed

As a general rule, the above-mentioned documents and powers of attorney must be notarized and filed as a public deed. For a S.A.S., the documents do not have to be notarized and filed as a public deed, as it is sufficient to obtain a notary public’s authentication of the relevant signatures.

Registration of the company

The public deed (or in the event of a S.A.S., the private document of incorporation), the acceptance letters of the persons appointed for the management and administration of the company, and the RUT (form used to register entities with the Tax Authorities) must be filed with the Chamber of Commerce of the corporation’s domicile, together with other forms issued by this entity.

Payment of capital and registration of the foreign investment

Foreign currency must be channeled through duly authorized financial institutions in Colombia or through compensation accounts registered with the Central Bank. Accordingly, foreign exchange declarations must be filed with the Central Bank to convert foreign currency into Colombian Pesos.

If the investment is made with foreign currency (not through a contribution of assets), the filing of the declaration will be sufficient to register the foreign investment. Otherwise, if the investment is made through a contribution of assets, the applicable procedures will differ (please see Chapter 2 on the “Foreign Exchange Regime” for further information).

Operations, amendments and right of withdrawal

Generally, corporations do not require the prior authorization of any public authority in order to become operational in Colombia. Nevertheless, companies which are established for undertaking highly specialized types of activities (including financial, stock brokerage or insurance activities, as well as the management and investment of funds obtained from the public) require the prior authorization of administrative authorities. Examples of such types of corporations include banks, trust companies, stock brokerage firms and insurance companies, among others.

Amendments to corporate bylaws and articles of incorporation generally do not require the approval of any

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authorities unless such amendments involve a corporate reorganization (i.e. merger or spin-off) or the reduction of capital through distributions to equity holders, all of which are subject to the fulfillment of certain requirements and/or procedures (including special notices, meeting procedures and administrative authorizations). At last, when changes in the corporate structure occur (e.g. mergers, spin-offs, restructurings, etc.) that may involve an increase in the liability of the equity holders or a diminution of their interest (such as dilution) such equity holders have the right to withdraw from the corporation with the resulting reimbursement of their capital contributions.

Regulation of parents and subsidiaries – Business groups

A company is a subsidiary or controlled when its decision-making authority is subject to control by one or more entities or individuals (parent or controlling party). This control may be economic, political or commercial and may be exercised through a majority or controlling interest in the corporate capital of the subsidiary, or through the execution of a contract or other instrument that enables a party to exercise dominant influence over the administrative bodies of the controlled company.

If the subsidiary company is subject to such control directly, it is called a first-tier subsidiary; if it is subject to such control through subsidiaries of the parent company, it is called a second-tier subsidiary. In this regard, it is important to highlight the following points:

The law recognizes that an entity may exercise control over another entity without any 1. participation in the capital of such entity.

Similarly, it is recognized that corporate control can be exercised by individuals or non-corporate 2. legal entities.

The majority participation in the capital of the subsidiary company may arise due to speculative 3. or strategic interests, and not necessarily for the purpose of forming a business group.

The existence of a business group consisting of multiple legal entities requires a finding of a unity of purpose and direction between the different entities, in addition to the existence of a subsidiary relationship.

The law recognizes a unity of purpose and direction when the existence and activities of all of the entities are designed to achieve an objective defined by the parent or controlling company by virtue of the direction that it exercises over the group, notwithstanding the ability of each member to pursue its corporate purpose individually.

The existence of a control situation and/or a business group must be registered with the Chamber of Commerce, so as to provide notice to third parties that may engage in commercial transactions with such groups.

Financial statements

Financial statements have the purpose of providing those who do not have access to a company’s financial records information about the entity’s assets, liabilities and revenue over a specific time period.

In this regard, the law provides that commercial companies must close their books and produce general purpose financial statements at least once a year, generally on December 31. However, the partners or shareholders may agree, through the entity’s bylaws, to different and additional dates for issuing financial statements.

General purpose financial statements are those that are prepared at the close of a specific period for information to undetermined users for the purpose of satisfying the common public interest in evaluating the capacity of an

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economic entity to generate positive cash flow. The financial statements include the balance sheet, the income statement, the statement of changes in equity, the statement of changes in financial position, and the cash flow statement.

Profits

Profits are distributed on the basis of financial statements prepared in accordance with generally accepted accounting principles, in proportion to the paid portion of the nominal value of the equity interests of each partner or shareholder, if the bylaws do not provide otherwise.

Clauses which deprive any shareholder or partner of full participation in the profits will be disregarded for purposes of payment of distributions on the basis of equity ownership.

Inspection, oversight and control

All corporate entities are subject to inspection and oversight and control by the Superintendent of Companies with the exception of those companies which by virtue of their activities are subject to overview by another Superintendence such as Finance, Public Utilities, Health, Ports, Private Surveillance and Security, etc.

Dissolution and winding-up

The liquidation of a legal entity occurs through a process that begins with its dissolution. This event marks the initiation of the winding-up process, which ends with the actual liquidation of the entity. The dissolution can be triggered by the expiration of the period agreed to by the equity holders for the life of the entity, or by the occurrence of certain circumstances (prescribed by law or the bylaws) that prevent continued activity in furtherance the corporate purpose, such as a decision by the highest corporate body or the relevant authorities, or the extinction of the property whose exploitation constitutes the corporate purpose, among others.

When the company is dissolved and is in the process of liquidation, its corporate purpose is restricted to a single aim: the use of its assets to pay any outstanding liabilities, and to proceed with all steps necessary to ultimately extinguish the legal entity.

The liquidation may be voluntary or court-ordered. A voluntary liquidation is conducted by liquidators appointed by the equity holders in accordance with the procedures prescribed by the Commercial Code. A court-ordered liquidation is conducted by liquidators appointed by judicial authorities and may occur as a consequence of the failure or breach of a restructuring agreement or debtor reorganization plan or reorganization agreement, as well as at the direct request of any debtors, the authorities or creditors, among other causes provided by law. Creditors may appear in such proceedings to file their claims, in the form and within the time period prescribed by law, for the purpose of enforcing their rights and obtaining payment of their claims in the order and with the priority and preferences established by law.

The creditors attend this process to present their claims according to the terms and conditions provided by law, with the purpose of enforcing their rights and get paid for their claims in the order and with the priorities and preferences establish in public order laws.

Foreign company branch3.3.

The Commercial Code states that “Foreign companies are companies that are established in conformity with the laws of another country and that have their principal offices abroad,” thereby establishing the status of a foreign company on two premises: i) it has been established under the laws of another country, and ii) it has its principal offices abroad.

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Although Colombian law does not provide a definition of a foreign company branch, the Commercial Code provides that if a foreign company wishes to carry out business in Colombia on a permanent basis, it must establish a branch with offices in the country. Applying the Commercial Code’s definition of a domestic branch, one can conclude that branches of foreign companies are also “(...) business establishments opened by a company within or outside its territory to undertake any of the company’s commercial activities, managed by agents with authority to represent the company (...)”.

Thus, a foreign company branch should be viewed as a business establishment opened by the foreign company in the country to carry out permanent activities. It follows that the foreign company branch is not an autonomous entity distinct from the parent company, and therefore it does not enjoy independent legal status.

Furthermore, for a foreign company to begin conducting business in Colombia on a permanent basis, it must establish a branch with offices in the country, as provided in the Commercial Code. Hence, it must be determined whether the activity that a foreign company is going to carry out in the country is a “permanent activity” that requires it to establish a branch.

The Colombian Commercial Code does not expressly define “permanent activity”, and only sets forth broad examples of activities that may be considered permanent, as follows:

Opening commercial establishments or business offices within Colombian territory, even if solely 1. for the purpose of providing technical or consulting services.

Participation as a contractor in projects or the provision of services2.

Participation in any way in activities related to the management or investment of funds obtained 3. from the public (private savings)

Participation in any of the segments or services of the mining industry4.

Obtaining a “concession” from the Colombian Government, the assignment of it or participation 5. in the exploitation of the same in any manner.

Conducting shareholder, member or boards of directors meetings, or management or 6. administration taking place in Colombian territory.

However, these provisions must be applied to each specific case, according to the circumstances surrounding those activities (i.e. nature, frequency or duration) to determine conclusively whether they are of a permanent or transitory characterization.

Creation

A foreign company branch is a business establishment of a foreign company created by its parent company, and therefore it does not constitute an independent legal entity.

Consequently, it must be created by means of a public deed granted in the domicile chosen for the branch.

The following documents must be notarized by a notary public in order to effect the creation of the branch:

Home Office’s foundation documents ū

Home Office’s bylaws ū

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Minutes of the meeting adopting the bylaws of the branch in Colombia and authorizing its opening ū

Home Office’s certification of good standing ū

Certifications issued by the Home Office that prove the authority of their legal representatives ū

The notary public will issue copies of the public deed that contain the aforementioned documents.

One of the copies of the public deed must be filed with the Chamber of Commerce located in the branch’s domicile. The Chamber of Commerce is responsible for supervising the registration of the branches in Colombia. At any person’s request, the Chamber of Commerce will provide certifications that prove the existence and legal representation of the branch, as well as information such as its name, corporate purpose, domicile and assigned capital and its legal representatives and financial auditor’s names.

Finally, the foreign company branch must be registered with the National Tax and Customs Authority (DIAN) by means of filing a Unique Tax Registration Form (RUT) to receive a Tax Identification Number (NIT).

Once these procedures have been completed, the branch may initiate its activities in Colombia.

Name

As such branch does not have a distinct legal existence from its foreign parent company, it is given the same name as its parent, with the addition of the expression “Sucursal Colombia” (Colombia Branch).

Assigned capital

Branches are required to have a certain amount capital assigned to them by their home offices which, in essence, serves as a general guarantee for any liabilities incurred in Colombia. In addition, the assigned capital (stated in the branch’s documents of incorporation) must be fully paid-in at the time of the branch’s establishment.

The home office may also provide its branch with supplementary capital to the assigned capital (balance sheet account for the available assets, foreign currency or services that remain in the current accounts of the home office during the year corresponding to the earnings or contributions).

The practical difference between the assigned capital and the supplementary capital is that if the home office decides to increase the capital assigned to the branch, it must amend the opening certificate, have it formalized through a public deed, and register it with the competent Chamber of Commerce. These steps are not necessary in the case of supplementary capital.

Corporate bodies

Because the branch of a foreign company is a business establishment, its main corporate bodies are the same as those of its home office. However, the branch has a general agent, who performs the functions of representing the branch, managing the establishment and representing the foreign company in transactions with third parties.

Additionally, the law provides that branches of foreign companies are required to appoint a statutory auditor, who must fulfill the same functions as those appointed by corporations.

Decisions

Except for the general agent’s authority to make administrative and ordinary course business type decisions,

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decision-making authority rests with the appropriate corporate body at the home office, in accordance with applicable corporate laws in the home office country of origin.

Special causes for winding-up

Given that the existence of the branch depends on the existence of the home office, the causes for liquidating branches are the same as those for liquidating the home office.

Moreover, branches are subject to the general causes for dissolution of Colombian companies that are compatible with the legal nature of the branch, because of the assimilation that is made between branches and companies.

Profits

All profits generated by the branch can be transferred abroad upon compliance with certain reporting requirements established by law with respect to foreign exchange transactions in Colombia (please refer to Chapter 2 Foreign Exchange Regime ).

Comparative analysis of the entities from a legal and business 3.4. perspective

As previously indicated, the four most commonly used corporate entity types by foreign investors in Colombia are: (i) limited liability company, (ii) corporation, (iii) simplified stock company (S.A.S.), and (iv) foreign company branch.

Please find below a chart that provides a summary of the main characteristics of each corporate entity type.

Corporation Limited Liability Company Simplified Stock Company Foreign Company Branch

Incorporation

By means of a public deed. Notary fees are of 0.3% of the subscribed capital, plus 16% of the VAT which will also apply to the notary fees.

By means of a public deed. Notary fees are of 0.3% of the capital, plus 16% of the VAT which will also apply to the notary fees.

By means of a private document duly signed before a Notary Public by the founding shareholders.Consequently, there are lower notary fees and the costs of the authentication are generally lower.

By means of a public deed. Notary fees are of 0.3% of the assigned capital, plus 16% of the VAT which will also apply to the notary fees.

Registration

The public deed must be filed with the Chamber of Commerce of the company’s domicile. The Chamber charges a registration fee of 0.7% of the subscribed capital.

The public deed must be filed with the Chamber of Commerce of the company’s domicile. The Chamber charges a registration fee of 0.7% of the capital.

The private document must be filed with the Chamber of Commerce of the company’s domicile. The Chamber charges a registration fee of 0.7% of the subscribed capital.

The public deed must be filed with the Chamber of Commerce of the company’s domicile. The Chamber charges a registration fee of 0.7% of the assigned capital.

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Required Number of Equity Holders

Minimum 5 – no maximum limit.None of the equity holders can own more than 94.99% of the outstanding capital stock.

Minimum 2 – maximum 25No restrictions regarding the percentage of ownership held by a single partner.

May be wholly owned by a single shareholder and has no limitation on the number of shareholders.

Not applicable

Capital

It is divided into shares of the same value.

The capital is composed of: (i) authorized capital (maximum capitalization amount fixed at the moment of its incorporation), (ii) subscribed capital (contributions the shareholder must pay to the company) and (iii) paid capital (contributions that have effectually been made to the company).

At the time of the company’s incorporation, the shareholders must subscribe for at least 50% of the authorized capital and pay no less than 1/3 of the subscribed capital.

It is divided into partnership quotas of the same value.

The total amount of the capital must be paid at the time of the incorporation.

It is divided into shares generally freely transferrable, except for cases when a pre-emptive right has been included in the bylaws in favor of the remaining shareholders of the company.

The company can issue the following shares: (1) ordinary, (2) privileged, (3) with preferential dividend and without voting rights, (4) with fixed annual dividends, and (5) of payment.

In addition, the shareholders can agree by unanimous consent to restrict the transferability of the shares for 10 year terms, renewable for periods of equal or lesser duration.

The capital is composed of: (i) authorized capital, (ii) subscribed capital, and (iii) paid-in capital (there are no proportions between these amounts that need to be observed and the shareholders can freely state the capital’s composition at the time of incorporation).

The shareholders have a term of two years to pay for the subscribed shares.

It is determined by the branch’s parent company and there is no limitation regarding its amount.

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Capital Increases

Within the limits of the authorized capital, an increase in capital requires the issuance of new shares with the approval of the General Shareholders Meeting. The issuance of shares is regulated by the board of directors. It only implies an amendment to the bylaws, if the authorized capital is increased, which has to be made by means of a public deed. Notary fees of 0.3% will be charged over the additional authorized capital, plus 16% of the VAT applicable over the notary fees. The Chamber of Commerce charges a registration fee of 0.7% of the additional subscribed capital.

Requires an amendment of the bylaws by means of a public deed and registration with the Chamber of Commerce.

Notary fees of 0.3% will be charged on the additional capital, plus 16% of the VAT. The Chamber of Commerce charges a fee of 0.7% of the additional capital for the registration of the public deed.

Within the limits of the authorized capital, an increase in the subscribed capital requires the issuance of new shares with the approval of the General Shareholders Meeting or other competent body. It only implies an amendment to the bylaws when increasing the authorized capital, by means of a public deed. The Chamber of Commerce will charge a fee of 0.7% of the additional subscribed capital for the registration of the public deed.

The authorized headquarters’ body can increase the branch’s capital in the incorporation’s public deed. In addition, the headquarters can transfer additional funds to the branch as supplementary capital.

Capital Decrease

Requires an amendment to the bylaws that needs to be authorized by the Superintendent of Corporations.



The authorized headquarters’ body can decrease the branch’s capital in the incorporation’s public deed. Regarding the decrease of the supplementary capital, it can be done without any authorizations or special procedures.

Corporate Purpose

The entity’s purposes must be clearly described. It cannot be undefined.


The entity’s purpose may be undetermined and undefined as long as it does not entail any illicit activity.


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Liability of the Equity Holders

Limited to the amount of the capital contribution.

Limited to the amount of the capital contribution, except for tax obligations for which the partners may be jointly liable.

Limited to the amount of the capital contribution.

The branch will be liable to any third parties up to its assigned and supplementary capital and, to the extent the assigned and supplementary capital are insufficient to meet the branche’s obligations to its creditors, with the capital of the home office.

Liability of the Managers

Managers are jointly liable (with such liability being unlimited) for any damages caused by their negligence and willful misconduct to the company, the shareholders and/or third parties.



Managers are jointly liable (with such liability being unlimited) for any damages caused by their negligence and willful misconduct to the branch, the home office and/or third parties.

Corporate Bodies

The general shareholders assembly is the highest corporate body; it elects the Board of Directors, which must consist of at least three members (each of which must have a replacement designated at the time of their initial appointment). The manager designated by the Board of Directors will have the duties and responsibilities set forth in the bylaws. The manager is usually the company’s legal representative.

The Board of Partners may delegate the administration of the limited liability company to a manager so long as the Board specifically delineates such manager’s responsibilities, powers and duties in the limited liability company’s bylaws.

The general shareholders assembly is the highest corporate body. The assembly can, in its sole discretion, determine whether the company shall have a Board of Directors (which is not legally required).

Not applicable

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Management

Board of Directors and the manager constitute the management.

The partners of the limited liability company may directly manage the company or delegate such responsibility to a manager.

The general shareholders assembly may select the management of the entity. In any event, the entity must have a legal representative (which can be the sole shareholder) and it may have a Board of Directors or any other corporate body or position.

The management of the branch will be the same as that of the home office but delegation to a local manager is permitted.

Amendments to Corporate Constitutive Documents

By means of a public deed and registration with the Chamber of Commerce.


By means of a private document authenticated before a Public Notary and filed with the Chamber of Commerce.


Transfer of Equity Interests

For the transfer of shares, the endorsement of the stock certificate and its subsequent recording in the corporate books is necessary. Preemptive rights may be established in the bylaws.

Requires an amendment to the bylaws; by law, the partners have a right of first refusal with respect to any transfer of quotas.

For the transfer of shares, the endorsement of the stock certificate and its subsequent recording in the corporate books is necessary. Preemptive rights may be established in the bylaws.

Not applicable

Fiscal Auditor

It always requires a fiscal auditor.

It is mandatory when the income or assets of the company as the 31st of December of the prior fiscal year exceeds an amount of five thousand (5,000) minimum wages and/or when its revenues during the prior year exceeds three thousand (3,000) minimum wages.

It is mandatory when the income or assets of the company as the 31st of December of the prior fiscal year exceeds an amount of five thousand (5,000) minimum wages and/or when its revenues during the prior year exceed three thousand (3,000) minimum wages.

It always requires a fiscal auditor.

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Dissolution and Winding-Up

The company is dissolved by the expiration of its term, whenever a dissolution cause, as provided by law or in the bylaws, occurs or by prior decision of the shareholders. The winding-up of the company requires the appointment of a liquidator by the shareholders.

The company is dissolved by the expiration of its term, whenever a dissolution cause, as provided by law or in the bylaws, occurs or by prior decision of the partners. The winding-up of the company requires the appointment of a liquidator by the shareholders.

The company is dissolved whenever a dissolution cause, as provided by law or in the bylaws, occurs or by prior decision of the shareholders. The winding up of the company corresponds to a liquidator appointed by the shareholders.

The branch is dissolved by the expiration of its term or by decision of the headquarters.The winding up of the branch corresponds to a liquidator appointed by the headquarters.

Advantages

The liability of the shareholders is limited to the amount of their capital contributions.

It may be created with only two partners and their liability is limited to the amount of their capital contributions with few exceptions.

The flexibility it has with regard to its incorporation procedure, and its internal structure has many advantages such as (i) the possibility of establishing an undetermined corporate purpose and (ii) the possibility of having only one shareholder.

The home office’s ability to provide supplementary capital to its local branch(which functions like a current account between the branch and the parent company).

CUSTOMS AND FOREIGN TRADE REGIMES

Four things an investor should know about the Colombian foreign trade regime:

Users of Free Trade Zones in Colombia are allowed to sell 100% of their production to the local 1. market.

Colombia’s customs regulations provide a special import-export program in connection with 2. agroindustry and services.

Colombia has negotiated and signed a great number of bilateral free trade agreements in 3. the past few years, thereby providing a broad spectrum of potential markets for Colombian companies.

Colombia has different types of importation regimes designed to satisfy most of the needs of 4. companies established in Colombia.

CUSTOMS AND FOREIGN TRADE REGIMES

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CUSTOMS AND FOREIGN TRADE REGIMES 4.

Colombia enjoys a strategic and privileged geographic location to access international markets through commercial agreements and tariff preferences that guarantee the best competitive conditions to sell Colombian products in foreign markets. Additionally, Colombia has customs procedures that are flexible, efficient and modern, in accordance with current international trade standards, and are controlled by the Colombian Internal Revenue and Customs Service (DIAN).

Foreign trade procedures4.1.

In 2005, Colombia implemented the Single Window for Foreign Trade (“VUCE”), managed by the Ministry of Commerce, Industry and Tourism. The VUCE, based on electronic and internet media, has the purpose of centralizing all the government procedures related to foreign trade operations in one simple tool. To this end, VUCE has 3 separate sections: Imports, Exports and the Single Foreign Trade Form (“FUCE”), that allows on-line transactions such as electronic payments to speed up the procedures. More information on VUCE may be obtained at the website (www.vuce.gov.co).

Imports4.1.1.

Imports, according to customs rules, are defined as the entry of goods into the “national customs territory” from the rest of the world, or from a Free Trade Zone, permanently or temporarily for a specific task or purpose.

The custom sub-tariff codes of 10 digits are listed in the Colombian Customs Tariff Schedule set by Decree 4589 of 2006. This Schedule lists the applicable tariffs with respect to each subheading. The value added tax (VAT) which is also part of the customs duties is regulated in the Colombian Tax Code.

Ordinary imports

The majority of imports into Colombia are ordinary imports. Once the importer has completed all customs procedures, under this type of importation, the importer in Colombia receives the goods on free disposal.

Importation declarations may be subject to revisions during the 3 years after the filing and acceptance date before the DIAN.

Temporary imports

Temporary imports for subsequent re-export in the same condition

Temporary import is defined as the import of certain goods that must be exported in the same condition as they entered the National Customs Territory within a specific period of time, that is, without having undergone any modifications, except for the normal depreciation originated by their use. Under this type of importation, the applicable customs duties (tariffs and VAT) are suspended. However, the sale of the goods will be restricted while they remain within the National Customs Territory.

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The temporary imports may be of 2 subtypes:

Short-term

Applicable when goods are imported to meet specific needs. The maximum import term will be 6 months, extendable for up to 3 additional months, and in exceptional situations for up to 3 additional months with prior authorization from DIAN. The customs duties on this type of temporary imports are permanently suspended.

Long-term

Applies to the imports of capital goods and any accessory or spare parts, as long as they constitute one single shipment. The maximum term for these imports is 5 years. Customs duties will be deferred in bi-annual installments, which must be paid only while the goods are within the National Customs Territory.

Temporary imports for active perfecting

Pursuant to the Customs Statute, under temporary imports for active perfecting the following subtypes are permitted:

Temporary import for active perfecting of capital goods

Customs duties will be suspended to allow the temporary imports of capital goods, their spare and repair parts, which will be re-exported after being repaired and reconditioned over a term of no more than 6 months, which can be extended for an additional 6 month term. The local sale of such goods will be restricted while they remain within the national customs territory.

Temporary import for industrial processing

Customs duties will be suspended to allow the temporary imports of raw materials and supplies that will be subject to transformation, processing or industrial manufacture by industries recognized as “Highly Exporting Users” (ALTEX) and “Permanent Customs Users” (UAP). The local sale of such goods will be restricted while they remain within the national customs territory.

International leasing

The concept of international leasing may be applied to financing of long-term temporary imports of capital goods, which may remain in the National Customs Territory for more than 5 years. In addition, DIAN may allow the long-term temporary imports of accessories, parts and spares that do not arrive as part of the same shipment, if they are imported within the 5-year term.

Payment of customs duties (tariffs and VAT) is carried out in bi-annual payments. The maximum term for deferment is 5 years, regardless of whether the goods remain for a longer period in Colombia. When the agreement’s duration exceeds 5 years, with the last payment corresponding to such period all customs duties that have not been paid must be attended.

The payments made to the leasing company, when it is a foreign leasing company without domicile in Colombia, are subject to an income and windfall tax withholding of 14% (capital income and domestic income).

In the case of operative leasing, the lessee may deduct on its income tax statement 100% of the payments transferred abroad (until 2012). In addition, this type of leasing is not subject to “integral inflation adjustments” on the part of the lessee, since it is not registered as an asset.

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Other types of imports

In Colombia, there are different types of imports, some with considerable benefits, such as:

Imports with franchise ū

Imports for transformation and assembly ū

Urgent deliveries ū

Re-imports for active perfecting ū

Re-imports in the same condition ū

Imports for warranty compliance ū

Imports through postal traffic and urgent deliveries ū

Travelers ū

Exports4.1.2.

Exports are foreign trade operations with respect to the exit of goods from the national customs territory to the rest of the world or to a Free Trade Zone.

In Colombia, exports are not subject to any customs duties and may enjoy special treatment, such as:

Special export programs (PEX) of tax reimbursements ū

Special export and import programs – Vallejo Plan ū

International Marketing Agents (Comercializadoras Internacionales), which are businesses specifically ūestablished to purchase national products for export. The manufacturers and the suppliers of the goods acquired by these businesses receive the same benefits as if they were exporters of goods.

Special export programs (PEX)

These programs allow the treatment as exports of sales made by a domestic producer to a foreign company, even though the products are not exported directly by such producer, but delivered to another domestic company to be transformed and exported as a finished product.

Special import and export programs – Vallejo Plan4.2.

In order to promote foreign trade operations, Colombia has included in its customs legislation special importation-exportation programs. Through these programs, goods such as capital goods, raw materials, inputs and parts may be imported with certain tax benefits. These benefits are subject to compliance with certain export undertakings of finished goods or services.

Benefits of Vallejo Plan are granted:

Direct operation, to the importer of the goods such as capital goods, raw materials, inputs and parts, ūthat produces and exports the final goods; or

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Indirect operation, to the importer or producer of intermediate goods sold to the exporter or whoever ūprovides services related to the production of the goods to the exporter.

The following are among the current types of Vallejo Plans:

Vallejo Plan for raw materials and inputs4.2.1.

Allows importing, with total or partial suspension of customs duties, specific goods, essentially raw materials, for complete or partial export within a certain period of time, after having undergone transformation, manufacture or repair (materials required for these types of operations are entitled to equal treatment as the specific goods).

Vallejo Plan for capital goods of the agricultural sector 4.2.2.

Starting on January 1, 2007, customs duty exemptions for the importation of capital goods, spare parts and intermediate goods were eliminated, except for products of the agricultural sector which are not subject to any government subsidies (Resolution 1148 of 2002, Ministry of Commerce, Industry and Tourism).

Vallejo Plan for services export4.2.3.

Allows the temporary import of capital goods listed in Decree 2331 of 2001, with total or partial suspension of any tariffs and deferment of the VAT payment.

Those having access to this program must export services, for an amount equivalent to 150% of the FOB value of the imported capital goods and spare parts. In addition, users of this Plan must give proper use of the capital goods and spare parts temporarily imported, and may not sell them or give them a use different from that authorized, while the goods are under the program restrictions. Usually, this type of Vallejo Plan is applicable to the export of services provided by companies whose main activity consists of one of the following:

Services of transmission, distribution and commercialization of electric energy ū

Special design services, value-added telecommunications and software exports ū

Lodging services ū

Human health ū

Air transportation of passengers ū

Research and development ū

Consulting and management ū

Architecture and design ū

Engineering ū

Junior Vallejo Plan4.2.4.

This Plan grants the exporter of goods the right to replace, through a new import exempted from additional customs duties, the raw materials or inputs that have been used in the production of such goods, when all customs

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duties were originally paid (tariffs and VAT) upon the initial import. This reposition right must be requested within the twelve months following the shipment of the exported products.

Vallejo Plan for spare parts 4.2.5.

This Vallejo Plan consists of the approval of a global amount of imports, in US$, to be used for the temporary import of spare parts to be integrated into capital goods, with exemption of the applicable tariffs.

With the import of the spare parts, an export undertaking is acquired equivalent to the 70% of the increases in production which are generated by the incorporation of the spare parts into the capital goods.

Free trade zones4.3.

In order to promote trade, investment, regional competiveness, economies of scale and employment, among others, Free Trade Zone regulations were modified in 2005. These are specific geographic areas in which companies may undertake industrial or commercial activities, taking advantage of a special tax and customs regime that provides them with certain tax and customs benefits.

Within a Free Trade Zone, any legal activity of a commercial, industrial or services-rendering nature may be performed, except those expressly restricted, which include:

No Free Trade Zones may be declared in geographical areas suitable for the exploration, exploitation ūor extraction of non-renewable natural resources as provided pursuant to the Colombian Mines and Oil Code.

Providing financial services ū

Providing public domiciliary utilities, except from companies that generate electricity or new companies ūthat provide international long distance public phone services.

Activities under the framework of any concession agreement with the Colombian State ū

Tax benefits

15% income tax rate for all users of the Free Trade Zones, except for Commercial Users which remain ūsubject to general income tax rate, currently at 33%.

Exemption of customs duties (VAT and tariffs) for goods imported from abroad, while the goods remain ūin the Free Trade Zone. However, custom duties are triggered when goods are permanently imported into the Colombian national territory.

Manufactured goods in the Free Trade Zone may be sold to the local market, paying taxes only on the ūadded value of the foreign supplies, or importing of the raw materials before entering the Free Trade Zone.

The sale of raw materials, parts, inputs and finished goods to industrial users of goods and services is ūexempted from VAT, provided that these goods are necessary for the undertaking of the user’s corporate purpose.

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The sale and shipment of goods abroad which are located within the Free Trade Zone are exempted ūfrom VAT

Customs benefits

Quick and simplified introduction procedures ū

To enter goods into the Free Trade Zone it is only required that the transportation document is ūconsigned or transmitted in favor of the Free Trade Zone user.

The merchandise within a Free Trade Zone may remain inside such zone indefinitely ū

The trade regulations allow partial processing or manufacturing processes of raw materials outside of ūthe Free Trade Zone for a period of up to 9 months.

Goods produced within the Free Trade Zone are considered to have Colombian origin for the purpose ūof free trade agreements and commercial agreements signed by Colombia (except for such agreements executed with Peru).

Ease of handling inventories and logistics operations between Border Port Free Trade Zones and Interior ūPort Free Trade Zones

Types of Free Trade Zones4.3.1.

Pursuant to Colombian Customs Regulations, there are Special Permanent Free Trade Zones or “Single-Company Free Trade Zones”, Permanent Free Trade Zones or “Multi-Company Free Trade Zones”, and “Temporary Free Trade Zones” .

In this vein, an investor that intends to develop a project in Colombia under the Free Trade Zone Regime could choose among the following:

Establish a Multi-Company Free Trade Zone in which other companies may be established as industrial ūusers of goods and/or services or commercial users

Establish itself as an industrial user of goods and/or services or as a commercial user in an existing ūMulti-Company Free Trade Zone

Obtain a declaration as a Special Permanent Free Trade Zone (Single-Company Free Trade Zone) in ūwhich the investment project will take place

Special permanent free trade zone or single-company free trade zone (SPFTZ)

Through this special framework, a new company that intends to develop a high impact investment project for the country may request the establishment of a free trade zone. Even though they are special permanent free trade zones, it is required that they are administered by an independent operator user. It is important to note that the activities developed by the company located in the free trade zone must be performed exclusively within the free trade zone.

Pre-existing companies that intend to access a free trade zone may only do so after fulfilling the requirements established for special permanent free trade zones for pre-existing investments, as described below.

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The main general requirements for obtaining the qualification as a special permanent free trade zones are:

To establish a new company, except for certain special cases ū

Comply with certain investment and employment generation requirements ū

The project must have a component of industrial transformation, transfer of technology or of services ū

Draft, file and obtain approval of a strategic plan for the business (Master Plan of General Development ūof the Free Trade Zone) that contains technical, economic, financial and marketing feasibility studies.

Fencing off the entire area to be declared as a Free Trade Zone before initiating any operational ūactivities

Obtain all regulatory authorizations and permits necessary for the construction and development of the ūproject in the area to be declared as a Special Permanent Free Trade Zone.

There are various types of Special Permanent Free Trade Zones; each of them must comply with the general requirements mentioned above and, depending on the types of goods and/or services, with the following additional requirements:

Special permanent free trade zone or SPFTZ for goods

For its authorization, a minimum new investment of at least 150,000 minimum monthly legal wages (MMLW) (US$ 42.2 million) must be made and 150 new direct jobs must be created within 3 years following the authorization. For each 23,000 MMLW (US$ 6.4 million) over the required US$ 42.2 million, the number of jobs to be created can be reduced by 15; provided, however, that the project creates at least 50 direct jobs.

Special permanent free trade zone or SPFTZ for services

For its establishment, any of the following levels of investment and employment creation must be met within the same period of time previously mentioned:

Investment Range Direct Jobs Created

From 10,000 MMLW ( US$2,818,947) to 46,000 MMLW ( US$12,967,157) 500

From 46,001 MMLW to 92,000 MMLW ( US$25,934,315) 350

In excess of 92,001 MMLW 150

Special permanent free trade zone or SPFTZ for agribusiness

For its establishment, a minimum new investment of 75,000 MMLW (US$21.1 million) must be made or 500 direct or related jobs must be created. The projects must certify their connection with the cultivation of farming areas and with the growth and harvest of domestic raw materials. This type of SPFTZ applies to biofuel projects, and to projects in the following sectors: meat and fish, vegetable and animal fats and oils, dairy products, food products that have not been classified in the previous categories (fruits and vegetables prepared or preserved foods, tea, soup, broth, vinegar, sauces and yeast) and coffee and threshing products.

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Special permanent free-trade zone for health services

This type of SPFTZ must comply with the same requirements of investment and job creation indicated for the SPFTZ of Services. Nevertheless, with respect to the job creation requirement, it is only required that 50% are direct jobs, and the remaining 50% may be related jobs.

Special permanent free trade zone for healthcare providing institutions

This type of SPFTZ must comply with the same requirements of investment and job creation indicated for the SPFTZ of Services. It must be noted that this type of SPFTZ is only applicable for private or public entities that are organized for the rendering of health services to those affiliated with the General System of Social Security in Colombia.

The specific requirements that these companies must fulfill are the following:

Commit to initiate the process (i) for national accreditation within 3 years, and (ii) for international ūaccreditation within 5 years of receipt of the authorization.

Filing of a document describing the equipment to be used by the industrial user for the development of ūits activities

Special permanent free trade zone or SPFTZ for port companies

For its establishment, a minimum new investment of 150,000 MMLW (US$ 42.2 million) must be made and 20 new direct and 50 related jobs must be created.

Special permanent free trade zone or SPFTZ for the border zone with Venezuela

For its establishment, a minimum new investment of 5,000 MMLW (US$1.4 million) must be made and 50 new direct jobs must be created within 2 years of receipt of the authorization.

Applications for this special regime must be submitted to the DIAN before December 31, 2011.

Special permanent free trade zone or SPFTZ for pre-existing investments

For its establishment, the investor must meet the following 3 requirements:

Net assets of more than 150,000 MMLW (US$ 42.2 million) ū

Make new investments within 5 years following the authorization of more than 692,000 MMLW (US$ 195 ūmillion)

Double the net taxable income calculated as of December 31 of the year before the date of the ūauthorization

The status of industrial user will be ascertained on December 31 of the tax period during which the requirements of investment and net assets are met. Nevertheless, while such status is obtained, machinery and equipment required for the execution of the project may enter the SPFTZ without triggering any customs duties.

Companies that were subject to the Special Tax System under the Paez Law are eligible for this type of SPFTZ with less burdensome requirements.

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Permanent free trade zone (PFTZ)

A permanent free trade zone is an area within the national territory in which multiple companies are established, subject to a special tax and customs treatment, managed by an operator user. For the creation of a new PFTZ, the User Operator must meet the following requirements:

Establishment of a new company ū

Have net assets in excess of 23,000 MMLW (US$ 6,483,579) ū

On the fifth anniversary following receipt of authorization, the PFTZ must have at least 5 users ū

The operator user and/or the industrial user shall make a new investment of 46,000 MMLW (US$ 12.9 ūmillion) within the 5-year term

Draft, file and obtain approval of a strategic plan for the business (Master Plan of General Development ūof the Free Trade Zone) that contains technical, economic, financial and marketing feasibility studies.

The project to be developed must consist of at least 20 hectares ū

Fencing off the entire area to be declared as a Free Trade Zone before initiating operational activities ū

Obtain all regulatory authorizations and permits necessary for the construction and development of the ūproject in the area to be declared a PFTZ

Types of users4.3.2.

Every Multi-Company Free Trade Zone or Single-Company Free Trade Zone must have an operator user. Multi-Company Free Trade Zones allow commercial or industrial users of goods and/or of services to be located within. Single-Company Free Trade Zones only allow industrial users of goods and/or of services.

To be qualified as a user in a Multi-Company Free Trade Zone, the interested party must request authorization from the operator user.

To be qualified as user in a Single-Company Free Trade Zone, the interested party must obtain the recognition of such status from the DIAN.

For producing goods, rendering services or undertaking commercial activities within the Multi-Company Free Trade Zone, industrial users must meet the following requirements, depending on the total assets of the company:

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Total Asset Range of the Company Minimum Amount of the New Investment to be Made

Minimum Amount of Direct Jobs to be Created

From 0 MMLW to 500 MMLW (US$140,947) US$ 0 0

From 501 MMLW to 5,000 MMLW (US$1.4 million) US$ 0 20

From 5,001 MMLW to 30,000 MMLW (US$8.4 million) 5,000 MMLW (US$1.4 million) 30

In excess of 30,000 MMLW 11,500 MMLW (US$3.2 million) 50

Operator user

The operator user is the company responsible for the management and control of customs matters, and is also in charge of promoting the creation and development of the Free Trade Zone.

Industrial users of goods

These are users that manufacture, produce, transform or assemble goods inside the Free-Trade Zone.

Industrial users of services

These are users that render services exclusively within the Free-Trade Zone to engage, among others, in the following types of activities: logistics, transportation, distribution, telecommunications, scientific and technological research, medical assistance, dental and medical health, tourism, technical support, shipping and airplane equipment, and consulting or similar services.

These types of users can also be industrial users of goods.

Commercial users

These are users that store, market, and undertake commercial activities within the corresponding Multi-Company Free Trade Zone. They may occupy up to 5% of the total area of the Multi-Company Free Trade Zone. They cannot be located in a SPFTZ and are not subject to the special income tax treatment.

Procedure and term4.3.3.

The process for declaring the existence of a Free Trade Zone consists of 2 stages, which occur before different authorities:

The first stage occurs before the Free Trade Zones Committee (Comisión Intersectorial de Zonas ūFrancas), which must provide a favorable determination regarding the feasibility of declaring the existence of the requested Free Trade Zone.

Once the project has been approved, a request must be presented to the DIAN, which will be ūresponsible for issuing a resolution that declares the existence of the Free Trade Zone.

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The term of a Free Trade Zone cannot exceed 30 years, which may be extended for up to 30 additional ūyears. Nevertheless, in the following instances, the term will be subject to certain special rules:

When the designated lands are not property of the user that requests the declaration �of the Free Trade Zone, the term of the Free Trade Zone may not exceed the term of the contract that certifies that the user is entitled to use of such lands.

In the Special Permanent Free Trade Zone of Ports Companies, the term of the FTZ will be �equal to that of the port concession.

The term of authorization of users cannot exceed the term of duration of the Multi- �Company Free Trade Zone

Highly exporting users (ALTEX)4.4.

Companies recognized as “Highly Exporting Users – ALTEX” by the DIAN enjoy a series of tax and administrative benefits. To be recognized as ALTEX, they must meet the following requirements:

To have exported during the 12 months prior to the filing of the request, an amount equal to or higher ūthan US$ 2,000,000.

The value of exports, directly or through an International Marketing Agent, must represent at least 30% ūof the amount of its domestic sales in the same period.

If the previous 2 conditions are not met, the entity seeking ALTEX recognition must certify that prior ūto the filing of the request for recognition as ALTEX, such entity exported directly or indirectly FOB amounts of at least US$ 21,000,000, without regard to the percentage of exports against domestic sales.

Among the tax benefits for ALTEX are:

No VAT is imposed for regular imports of industrial machinery that is not produced in the country, but ūdesignated for the transformation of raw materials.

Possibility of obtaining authorization from the DIAN for operation of an industrial processing warehouse ūthat allows the import of supplies and raw materials with suspension of customs duties and of VAT, as long as such supplies and materials are used in the production of export products.

Permanent customs users (UAP)4.5.

Permanent Customs Users (UAP) are recognized as such by the DIAN for 5 years if they have carried out foreign trade operations in the previous 12 months for a FOB value equal to US$ 5,000,000 or such value as a yearly average during the past 3 years and have filed at least 100 import or export declarations in the past 12 months. The value of US$ 5,000,000 may be reduced by 60% if the taxpayer is already classified as a “Large Taxpayer”.

Those entities that have used Plan Vallejo in the previous 3 years from the filing date and show exports of at least US$ 2,000,000 in the previous twelve months will also be considered UAPs.

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UAPs must provide a bank or insurance company guarantee, the amount of which will be determined by the Tax Authority and may not exceed 5% of the FOB value of the imports and exports carried out in the previous 12 months of the filing of the request of recognition and registration. The guarantee must be delivered within 15 days of the recognition and registration.

The UAPs are entitled the following benefits once they are recognized and registered:

Automatic imported merchandise release ū

Possibility of importing raw materials or inputs under the temporary import for industrial processing ūregime, that allows the import without paying customs duties for those raw materials or inputs used for manufacturing goods destined for export.

Possibility of providing a single global guarantee that covers all the foreign trade operations before the ūDIAN

Authorized customs warehouses4.6.

Authorized customs warehouses are public or privately owned spaces approved by the DIAN for the storage of goods under customs control. The goods may remain temporarily stored in the authorized customs warehouses, without payment of customs duties (VAT and tariffs) applicable to their importation or nationalization, for the duration established by law, while their customs situation is determined.

Among the privately-owned customs warehouses are:

Private warehouses for transformation or assembly ū

Private warehouses for industrial processing ū

Private warehouses for international distribution ū

Private warehouses for aviation ū

Transitory private warehouses ū

Warehouses for urgent deliveries ū

Colombia and the World Trade Organization (WTO)4.7.

The WTO Agreement came into force for Colombia on April 30, 1995 and since its ratification, the country meets all of its commitments as full member of the WTO.

Tariff preferences4.8.

Generalized preference system with the European Union (GPS Plus)4.8.1.

At the end of 2005, the system called GPS Plus was approved, having as its purpose to foster economic and social development and the integration of developing countries into the world economy. The system has a 10-year term and went into effect on January 1, 2006.

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On July 22, 2008, the Council of the European Union approved the Generalized Tariffs Preferences System for the period between January 1, 2009 and December 31, 2011. During that period, Colombia is a beneficiary of the tariff preferences granted by the European Union as a special stimulus for sustainable development.

Commercial agreements4.8.2.

In addition to the commercial preferences mentioned above, Colombia has been structuring a policy of open integration, thanks to which it has reached a great number of foreign markets. Particularly for the Latin American arena, this integration has been achieved in the framework of the Latin American Integration Association – ALADI.

Moreover, within the various agreements signed by Colombia, in addition to those described in the Free Trade Agreements table in Chapter 2, the most relevant commercial agreements include:

Andean Community (CAN)

One of the strategic integration plans for Colombia is the Andean Community of Nations (CAN) that works under the auspices of ALADI. By virtue of this agreement, Colombia is part of a Free Trade Zone with Bolivia, Ecuador and Peru. It is important to point out that Venezuela was a member until April 22 of 2011, date in which its withdrawal from the CAN became effective. Additionally, on September 2006, the Council of Ministers of Foreign Relations of the Andean Nations granted the condition of associated member country status to Chile, thereby reaffirming the economic commitments established with that country and further expanding the commercial relationships in the region.

The main objective of the CAN is to strengthen the integration of Andean countries through a common market, in which agreements are reached, by consensus and with a supranational character, on monetary, fiscal, currency exchange, environmental and public services policies.

Economic Complementation Agreement “CAN” – “MERCOSUR”

On October 18, 2004, Colombia signed the Economic Complementation Agreement with Argentina, Brazil, Paraguay and Uruguay, the countries that make up “MERCOSUR”, and Colombia, Ecuador, and Venezuela (the member countries of the CAN). The agreement, with an unlimited duration, takes into account the asymmetries derived from the different levels of economic development of the parties, and as a consequence, it determined sub-items for immediate tariff elimination and periods for tariff elimination of between 6 and 15 years for critical products such as vehicles, auto parts and electrical appliances.

Caribbean Community (CARICOM)

CARICOM is a trade liberalization program that went into effect on January 1, 1995. For its application, it takes into account the differences in economic development levels of its member countries. The agreement gives Colombia access to 14 million consumers in the CARICOM member countries.

In the framework of the agreement, Colombia grants tariff preferences to member countries in 1,128 sub-items of products and receives a reduction in tariffs on 1,074 sub-items from Trinidad and Tobago, Jamaica, Barbados and Guyana. The import duties for negotiated products are 0%.

Colombia and the Pacific Basin

Colombia currently is a member of the Pacific Basin Economic Council – PBEC, also known as the “Pacific Club”. This is a non-governmental association consisting of the most important entrepreneurs of countries with coast lines on the Pacific. The association’s purpose is to increase mutual knowledge, business and investment flows, economic cooperation and transfer of technology and tourism.

LABOR REGIME

Five things an investor should know about labor matters in Colombia:

Employment agreements that are executed in Colombia, regardless of the nationality of the 1. parties, are governed by local law.

At the end of each year, the Government establishes the current minimum monthly legal salary.2.

Under Colombian labor law, all payments made as a direct retribution of the employees’ work 3. will be considered to constitute salary without exception and therefore any contractual term that attempts to exclude any such payments from the employees’ base salary will be invalidated.

Both citizen and non-citizen employees are required to join and contribute to the social security 4. system.

In addition to the employee’s monthly salary, employers and employees may define in the 5. employment agreement payments which are deemed to be excluded from the employee’s base salary, but such payments may not exceed 40% of the employee’s base salary.

LABOR REGIME

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LABOR REGIME5.

Labor law regulates employment relationships, which may be either (i) individual labor law, that regulates the relationship between the employer and individual employees, or (ii) collective labor law, which regulates the relationship between employers and employees united in associations, whether unions or otherwise.Labor law applies to all residents, irrespective of their nationality, regardless of the employer’s origin or the location of execution of the contract. Every labor relation executed in Colombia is subject to Colombian labor law.

Overview 5.1.

The employment agreement does not require special formalities other than those exceptions provided by law (ie. fixed term agreement). For the purposes of declaring that a valid contract has been formed, the following elements must be set forth in such contract: the personal activity of the employee; permanent subordination and a salary that compensates the employee for the services rendered.

Labor agreements 5.2.

Contracts by duration 5.2.1.

Employment agreements can be classified according to their duration, as follows:

Labor Agreement

Indefinite Term

The duration of this type of agreement depends on the subsistence of the causes that originated the relationship and the scope of the work to be performed.All verbal contracts are considered to be indefinite term agreements, regardless of the fact that the parties may have agreed otherwise.

Fixed Term

The parties establish a term for the duration of the contract, which may not exceed three years. These types of agreements must be in writing, or it will be considered as indefinite. The fixed term labor contracts with a term of less than one year can only be renewed for three equal or lesser terms. If a further renewal is desired, the term may not be less than one year. If the term is between 1 to 3 years, it may be renewed indefinitely. If renewal is not desired, prior notice of at least 30 calendar days must be given to the other party, before the expiration date of the contract.

For the time that the performance of the work may last

The length of the agreement depends on the duration of the duty or the work that has been contracted; in that sense it does not permit any renewals.It is necessary to describe in detail the duties or work object of the contract and for that reason must be in writing.

Occasional, accidental or transitory

This type of contract is appropriate for the fulfillment of duties that vary from the normal activities of the company and its duration is less than one month.

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Probationary period5.2.2.

During the probationary period, the employer has the opportunity to evaluate the employee’s performance, and, simultaneously, the employee may evaluate the work environment. During such period, which should be stated in writing, either party may terminate the employment contract without prior notice or incurrence of compensation payments. The probationary period is related to the duration of the employment contract agreed, but it may not exceed two months.

Foreign workers 5.2.3.

Foreign nationals have the same rights and obligations as Colombian workers. However, when foreign nationals enter into an employment agreement in Colombia, both the employer and the foreign national future employee must meet additional requirements in connection with the administrative procedures at the Ministry of Foreign Affairs for the physical entry of the foreign worker into Colombia and supervision during such foreign national’s stay in Colombia.

Payments from the employment relationship 5.3.

Salary 5.3.1.

The salary is the employee’s primary type of compensation for services rendered for the employer’s benefit. Colombian labor law distinguishes between regular salaried employees and employees that receive a so-called “integrated salary”.

Arrangement

A regular salary compensates the employee’s services rendered, and it may be fixed or variable. In addition to the regular salary, the following must be added: (i) any additional compensation for overtime work, (ii) surcharges, (iii) percentage on sales and commissions, (iv) additional salaries and regular bonuses, (v) permanent travel expenses for employees meals and lodging, and (vi) in general, any payment made as direct compensation for the employee’s work.

At the end of each year, the Government establishes the current minimum monthly legal wage (SMLMV). For 2011, the SMLMV was set at COP$535,600 (US$282).

The integrated salary differs from the regular salary, as it constitutes the only payment that in addition to the compensation of the personal service, remunerates beforehand the value of surcharges, benefits and legal fringe benefits, such as severance, severance’s interest, service bonuses, and generally all other fringe benefits; except vacations. In conclusion, the employee that only receives one monthly salary payment is not entitled to any additional payments for any legal fringe benefits. An integrated salary arrangement must be stated in writing in the text of the employment agreement, or as an additional clause, or through crossed letters between the parties, indicating the factors included in such stipulation. Additionally, an integrated salary is only permissible for those employees that earn more than ten monthly minimum legal salaries plus a fringe benefit factor of at least 30%. For 2011, the minimum amount of an integrated salary is of COP$6,962,800 (US$3,665).

Whenever the parties decide to agree to an integrated salary, the employer must pay all the accrued fringe benefits owed.

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Extralegal benefits

Employees and employers can define in the employment agreement certain payments which are not considered salary and therefore are excluded from the calculation of base salary. However, it is important to bear in mind that all payments made as direct contribution of the employee’s work will be deemed to constitute salary without exception and therefore the contractual definition that attempts to exclude such payments from the employee’s base salary will be invalidated. Payments or benefits that are excluded from the base salary cannot exceed 40% of the base salary; the total amount must have proportionality to the salary of the 40%.

Travel expenses (per diem)

Travel expenses include both travel costs, as the outlays for meals, and other expenses when the employee is traveling for the benefit of the employer to perform a particular task. Travel expenses, when paid on a regular basis, are deemed to constitute salary when destined for meals and housing (excluding those destined for transportation and expenses of representation). Any agreement regarding travel allowances when paid on a regular basis destined to subsistence and housing, as to not be considered salary, would have no legal effects.

Fringe benefits

Every employer has the obligation to grant to its employees who earn a regular salary the following benefits:

Concept Pay Period Description

Severance Annual

Employers must make an annual direct deposit with a severance fund on behalf of every employee, equivalent to one monthly salary for every year of service and proportionally for a fraction thereof. Said deposit must be made before February 15 of each year. Upon termination of the employment contract, the employer must pay the employee the accrued severance until the date of termination.The lack of timely payment generates a compensation of one day’s salary for each day of delay until payment is verified during the term of employment.

Interest on severance Annual

Equivalent to 12% per annum on the balance of each year’s severance owed to the employee as of December 31 of the preceding year, which must be paid no later than January 31 of each year.

Service bonus Semi-Annual Equal to one monthly salary for each year of service and 50% must be paid in June and the remaining 50% in December of each year.

Transportation aid Monthly Employer must reimburse each employee whose salary is no more than two times the SMLMV a monthly payment for transportation expenses (for 2011, it is of COP$63,600 (US$33)).

Footwear and dress aid

Every four months

It is an endowment of one pair of shoes and one labor dress that has to be provided three times a year to every employee, in accordance with the task to be performed. Employees entitled to this benefit are those that earn up to twice the minimum legal salary and that have been employed for at least three months (no later than April 30, August 31, and December 20 of each year).

Family allowance Monthly It is a sum of money in-kind payments and services, provided and paid by the government’s family compensation bureau. Any employee whose pay does not exceed four SMLMV is entitled to this benefit.

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Contributions to the Social Security System

With the approval of Law 100 of 1993, the General Social Security System (the “SGSS”, its acronym in Spanish) was created, consisting of (i) the General Pensions System (the “SGP”, its acronym in Spanish), (ii) the General Health Social Security System (the “SGSSS”, its acronym in Spanish) and (iii) the General Professional Risks System (the “SGRP”, its acronym in Spanish). Pursuant to said law, every employer must affiliate its employees with the SGP, the SGSSS and the SGRP, and deduct from the employee’s salary the amounts established by law and pay a percentage of the employee’s salary in order to complete the contribution, according to the parameters listed in the charts “Contribution vs. Salary” and “Contribution Employee-Employer” ahead.

SystemContributions (% of Salary)

Employee Employer

Pension 4% 12%

Health 4% 8.5%

Risks - Between 0.348% and 8.7% *

* The percentage of the contributions to the SGRP varies in accordance with the insured risk.

Employees who earn more than four SMLMV must make a further contribution to the SGP, for the pension solidarity fund, which varies in a range of 0.1% to 1% extra, depending on the salary level of such employee. Colombia has executed bilateral social security agreements with Chile, Argentina, Uruguay and Spain. The intent of these agreements is to guarantee that citizens of the contracting countries can receive credit for any time periods during which they contributed to the pension system in any of the member countries for the purpose of recognizing the pensions for retirement, disability, or to survivors, under the conditions and with the characteristics of the legislation of the country of residence of the employee at the moment that such employee requests the relevant benefits.

Payroll fees

Employers are required by law to make some additional payments, calculated as percentages of the total value of the company’s payroll. Said payments must be made to a Family Compensation Bureau (Caja de Compensación Familiar “CCF”), to the National Apprenticeship Service (Servicio Nacional de Aprendizaje “SENA”) and to the Colombian Institute of Family Welfare (Instituto Colombiano de Bienestar Familiar “ICBF”), according to the parameters listed in the following chart.

Entity % of Payroll

CCF 4%

SENA 2%

ICBF 3%

Payroll fee benefits

Currently, there are several tax benefits and other payroll contributions available to employers that create new positions for employees belonging to so-called vulnerable groups, which are defined to include (i) those under the age of 28, (ii) persons in situations of displacement, (iii) persons in the process of reintegration (from armed

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groups operating outside the law), (iv) persons claiming disability status, (v) women over 40 years which during the previous 12 months have been working without a contract, and (vi) heads of households of level 1 and 2 of the SISBEN.

Working hours 5.4.

The maximum ordinary working day is 8 hours per day and forty-eight hours per week, between either Monday to Friday or Monday to Saturday, as may be agreed between the parties. The law also allows flexible working hours settled with the workers.

Night work between 10:00 pm and 6:00 am is paid with a surcharge of 35% of the salary paid for regular daytime hours. Also, daytime overtime is compensated with a surcharge of 25% of the regular daytime salary. The night and overtime hour are paid with a surcharge of 75% of the value regular daytime hours.

Mandatory remunerated rest5.4.1.

Mandatory remunerated rest on Sundays and holidays

Sundays and national holidays are considered by Colombian labor law as days of mandatory remunerated rest. This means that as a general rule, the employee is not required to render services on such days but will still be entitled to receive the correspondent salary. If an employee is asked to render services on Sunday or on any National Holiday, such employee is entitled to special surcharges.

If work on Sundays is regular or habitual, this means that the employee works three or more Sundays in one month, such employee is entitled to a surcharge of 75% of the ordinary salary of the daily hour plus one day of compensatory rest in the following week.

If work on Sundays is occasional, which means that the employee works two Sundays or less in one month, such employee is entitled to one of the following benefits at the employee’s choice: one day of compensatory rest in the following week, or a surcharge 75%.

Vacations

All employees have the right to enjoy 15 days of remunerated rest for every year of service and proportionally for any fractions thereof, which vacation days can only be accumulated for up to 2 years, and in special circumstances such vacation days can be accumulated for up to 4 years.

Special obligations of the employer 5.5.

Apprenticeship contracts5.5.1.

All employers with twenty or more employees must hire apprentices in the ratio of one apprentice for every twenty employees. This obligation also applies to employers with more than fifteen but less than twenty employees. If the employer does not wish to engage such apprentices as required by law, the employer may choose to monetize the share, by paying the National Service of Apprenticeship (in Spanish known as: Servicio Nacional de Aprendizaje, its acronym SENA) for each of the apprentices which are no longer linked.

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Licenses 5.5.2.

Maternity leave

Every pregnant employee is entitled to receive a remunerated leave of 14 weeks at the time of a child’s birth (or even two weeks before) corresponding to the salary that she receives at the time immediately prior to such leave. In the event of multiple pregnancies, the license will be extended to 16 weeks, and if the baby is born prematurely, the difference between the gestation date and the estimated birth date will be taken into account and added to the 14 weeks established by law.

The Social Security System is required to pay 100% of the salary for the leave, provided that all legal requirements are met. Employment cannot be terminated by reason of pregnancy or breastfeeding, except if there is just cause previously qualified by the Ministry of Social Protection.

Pregnancy tests are not allowed.

Paternity leave

The husband or permanent companion will have the right to eight working days paid leave for paternity.

In both cases, the husband or permanent companion must have contributed to the social security system the same number of weeks which are required from the mother to have the right for a maternity leave.

Mourning period

Employees are entitled to five working days of paid leave in the case of death of a family member, spouse or permanent companion, or a relative in the second degree of consanguinity, affinity and first former civil.

Regulations5.6.

Work regulations5.6.1.

The implementation of work regulations is mandatory in commercial companies with more than five permanent employees, in industrial companies with more than ten employees or agricultural, livestock or forestry companies with more than twenty employees.

Hygiene and industrial safety regulation5.6.2.

Companies that have more than ten permanent employees must implement hygiene and industrial safety regulation.

Termination of the employment agreement5.7.

Generally, employment agreements may be terminated without prior notice by any of the parties. If the contract is terminated by the employer, the effects of the termination will vary depending on the type of contract and whether the contract is terminated with or without just cause.

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Indemnification5.7.1.

Indemnification payments become payable in the event of the employer’s failure to comply with any legal or contractual obligations, or for the failure to comply with any obligations that the labor law imposes on employers. The most common types of indemnification include the following:

Indemnification for the termination of the employment agreement without cause (Severance):

Type of Employment Agreement Severance

Fixed term The salary payable for the time period remaining until the completion of the term.

For the time that the performance of the work may last

The salary corresponding to the term determined by the duration of the duty or the contracted work, in which event the indemnification will not be less than 15 days of salary.

Indefinite Term

Employees with salaries less than ten times the minimum legal monthly wage:

For employment relationships of one year or less, thirty days of salary; plus twenty additional days for each subsequent year and proportionally for fractions thereof.

Employees with salaries that are equal to or exceed ten minimum legal monthly wages:

For employment relationships of one year or less, twenty days of salary; plus fifteen additional days for each subsequent year and proportionally for fractions thereof.

Employees with ten years or more of services as of December 27, 2002: forty-five days of salary for the first year, plus forty additional days for each subsequent year and proportionally for fractions thereof.

Employees with ten or more years of services as of January 1st, 1991, have the right to be restored to their position, and in the event of a termination without just cause, the employer must pay an indemnification of forty-five days of salary for the first year and thirty days of salary for any additional years; without prejudice that the employee may initiate a labor law suit seeking restitution to such employee’s original work place.

Default Indemnity

If the employer at the time of termination of the employment agreement does not pay the employee the sums owed for salary or additional benefits in due time and form, the employer will be required to pay a default indemnity corresponding to one day of the employee’s last salary for every day of delay in the payment, during a period of time of two years from the day on which the right was accrued. From the month 25 on, the employer would have to pay current banking interest until the day on which the payment is effectively completed.

Reinforced stability5.8.

In accordance with the Constitution, there are certain types of employees that cannot be dismissed without a previous authorization of a labor authority, such as: (i) pregnant women, or on maternity leave; (ii) union leaders, and (iii) employees with disabilities, among others.

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Collective rights5.9.

During the course of a collective work conflict, collective law regulates (i) the relationship between the employer and union organizations, (ii) collective contracting, and (iii) the defense of common interests, both of employers as well as of employees.

Right to unionize5.9.1.

Colombian employees have the right to unionize as an exercise of their common labor rights. This constitutional right aims to protect the creation and development of labor unions, as well as guarantee the exercise on the part of the employees of the defense of their labor and union interests.

Union5.9.2.

Unions are employee organizations lawfully constituted for the purpose of obtaining, improving and consolidating common rights vis-à-vis their employers. It is also the association of employees aimed at the union member’s defense of their individual and collective interests. Pursuant to Colombian Labor Law, any group of twentyfive or more employees, regardless of whether they are employees of the same company or not, may constitute a labor union.

Collective bargaining and collective agreements 5.9.3.

The right of collective bargaining to rule labor relations is guaranteed and protected both by the Colombian Constitution and by the Labor Code, for both unionized and non-unionized employees. The collective agreement is entered with the unionized employees and the collective accords are entered between employers and non-unionized workers only in cases where the union membership is not more than one third of the employees.

Strike5.9.4.

A strike is defined as the collective, temporary and peaceful suspension of work, carried out by the employees in a company or establishment, with the aim to effectuate changes regarding certain economic and professional matters proposed to their employers, after compliance with certain procedures. Its exercise is only lawful and possible within the collective bargaining process as an option to employees, provided that they work for an employer in the private sector who does not carry out activities classified by law as essential public services.

Several alternatives for hiring personnel5.10.

Colombian labor law permits alternatives for hiring permanent employees, with particular regulations. In each particular case, it is important to verify the adjustment to the law, in order to avoid contingencies.

Consultant’s agreement5.10.1.

An employer may decide to execute a services agreement with an individual performing as an independent contractor; however, this agreement may only be arranged to rule the execution of a liberal profession or activity and, in such case, it must be clearly established that the performance of the contract will be done with technical and administrative autonomy, under the account and risk of the contractor, and therefore without the existence of dependence or subordination to the company that hires such consultant.

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Temporary employment agencies (TEAS)5.10.2.

A temporary employment agency (TEA) provides personnel, through “mission employees”, which are hired directly by the TEAS. Companies may only enter into a services agreement with TEAS under the circumstances presecribed by law.

Cooperative of associated workers5.10.3.

A company may contract the services of a cooperative, in which case for all legal purposes, the cooperative will be the true and unique responsible for all legal obligations with the associates that provide their services. The law provides that the cooperative must render the contracted services with technical and administrative autonomy, which implies that the contracting party is not allowed to give orders relating to mode, time, and quantity of the work neither to the cooperative, nor to its associates.

IMMIGRATION LAW – VISAS

Five things an investor should know about immigration law:

For a foreign national to enter or remain in Colombia as a visitor in the tourist, temporary or 1. technical categories, he or she must always apply for a visa, except for certain foreign nationals from countries which are exempted from the visa requirements imposed on other foreign nationals.

Foreigners who intend to invest in Colombia and satisfy the minimum investment thresholds are 2. allowed to apply for a resident visa.

The investor visa is granted for an indefinite period and with multiple entries. Nevertheless, 3. the validity of the investor visa will expire if the investor leaves the country for more than two consecutive years or if the investment does not remain in Colombia.

All foreign nationals who intend to practice a profession or engage in a regulated activity are 4. required to have a (i) temporary permit, (ii) validation of their university degree, and obtain (iii) a professional license.

Foreign nationals who enter the national territory as a tourist can only engage in leisure or 5. entertainment activities. In order to pursue any other activities, they require prior permission from the immigration authorities.

IMMIGRATION LAW – VISAS

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IMMIGRATION LAW – VISAS6.

Through its immigration laws, Colombia controls and regulates the entry, residency and departure of foreign nationals. This Chapter summarizes the Colombian legal framework with respect to immigration, including entry and residency permits and the main categories of visas that may be requested by a foreign national intending to establish relationships, provide services, trade or engage in investment activities in Colombia.

Regulations 6.1.

Foreign nationals entering the country must observe immigration laws and regulations.

The legal framework on immigration is contained in the Colombian Constitution and, in particular, a compendium of laws, decrees and resolutions.

The Constitution provides certain rights to citizens, assigns legislative, executive and judiciary powers and responsibilities to the three branches of government and defines the physical scope of the sovereign territory. It also details the principles of citizenship and issues related to foreign nationals.

Colombian immigration law in general terms addresses the following matters:

Regulation of the different categories of visas and work permits which foreigners must obtain prior to ūentering Colombia. In 2009, the entry and permanent residency requirements for foreign nationals in Colombia were amended to facilitate and greatly ease the immigration process, especially with respect to business visits.

Establishment of the requirements for eligibility for the different types of visas and work permits ū

Regulation of the conditions for hiring of foreign nationals by a Colombian company, and the ūcircumstances arising from their employment, mainly regarding work permits and associated documents.

Regulation of the receipt, loss, recovery and renunciation of Colombian citizenship ū

Regulation of certain activities and professions in Colombia for Colombian and foreign nationals, which ūmay require approval of a Professional Council. The approval for the practice of the profession or activity is accomplished through registration and issuance of a professional license by the Professional Council.

Establishment of the conditions for the entry of foreign nationals into the country, particularly through ūthe requirement of a visa. Immigration legislation provides a list of countries whose nationals must obtain a type of visa consistent with the purpose of the visit of a foreign national to Colombia.

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Government entities responsible for the Colombian immigration 6.2. practice

The Ministry of Foreign Affairs, the Colombian consulates abroad, the Ministry of National Education and Professional Councils collectively are responsible for enforcement of and compliance with the immigration and employment regulations. The immigration laws are also enforced by the Administrative Department of National Security (DAS), which maintains a presence in all immigration offices at foreign visitor entry points in Colombia.

Ministry of Foreign Affairs

The Ministry of Foreign Affairs gathers coordinating units or divisions covering various specialized areas such as the process for attachment of an Apostille and legalization of immigration-related documents, the issuance and renewal of passports and the granting of visas.

Only the Visa Coordination Office of the Ministry of Foreign Affairs and the Consulates abroad have the discretionary authority to issue, deny or cancel visas or work permits.

Administrative Department of National Security (DAS)

The Immigration Division of the DAS is responsible for registration and control of the entry, residency and departure of foreigners in Colombia, including control over the issuance of entry permits and their renewals, registration of foreign nationals, foreign national’s ID cards, and issues related to safe conduct, among others.

The DAS immigration offices are headquartered in Bogota, but there are many DAS offices in other cities and numerous immigration control offices located at airports, border areas, seaports and river ports.

Currently, DAS is undergoing a restructuring process that has not yet been fully defined. However, the restructuring process may potentially include the creation of an intelligence agency, which would have as one of its main functions responsibility over the immigration process.

Ministry of National Education

Through the Ministry of Education, foreign professionals may apply to obtain a verification of their degree or professional diploma. This procedure takes on average of six months and after receiving such certification, the foreign national must register to obtain a professional license from the appropriate Professional Council.

Professional Councils

Labor legislation related to regulated professions is the responsibility of each Professional Council. There are certain Professional Councils granting temporary licenses to allow foreign nationals to work in a regulated industry for a temporary period, usually one year, and such temporary license may be renewed for an additional year. Such licenses are normally requested by foreign nationals who do not want to apply for permanent residency in Colombia.

Classification of visas6.3.

A visa is a permission granted to a foreigner to enter and remain in Colombia, granted by the Ministry of Foreign Affairs or through Colombian consulates abroad. There are six different types of visas: (i) courtesy, (ii) business, (iii) crew, (iv) temporary, (v) visitors, and (vi) residents, some of which are further divided into subcategories. The type of visa to be issued will vary depending on the circumstances, e.g. the purpose of the visit, applicant’s occupation or ability of applicant to make an investment for a local business.

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To apply for any of these types of visas, a foreign national must submit, in addition to general travel documents, certain additional documents required for the type of visa application to be made. It is important to note that any documents issued abroad in languages other than Spanish must be translated to Spanish by an official translator authorized by the Ministry of Foreign Affairs or by the foreign office of the country where the documents originate. Public documents should be certified via an attachment of an Apostille or legalized by the local Colombian consulate or the entity responsible from the country that issues them.

This section will describe some of the main categories of visas that may be requested by a foreign national.

Visitor visas6.3.1.

Visitor visas are issued to foreign nationals that require a visa to enter Colombia temporarily without the intent to settle in the country. There are three types of visitor visas:

Temporary visitor visa

Temporary visitor visas are issued for (i) commercial and business activities, (ii) journalism and covering special events to members of journalist teams with appropriate accreditations, (iii) participation in unique academic activities that exceed one academic semester, (iv) interview in connection with hiring processes, (v) purposes of medical treatment, (v) sporting, scientific, artistic or cultural unpaid events, or (vi) training seminars at or for public or private entities.

The visa may be granted for up to 180 calendar days.

Tourist visit visa

Tourist visitor visas are issued for activities of leisure and recreation. They are issued for up to 180 calendar days within the same calendar year and allows multiple entries.

Technical visitor visa

Technical visitor visas are issued to provide urgent technical services to public and private entities upon presentation of a letter of responsibility from the entity which requires such urgent services. It may be granted for up to 45 calendar days within the same calendar year.

If warranted by the facts and circumstances, the Ministry of Foreign Affairs may grant a technical visitor visa for the first time up to 180 calendar days within the same calendar year, in the exceptional case in which the facts and circumstances that warranted the granted permission to enter as technical visitor remain, having completed the maximum period of permanence of 45 calendar days allowed by the permit.

Resident visas6.3.2.

Resident investor visa

This type of visa may be requested by foreign nationals who in their own name make a direct foreign investment of at least US$100,000 in Colombia or at least US$200,000, in the case of real estate, in which case such foreign national must prove to the public ownership of the property (i.e. notarized and recorded deed as well as certificate of conveyance and clearance of the property).

Foreign nationals may, with such visa, undertake commercial and managerial activities related to their Colombian investment.

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This type of visa will remain valid if the visa holder maintains the level of the investment in the country for at least 3 years.

Qualified resident visa

This type of visa may be requested by persons who can prove that their foreign direct investment of at least US$100,000 or US$200,000 for real estate property has remained in the country for over 3 years. It may also be requested by foreign nationals who have had a temporary visa or a qualified resident visa who demonstrate a source of income and who have remained in Colombia for at least 5 consecutive years.

Persons who are the spouse or life partner of temporary visa holders, must only demonstrate residence in the country for 3 years. Additionally, persons who are parent of a Colombian national may apply.

The qualified resident visa is granted for an indefinite period with multiple entries. However, its validity will expire if the foreign national leaves the country for more than 2 consecutive years or fails to demonstrate that such foreign national’s investment remains in Colombia.

Resident visa as a relative of a Colombian national

A resident visa can be requested from the Internal Working Group of the Ministry of Foreign Affairs for persons who have renounced their Colombian citizenship. With prior permission from the Internal Working Group, they may also apply for a resident visa at a Colombian Consulate.

The resident visa is granted for an indefinite term.

Nationalities that do not require a visitor visa

Citizens of more than 80 countries are not required to apply for a visitor visa for purposes of entering Colombia and do not need to undertake additional procedures before Colombian Consulates abroad. Citizens of such countries do not require any type of visitor visa to enter and remain temporarily in Colombia.

At the airport, an official from DAS will grant tourists and other temporary visitors a limited duration visa, taking into account the activities to be undertaken and the time the visitor remain in the country. Generally, a visa is granted for 15 to 45 calendar days. This term may be extended at the Sub Directorate of the DAS, provided that the temporary visitor’s stay in the country does not exceed a term of 180 calendar days within the same calendar year.

The permission to enter and reside in Colombia to provide urgent technical services to public or private entities requires a permit issued by the Immigration Sub Directorate of the DAS that allows the foreign national to enter Colombia for purposes of assisting with respect to the urgency requiring such services. This permit may be granted for up to 45 calendar days within the same calendar year.

Foreign nationals from other countries that intend to visit Colombia must apply for the corresponding visitor visa category at the local Consulate of Colombia abroad in accordance with Section 6.3.1.

Business visa6.3.3.

This type of visa may be requested by traders, manufacturers, or individuals with business interests or interested in establishing a commercial presence in the country. Similarly, legal representatives, officers, directors or executives of foreign companies can apply for this type of visa, as well as companies that have economic ties with a national or foreign company in Colombia and who are able to develop business management activities related to the interests they represent (e.g. attend meetings of partners or shareholders or conduct general business activities).

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Additionally, business persons can apply for a business visa if the applicant’s country is party to a free trade agreement, partnership agreement or other international commitment with Colombia. The business visa will be granted to such foreign national of the respective country counterparty that seeks to undertake the activities defined in those agreements (e.g. promote businesses and make investments).

Finally, people visiting Colombia as the head, representative or member of a foreign trade office of a governmental nature that promotes economic and trade activities with Colombia can apply for a business visa.

A business visa is granted for a maximum term of 4 years for multiple entries and allows residency of up to 1 continuous year for each entry, except in the case of persons who come within the framework of a free trade agreement, association agreement or other international commitment to which Colombia is a party, in which case they may remain for up to 2 consecutive years for each entry.

The persons who receive a visa as head or member of a foreign trade office of a governmental nature may reside in Colombia for a period of 4 consecutive years.

The foreign national holder of a business visa cannot establish permanent residence in Colombia or receive a salary or any wages in Colombia.

Temporary visas 6.3.4.

Temporary worker visa

The temporary worker visa is issued to foreign nationals intending to work in Colombia, and who are sponsored by companies established or domiciled in Colombia.

The temporary worker visa is granted to foreign nationals engaged in the following types of activities:

Foreign nationals hired by local companies to develop activities in their specialty, such as technicians, ūjournalists, persons from art groups and legal representatives, among others.

Foreign nationals who intend to enter the country under academic agreements between institutions of ūhigher education or inter-administrative agreements in specialized areas

Accredited foreign journalists who are hired by a news or national or international information agency ū

Foreign nationals appointed by an organ or government entity ū

Foreign nationals who are managers, technical or administrative staff of foreign private or public ūentities and which have been transferred from abroad to assume specific posts in their companies.

Foreign nationals who provide services in specific projects to a Colombian company without formalized ūemployment arrangements

Foreign nationals who are members of an artistic, sporting or cultural group hired for remuneration on ūaccount of their activity

Foreign nationals who are volunteers and missionaries which are not part of the hierarchy of a church or ūreligious group

The temporary worker visa is granted for a maximum period of 2 years with multiple entries. However, its validity will expire if the foreign national leaves the country for more than 180 consecutive days. People who are members

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of artistic groups who are hired to perform in Colombia for pay only receive a temporary work visa for a maximum period of 6 months. The temporary worker visa issued to teachers will be granted for the term of the respective teaching contract and an additional 3 months, not exceeding a period of 2 years.

Special temporary visa

Special temporary visas are granted to foreign nationals who intend to enter Colombia for special reasons such as:

Participation in administrative or judicial processes ū

Develop trade or activities of an independent nature, which do not unreasonably impact the public ūspace

To develop occupations not covered by other types of visas ū

Enter as a lender in an amount not less than the equivalent of 10 monthly legal minimum wages ū(SMLMV)

To undergo medical treatment, when such treatment cannot be completed within the term of a visitor ūvisa or entry permit.

Act as a volunteer or aid worker of a non-profit or nongovernmental organization or have been duly ūpresented by an international agency or a diplomatic mission for work related to social welfare, observation or humanitarian aid, among others, in Colombia.

To act as a partner or owner of a company or an establishment constituted and registered with a ūchamber of commerce, indicating a capital or registered active owned by the foreign national applying for the visa of not less than 100 legal minimum wages (SMLMV) (COP53,560,000) or US$28,189.

To own real estate property in an amount not less than US$100,000, which has been duly registered. ū

Special temporary visas are granted for 1 year, except for the last two examples listed above, for which such special temporary visa can be extended up to a maximum period of 2 years.

Registration with the sub directorate of immigration of the DAS6.4.

Foreign nationals are required to register with the DAS within 15 days following their entry into the country, using any type of visa issued for a term exceeding 3 months. The DAS shall issue a Foreigner’s Identity Card which shall expire at the same time as the visa that has been issued to such foreign national. If the foreign national does not register with the DAS within 15 days, such foreign national may be penalized financially by the DAS and the visa becomes subject to cancelation.

TAX REGIME

Five things that investors should know about the Colombian Tax Regime:

The general income tax rate is 33%. 1.

The income tax rate in free trade zones is 15%.2.

For 2011, a progressive income tax regime was created. This special regime applies to companies 3. incorporated as of 2011 and which are deemed to be “small companies” based on their assets and number of employees.

Foreign nationals are subject to income tax only on their Colombian source income during the 4. first five years of their continuous residence in the country.

The government has defined priority sectors that are subject to 0% income tax.5.

TAX REGIME

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TAX REGIME7.

The Colombian Tax Regime establishes national and local taxes. The main national taxes are: (i) income and capital gains tax, (ii) value added tax (VAT) and, (iii) bank debit tax. On the other hand, the main local taxes are: (i) the tax on industrial and commercial activities, (ii) billboard tax, (iii) real estate tax and, (iv) registry tax.

Income and capital gains tax7.1.

This tax applies to taxpayers’ accrued income likely to improve their wealth and derived from (i) day-to-day operations of their business (i.e. ordinary income) and (ii) extraordinary activities which do not occur usually, during their day-to-day business operations (i.e. extraordinary income).

General features 7.1.1.

For tax purposes, income is any kind of resource which increases the taxpayer’s wealth. National legal entities and Colombian residents are subject to this tax on their worldwide sourced ordinary and extraordinary income. On contrary, foreign legal entities and their branches are taxed solely on their Colombian sourced ordinary and extraordinary income. As long as foreign individuals are concerned, they are taxed on their worldwide sourced income only after having completed their fifth year of residency (whether continuous or interrupted) in Colombia.

Income tax is determined annually and its determination coincides with the end of the calendar year. If a taxpayer is not subject to tax during the entire calendar year, such taxpayer’s tax liability will be pro-rated for the year.

National sourced income 7.1.2.

Pursuant to Colombian tax law, the following types of revenue constitute national sourced income, among others:

Revenues derived from the exploitation of tangible and intangible goods within the Colombian territory ū

Revenues derived from the rendering of services within the Colombian territory. Likewise, payments ūderived from the rendering of technical services, technical assistance services and consulting services rendered abroad, are also national source income provided the beneficiary is a Colombian resident

Revenues derived from the transfer of goods located in Colombia when the transfer of title takes place ū

Revenues derived from cross-border interest and lease payments when the debtor is a Colombian ūresident

Income that is not deemed national sourced7.1.3.

The following types of revenues are not deemed to constitute national sourced income:

Revenues derived from technical services regarding the repair or maintenance of goods when rendered ūabroad

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Revenues derived from the sale of securities, bonds and other debt instruments issued by a Colombian ūparty and traded abroad.

Revenues derived from interest payments done by Financial Cooperatives (“Cooperativas Financieras”), ūFinance Companies (“Compañías de Financiamiento”), and by the Colombian Foreign Trade Bank (“Banco de Comercio Exterior de Colombia – BANCOLDEX”) and other financial entities incorporated under Colombian law.

Rates and tax base7.2.

The general income and capital gains tax rate is 33%. Nevertheless, legal entities qualified as “Goods and Services Industrial Users” located in free trade zones within Colombia enjoy a reduced income tax rate of 15%. In addition, certain companies, considered as small companies due to the size of their assets and the number of employees, and which start their activities as of 2011, will enjoy special progressive income tax rates, as follows: 0% for the first two years; 8.25% for the third year; 16.50% for the fourth year; and 24.75% for the fifth year. Subsequent to the completion of the fifth year, small companies that are beneficiaries of this special progressive system will become subject to the general income tax rate of 33%.

The Colombian Tax Regime establishes two systems to determine the income tax base: the regular system and the minimum presumptive income system.

Regular system description7.2.1.

In principle, the regular system includes all revenue or income, ordinary and extraordinary, earned during the fiscal year, which is likely to increase the taxpayer’s wealth and which is not expressly excluded by law. From such income, it is necessary to subtract refunds, discounts and reductions in order to determine the taxpayer’s net revenue for the fiscal year. From net revenue it is necessary to subtract the costs attributable to such income having as a result the gross income. The gross income is then reduced by the deduction of permitted expenses which will result in net Income. Notwithstanding legal exceptions, the net income will constitute the tax base, to which the relevant tax rate will apply.

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Regular System Calculation

Gross RevenueLess: refunds, discounts and reductions

Net RevenueLess: items not considered as income

Net Taxable RevenueLess: costs

Gross IncomeLess: allowed deductions

Net IncomeLess: exempt income

Net Taxable IncomeTimes: applicable rate

Basic Income taxLess: tax discounts

Net Income Tax

Minimum presumptive income system7.2.2.

The minimum presumptive income system is an alternative method to calculate the income tax, under which the tax base shall not be less than the 3% of the taxpayer’s net worth as of December 31 of the immediately preceding fiscal year. This system supposes a minimum profitability likely to be taxed. As a consequence, this system is not based on actual income earned by the taxpayer. On contrary, it is a legal presumption given by the statutory parameters.

Non-taxable income 7.3.

Tax law establishes a special fiscal treatment that allows the exclusion of certain types of income from the determination of the tax base. Among others, some examples of non-taxable income include the following: dividends (so long as the dividend-paying entity has already paid taxes on the profits that fund dividend payments); the portion of profits that derive from the transfer of shares corresponding to retained profits (taxed at the corporate level) triggered between the acquisition date and the date of their transfer, the capitalization of the premium on shares, the capitalization of certain balance sheet items, compensation from insurance coverage, and distribution of profits derived from a company’s winding-up.

Notwithstanding the above, the determination of whether certain types of income are non-taxable income must be made on a case-by-case basis.

Costs, deductible expenses and other special deductions7.4.

Costs consist of charges related to the acquisition or production of goods or the provision of services. Such costs, if accrued during the corresponding fiscal year, can be deducted for income tax purposes as long as they are (i)

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directly related to the producing activity, (ii) necessary, and (iii) proportional to the performed activities. Permitted deductions must be paid in cash or through payments in kind, except costs that are incurred in advance. Costs incurred by taxpayers whose account books are based on the accrual system are deemed to be realized whenever the obligation to pay arises, even if such payment has not yet been made.

Expenses are any outlays incurred in connection with the administration, sales process, investigation and financing transactions undertaken by a taxpayer. Tax law allows deductions of expenses for income tax purposes as long as they are (i) directly related to the producing activity, (ii) necessary, and (iii) proportional to the performed activities.

As of 2014, incurred expenses and costs paid in cash, and not through the financial system (i.e. banking transfers, credit cards, and debit cards, among others) will not be deductible for income tax purposes. However, other methods of extinguishing contractual obligations such as payments in kind, compensations, and others, will continue to be deductible for income tax purposes.

Some examples of permitted deductions include:

Wages and payroll taxes 7.4.1.

Wages paid to employees can be deducted from income for tax purposes as long as the employer/taxpayer has duly paid the corresponding payroll taxes (“Aportes Parafiscales”) (i.e. ICBF, SENA, family subsidy, and welfare services) and has performed the corresponding withholding. All of these social contributions are also deductible for income tax purposes.

Paid taxes7.4.2.

100% of the industry and trade tax and any real estate taxes paid during the corresponding fiscal year ūare deductible for income tax purposes.

From 2013 until 2018, 50% of the debit tax will be deductible for income tax purposes (please see the ūsection describing Financial transactions Tax – GMF). During fiscal years 2011 and 2012, 25% of the debit tax will be deductible for income tax purposes.

Interest payments 7.4.3.

Interest payments on loans with any financial institution subject to oversight by the Finance Superintendence (Superintendencia Financiera) are fully deductible.

On the other hand, interest payments made to individuals or other legal entities are deductible solely in the fraction that does not exceed the maximum rate authorized by the corresponding authorities to bank institutions during the corresponding tax year.

Cross border payments7.4.4.

Cross border payments can be deducted for income tax purposes as long as they are directly related to the producing activity of the taxpayer, and the corresponding withholding tax (if any) has been withheld.

Nevertheless, the withholding tax is not necessary when the income is derived from certain types of payments, as follows:

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Commission payments to foreign commission agents related to the purchase or sale of merchandise, ūraw materials and other types of goods, provided that such commission does not exceed a specified percentage of the transaction, as fixed by the Ministry of Treasury (Ministerio de Hacienda y Crédito Público) for the corresponding tax year.

Interest payments on short-term loans (not in excess of one year) whose underlying purpose relates to ūthe import/export of goods, bank overdrafts, and overdraws, as long as they do not exceed the value’s percentage of each loan, overdrafts or overdraws fixed by the Colombian Central Bank.

For cross border payments, where costs and deductions are aimed to generate national sourced income and which are not subject to withholding tax, the deductibility related thereto shall not exceed 15% of the taxpayer’s taxable income base, calculated before subtracting such costs and expenses, although, certain exceptions to this rule are provided by law. However some exceptions to this rule apply:

Those payments in which the withholding tax is mandatory. ū

The abovementioned Commissions and interests payments in which the withholding tax is not ūnecessary.

In case of payments stated in Section 25 of the Colombian Tax Code, which do not generate Colombian ūsource income.

For payments for acquisition of any kind of tangible good. ū

Capitalized costs and expenses aimed to be amortized according to the Accounting rules. ū

Those payments incurred by virtue of the compliance with a legal obligation. ū

Charitable donations7.4.5.

Charitable donations to certain entities expressly authorized by Colombian law are deductible for income tax purposes during the fiscal year or period in which the donation took place, and as long as all the legal requirements related thereto are duly fulfilled.

Scientific and technological investments 7.4.6.

Taxpayers that invest directly or indirectly in research and technological development projects are allowed to deduct 175% (before 125%) of such investment expense for income tax purposes. This deduction shall not exceed 40% (before 20%) of the taxpayer’s net income, determined before subtracting such investment.

According to Act 1450, 2011, the excess may be carried forward to subsequent fiscal years. The deduction can be transferred to partners or shareholders of the entity which took the benefit.

Likewise, the funds perceived by the recipient of these investments, while meeting the requirements established by law, shall be deemed as non-taxable income or capital gain.

Investments in environmental control and improvement 7.4.7.

Taxpayers (entities) that invest directly in environmental control and improvement projects are allowed to deduct such investments during the corresponding tax year. This deduction shall not exceed the 20% of the legal entity’s

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tax base, determined before subtracting such investment.

Fiscal losses carry-forwards7.4.8.

As of 2007, Colombian law permits the carry-forward of fiscal losses to subsequent tax periods. There is no time limitation in order to carry forward such fiscal losses, notwithstanding the Minimum Presumptive Income System (as described above). Carry-forward losses may not be transferred to a legal entity’s equity holders.

In the event of a merger or spin-off transaction, the purchaser or the new company may carry-forward the fiscal losses of the merged or spun-off company with certain limitations.

Amortization of investments7.4.9.

Amortization consists of distributing the cost of intangible assets over their useful life or any other period of time fixed pursuant to certain valid criteria. Under the current tax regime, investments which are carried out to achieve the enterprise’s goals can be amortized (however, such enterprise may not amortize costs stemming from real estate investments or fixed amortizable assets).

Preliminary expenses of installation, organization and activities development incurred for purposes of achieving the enterprise’s aims, and that can be depreciated, shall be registered as assets for their amortization over a period exceeding at least 1 year or fiscal period and shall be treated as deferred charges.

These investments have to be amortized in a period that shall not be less than 5 years, unless the amortization has to occur in a shorter time period because of the nature or type of the business.

Depreciation7.4.10.

Reasonable values for the depreciation caused by the asset’s weakening, normal deterioration or obsolescence can be deducted for income tax purposes, taking into consideration the installments or necessary sums to amortize 100% of the asset’s cost during its useful life.

Difference in foreign exchange payments7.4.11.

Payments in foreign currencies are estimated for the purchase price in Colombian pesos. Therefore, when there are liabilities or assets in a foreign currency, their value shall be adjusted according the applicable exchange rate (“Tasa de Cambio Representativa del Mercado TRM”) and any difference in exchange rate shall be taxed or deducted, depending on the circumstances.

Exempted income7.4.12.

Applicable tax law establishes some revenues that may constitute tax-exempt income, among others, the following:

Publishing companies whose purpose it is to edit books, magazines, brochures or collectable collections ūwith scientific or cultural contents (tax-exempted until 2030).

The payment of capital, interest payments, commissions and other items related to foreign public debt ūand other transactions of a similar nature are exempted from all national taxes as long as they are paid to foreign non-resident parties.

The sale of energy generated from (i) wind-sourced, (ii) bio-mass, or (iii) agricultural residues by ū

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generating companies are tax-exempted for a term of 15 years, as from January 1, 2003, as long as the company sells the energy by itself, and issues and trades certificates of reduction of greenhouse effect gases.

Income derived from the cultivation of slow-growth plantations such as cacao, rubber, palm oil, citric ūand other fruits as determined by the Ministry of Agriculture and Rural Development (“Ministerio de Agricultura y Desarrollo Rural”). In order to take advantage of this tax exemption, the plantation owner must sow the relevant seeds between 2003 and 2014. This tax benefit can be applied for a term of 10 years, beginning upon starting of the sowing or producing.

The provision of waterway transportation services with vessels and floating platforms of low depth are ūalso income tax-exempted for a period of 15 years as of 2003. Low depth vessels and floating platforms shall have a draft of less than 4.5 feet.

Hotel services rendered in new hotels built between January 1, 2003 and December 31, 2017 are ūeligible for tax exemptions for a term of 30 years from the date of initiation of services at such newly constructed hotel facility.

Hotel services rendered in remodeled or expanded hotels between January 1, 2003 and December 31, ū2017 are also tax exempted for a term of 30 years and exclusively in proportion to the value of such remodeling or expansion.

Ecotourism services are exempted for a period of 20 years as of 2003 ū

Investments in new forest plantations, sawmills and wood trees ū

New pharmaceutical products and software created in Colombia and protected by Colombian ūintellectual property legislation, with an important content of national scientific and technological investigation, for a term of 10 years as of January 1, 2003 until December 31, 2012.

Tax credits7.4.13.

Colombian law establishes as tax credits certain items that can be deducted from income as determined by the taxpayer. Among others, it is available for the following types of tax credits:

Credit on income tax paid abroad for national taxpayers and foreign individuals starting their fifth year ūof residence in Colombia with respect to foreign sourced income

Credit on income received by any companies for growing trees in reforestation areas ū

Credit on income tax over VAT accrued on the import of heavy machinery for primary industries ū

Tax credits cannot exceed the Colombian income tax due. The income tax after credits cannot be lower than 75% of the tax determined by the minimum presumptive income system over the net-worth, before any tax discount.

Transfer pricing7.5.

In general terms, taxpayers who engage in transactions with affiliates or other related parties residing abroad are subject to the transfer pricing regime. Accordingly, taxpayers subject to the transfer pricing regime must conduct such related party transactions on commercial standards (including prices and profit margins), which should be established in comparable transactions with independent third parties. In essence, their operations and business

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transactions with related parties must be conducted on an arm’s length basis. Colombian law on transfer pricing matters is based on the guidelines set forth by the Organization for Economic Co-operation and Development (OECD) and became effective in 2004.

Therefore, taxpayers who carry out operations with foreign related parties that exceed the amounts established by law related to gross assets and gross revenue are required to file annually an Informative Return about every operation carried out with foreign related parties. Additionally, they must prepare and submit an annual informative report to the National Customs and Tax Authority – DIAN, and provide supporting documentation of every operation undertaken in order to prove the correct application of the transfer pricing regime. Support documentation must be safely kept for a period of 5 years starting from January 1 of the fiscal year following its preparation.

Given the case in which the operations with related parties abroad effect the balance sheet of the taxpayer, who fulfills the criteria in order to be bound by the transfer pricing legal regime, the preparation and filing of the support documentation of such operations will not be required, nonetheless, such information must be included in the annual informative report.

It is important to bear in mind that non-compliance with the transfer pricing regime is punishable by law. Types of non-compliance giving rise to potential sanctions with respect to the transfer pricing regime may include the following: (i) untimely filing of support documentation, (ii) errors in the support documentation, (iii) filing information different from that requested by the National Customs and Tax Authority – DIAN, (iv) filing information which does not allow the verification of the transfer pricing, and (v) not providing information regarding transactions with foreign related parties.

In addition, the tax authorities may impose sanctions related to non-compliance with respect to the annual informative return, including: (i) untimely filing of the annual informative return, and (ii) amendments to the informative return by the Government.

Capital gains tax7.6.

As a complement to income tax, capital gains taxes are imposed on earnings that are obtained from certain operations expressly defined by law.

Ordinary costs and deductions taken by the taxpayer are not applicable to capital gains profits; in addition, capital losses cannot be taken into account for purposes of computing the ordinary taxable income of the taxpayer.

Among the most significant operations subject to the capital gains tax are the following:

Gains (the excess of the sale price over the tax basis of the asset) derived from the sale of fixed assets of ūthe taxpayer owned for a period of at least 2 years

Gains derived from the liquidation of any type of corporation on the excess of the invested capital, ūwhen the gains or earnings do not correspond to income, reserves or earnings distributable as non-taxable dividends, as long as the company has completed at the moment of its liquidation two or more years of existence.

Gains derived from inheritances, legacies, donations, as well as those received in the manner of spousal ū

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forced shares.

Gains derived from lotteries, raffles, and others similar activities ū

For entities, whether national or foreign, the capital gains tax rate is 33%.

Withholding taxes7.7.

The Colombian tax system provides for withholding taxes as a method of advance tax collection. This mechanism authorizes, by law or regulation, a private or public entity, under certain special conditions, to collect or withhold certain taxes due to its special attributes. According to the tax code, the withholding agents are, among others, corporations that due to their characteristics intervene in acts in which tax withholding must be practiced because it is required pursuant to law.

The main obligations of withholding agents are to (i) withhold in accordance with the tax law, (ii) deposit the withheld amounts in the places and on the dates established by the Government, (iii) file, on a monthly basis, the withholding tax returns, and (iv) issue tax withholdings certificates.

Notwithstanding the above, it is important to bear in mind that provided that there are differential rates for local transactions and special rates for payments abroad, in order to determine the applicable withholding tax rate for a particular transaction, it is necessary to consider their precise nature. Therefore, tax withholding is determined on a case-by-case basis.

Equity tax7.8.

For fiscal year 2011, corporate and individual income taxpayers who are required to file income tax return and whose net assets (assets minus liabilities) as of January 1, 2011 add up to COP $3,000,000,000 (approximately USD 1,578,947) are also required to pay the equity tax.

Additionally, the Government through a Legislative Decree issued during a state of economic, social and ecological emergency, imposed a surtax of 25% for such taxpayers.

Likewise, the Government created a special equity tax for taxpayers with net assets below the amounts established in the current law. Like the current equity tax, the special equity tax was triggered only once as of January 1, 2011 and to the taxpayers who as of January 1 met the requirements set in the law.

The following table summarizes the thresholds and the applicable rates:

Tax base (Net assets) Rate

Net assets above USD 2,631,578 4.8% (+25% surtax)

Net assets between USD 1,578,947 and USD 2,631,577 2.4% (+25% surtax)

Net assets between USD 1,052,632 and USD 1,578,946 1.4%

Net assets between USD 526,316 and USD 1,052,631 1%

The tax base of this tax is constituted by the value of the taxpayer’s net assets possessed as of January 1,

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2011, excluding the net value of shares held in Colombian companies, as well as the first COP $319,215,000 (approximately USD168,008) of the value of the taxpayer’s residence (in the case of individuals). The date of accrual of the tax is January 1, 2011 (for one time only).

Equity tax is neither creditable nor deductible from income tax and it may not be offset against any other taxes due and payable. Nonetheless, the law authorizes taxpayers to charge this tax against the asset revaluation account, without effecting the income statement of the year.

Value added tax (VAT)7.9.

This is a national tax which taxes (i) the sale of tangible goods which are not fixed assets and have not been expressly excluded by tax law, (ii) the provision of services within Colombian territory (some exceptions apply), (iii) the import of tangible personal property that has not been expressly excluded by tax law, and (iv) the sale and operation of games of chance excluding lotteries.

In Colombia, this tax is structured as a value added tax, therefore the taxpayer is allowed to credit against the VAT paid on goods and services acquired and used in the production of income against the VAT generated on the sale of goods or the provision of services from VAT-taxable operations. Certain limitations to this credit tax may apply.

Entities/individuals which are responsible before the tax authorities for the collection and payment of the VAT are those who undertake any of the activities subject to the VAT. However, the economic burden of the VAT is levied upon the final consumer. In this sense, the following people, among others, are responsible for the collection and payment of the VAT:

With regard to sales of goods, the merchants or businesses, regardless of whether they are distributors ūor manufacturers

The providers of services not excluded from the tax ū

Importers ū

When the responsible of this tax is a foreign non-domiciled entity, the Colombian entity should act as a ūVAT withholding agent obliged to collect and pay such VAT through filing tax withholding returns.

With respect to the sale of tangible goods (not fixed assets) and in the provision of services, the tax base is generally determined by the total value of the relevant transaction. Additionally, there are some special tax bases for certain goods and services.

The general VAT rate is 16%, and it is applicable to most types of transactions. However, there are some special VAT rates that vary from 1.6% to 35%.

Zero rated and exempt transactions 7.9.1.

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VAT-zero rated goods

National or imported equipment and materials aimed for the construction, installation, assembly and ūoperation of environmental monitoring and control systems

Imports of raw materials and supplies under the so-called Vallejo Plan (which is a special import and ūexport program described in further detail in Chapter 4 on Customs and Foreign Trade Regime), under which these materials and supplies are incorporated into products for subsequent export.

Temporary imports of heavy machinery and equipment for basic industries provided that the types ūof machinery and equipment are not produced in Colombia. It is understood that basic industries are mining, hydrocarbons, heavy chemistry, iron and steel industry, metallurgy, extraction of natural resources, generation and transmission of electrical energy, and obtaining, purifying and conducting hydrogen oxide.

Imports of machinery and equipment produced outside the country for recycling and processing of ūwaste

Ordinary imports by highly exporting users, so-called ALTEX (further described in Chapter 4 on Customs ūand Foreign Trade Regime), of industrial equipment not produced in the country and aimed at raw materials transformation, for an indefinite period of time.

The sale of fixed assets ū

The equipment and elements imported by research and development entities and other educational ūinstitutions recognized by the Colombian Ministry of Education.

Exempt services

Public and private, national and international freight transportation ū

Public transportation of passengers in the national territory by water or land ū

National air transportation of passengers where there is no authorized land transportation ū

Transportation of gas and hydrocarbons ū

Interest payments and other financial income from credit operations and financial leasing ū

Medical, dental, hospital, clinical and lab services for human health ū

Utilities including energy, water, sewage, road maintenance and street cleaning, garbage collection and ūgas

Internet access services for homes in low-income urban zones 1, 2 and 3 ū

Exempt imports

VAT exempt imports are expressly listed in the law. The types of imports that do not trigger the VAT are those where

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there is no clearance through customs (i.e. short term importations), importation of heavy machinery for basic industries, importations to special customs areas, among others.

Determination of the VAT7.9.2.

VAT is determined by the difference between the tax accrued on taxable transactions and the VAT credits authorized by law.

Debit tax or financial transactions tax (GMF)7.10.

The financial transactions tax is a permanent tax, payable instantaneously at the time of any financial transaction through a saving or checking bank accounts, cashier’s checks or deposit account in the Central Bank (“Banco de la República”) or through any accounting entries that involve or imply the payment of obligations. The tax is payable on the amount of the financial transaction.

The tax rate is 0.4% of the total amount of the financial transaction. From 2014 to 2017 the applicable rate will progressively be reduced. In 2018 this tax will be permanently repealed.

From 2013 to 2018, 50% of the total tax paid will be deductible for income tax purposes, regardless of whether the transactions have a causal nexus with the income producing activity of the taxpayer. For years 2011 and 2012 the 25% of the GMF paid will be deductible for income tax purposes.

This financial transactions tax is collected through a withholding mechanism, and the withholding agents are either the Central Bank (“Banco de la República”), any of other financial entities subject to oversight by the Finance Superintendence (“Superintendencia Financiera”) or the Cooperatives Superintendence (“Superintendencia de Economía Solidaria”) where the respective checking account, savings account, deposit account or collective portfolio are held, or where the accounting transactions that imply the transfer or disposal of resources are booked.

It should be noted that the law establishes a series of financial operations and transactions that are exempted from this tax.

Industry and trade tax and the supplementary tax of billboards 7.11.

Industry and trade tax 7.11.1.

The industry and trade tax is a sub-national (municipal) level or local tax that is imposed on revenue generated from the exercise of industrial, commercial or service activities that are carried out directly or indirectly by individuals, legal entities or unincorporated entities in any of the Colombian municipal jurisdictions.

The tax base of this tax is constituted by the gross income generated by the taxpayer, minus any permitted deductions, exclusions, and certain other values.

The rate of this tax is defined by each municipality within the limits set forth by law. Currently, the rates are as follows: from 0.2% to 1% (nevertheless higher rates may apply in some municipal areas).

Supplementary billboard tax 7.11.2.

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The Supplementary billboard tax is sub-national (municipal) or local tax, assessed in addition to the industry and trade tax. This specific tax is triggered by the placement of billboards in public spaces. This tax is imposed on any persons or companies engaged in industrial, commercial and service activities in the municipal jurisdictions that use the public space to advertise their business through billboards.

The tax base is the industry and trade tax liability. The applicable rate changes depending on the jurisdiction -the rate shall not be higher than 15%-.

Real estate tax7.12.

The real estate tax is imposed on real property located in urban, suburban or rural areas, whether or not constructed land. Therefore, the property taxpayers are the owners or holders of the real property.

The real estate tax base is the estate’s official appraisal. Nonetheless in zones such as the Capital District of Bogota, the tax base is the value of the property as appraised by the taxpayer directly.

The applicable rate depends on the nature of the property, namely whether it is rural, urban or suburban, and varies between 0.5% and 3.3%, taking into account the economic use of each property.

This tax is 100% deductible for income tax purposes, as long as there is a direct relation with the income producing activity of the taxpayer.

Registry tax7.13.

The registry tax is levied on any acts, contracts or business set forth in documents that require a registration with the Chamber of Commerce and the Public Registry Office (Oficina de Registro de Instrumentos Públicos).

The tax base is the value referenced in the document that describes the act, agreement or judicial contract. In the case of documents that do not have a stated value, the tax base is given by the nature of such documents.

Acts, agreements, or judicial contracts with a stated value subject to registration with the Offices of ūPublic Instruments will trigger a tax rate between 0.5% and 1%.

Acts, agreements, or judicial contracts with a stated value subject to registration with the Chambers of ūCommerce will trigger a tax rate between 0.3% and 0.7%.

Acts, agreements, or judicial contracts without a stated value that are subject to registration either with ūthe Office of Public Instruments or Chambers of Commerce will trigger a tax rate between two and four minimum daily wages.

Some examples of documents without a determined value include: naming acts, name changes, statutory bylaws addendums (excluding the increase of capital and mergers), liquidation of companies, etc.

Examples of acts with determined value include the following: company incorporation, increase of social capital and increase of the subscribed capital, transfer of quotas, sale of commercial establishments, liquidation of companies, etc.

ENVIRONMENTAL REGIME

Four things that an investor should know about Colombian environmental laws and regulations:

Any activities involving the use or affecting natural resources will require environmental licenses, 1. permits and/or authorizations. It is necessary to obtain these environmental permits prior to the undertaking of any such activities.

If the project related to natural resources is located within indigenous or Afro-Colombian territories, 2. it is necessary to consult with such communities prior to the initiation of the project to ensure that they will not be negatively affected and will participate in the benefits arising from the project.

The environmental authorities may declare certain areas as “protected areas” where industrial 3. activities are completely or partially prohibited.

Colombia is a party to a number of important environmental international treaties such as the 4. Kyoto Protocol on Climate Change. In addition, the Clean Development Mechanism (CDM) for the reduction of emissions is a great investment alternative as it offers important customs and tax benefits, as well as the possibility to negotiate internationally the certified emission reduction (CER) credits.

ENVIRONMENTAL REGIME

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ENVIRONMENTAL REGIME8.

The Colombian Constitution is known as the “Green Constitution” because of the importance attributed to environmental principles and the rights and mechanisms granted to Colombian citizens for the purpose of protecting the environment.

The Colombian Constitution establishes as State and citizens’ duties (i) the protection of the natural wealth of the Nation, with the purpose of ensuring the protection of certain rights, such as the right to enjoy a clean environment, (ii) the maintenance of the ecological balance and the proper management and use of natural resources, (iii) the public safety and health, and (iv) the prevention of foreseeable natural disasters. The regulations aim to guarantee sustainable development, the conservation of the country’s biological diversity, the integrity of the environment, the protection of natural resources, the landscape, human health, the preservation of areas with special ecological importance and the planning, management and rational use of the country’s natural resources.

Main environmental authorities 8.1.

Ministry of Environment and Sustainable Development (MADS)8.1.1.

The MADS is the government agency responsible for managing the environment and renewable natural resources. As such, MADS defines the public policies regarding their recovery, conservation, protection, management, use and exploitation.

Regional Autonomous Corporations (CAR) and Urban Environmental Units (UAU)8.1.2.

The CARs are public entities with competence over areas that constitute the same ecosystem or that make part of the same geopolitical, biogeographic or hydrogeographic unit. CARs are responsible for overseeing the activities related to the environment and natural resources within the same jurisdiction, and promoting sustainable development.

UAUs perform the same functions as the CARs within the urban perimeter of the municipalities, districts or metropolitan areas with a population of at least 1,000,000 inhabitants.

Types of control8.2.

The use of natural resources and the development of any type of activity involving or affecting the same are subject to specific controls and regulations. Accordingly, the person interested in developing such kind of projects must apply to obtain the necessary environmental licenses, permits, concessions or authorizations.

Environmental license8.2.1.

The undertaking of any activities that according to the law and applicable regulations may cause a substantial impact on natural resources or the environment or significantly alter the existing landscape will require an environmental license. This means that environmental licenses will be necessary for the development of mining projects, hydrocarbon exploitation, the construction of international airports, among others.

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The environmental license contemplates measures for the prevention, mitigation, correction, compensation and the proper management of the environmental effects caused by the activities authorized in it. The term of the environmental license will be the same as of the project that it allows and, therefore, will shelter all of its phases. The license must be obtained prior to initiation of the project.

It will also contain all the permits, authorizations and/or concessions for the use of the natural resources that are required for the development of the project and a project or activity will not need more than one environmental license. It will be granted by the MADS or the corresponding CAR, depending on the magnitude of the project. If either the MADS or CAR denies the environmental license, the applicant may appeal the decision to the appropriate courts.

Once an environmental license is granted, its terms and conditions will set forth the permitted activities of the holder. Thus, any omissions when applying for an environmental license may result in the inability to undertake the omitted activities, and the holder of the license will have to apply for modifications prior to undertaking such additional activities not listed in the original grant of environmental license.

Mechanisms for the management and control of natural resources8.2.2.

The environmental authorizations, concessions and permits required for undertaking activities involving the use of natural resources that may have an environmental impact are classified depending on the type of natural resource. The main instruments for the management and control of natural resources are:

Air (Quality of the air)

Gas emissions to the atmosphere are regulated by law. In some cases it may require an emissions permit. The permit must identify the type of project to be developed, the permitted emissions and quality and quantity thereof. Its term is five years.

All projects that emit gases to the atmosphere must comply with the limits of permissible emissions established by law.

Air (Quality of the air)

In order for the “Emissions Diagnosis Center” to operate, they will require an authorization granted by the environmental authorities with the purpose of verifying the emissions produced by mobile sources within a certain area.

Water

With respect to any projects or activities involving water, the environmental authority may grant any of the following permits:

Concessions: grants the right of using and taking water from rivers and wells. Generally, the term of this type of permit will be ten years. Under limited circumstances, it may be granted for up to fifty years for works related to the provision of public services or for public interest works.

Discharge waste permits: it grants the right for discharging waste into the water. Its term may be up to five years.

WaterA special permit is required in the event in which it is necessary to make use of a riverbed. This permit will also be necessary for the construction and functioning of hydraulic works for the defense and conservation of lands, riverbeds and banks of the rivers, streams or of any other body of water.

Water A special permit is required for the exploration of wells and underground water if the applicant wants to explore the subsoil in search of water.

Hazardous Waste There are special regulations for the proper management, treatment and final disposal of hazardous waste, as well as for the selective collection and environmental management of computer waste.

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External Visual Signage

This kind of publicity is subject to prior registration with the office of the municipality in charge. The applicant must pay a fee for purposes of undertaking such publicity.

Trees A permit must be obtained if an applicant wants to extract forest products for the undertaking of any activity. It is also necessary to obtain an authorization for tree logging.

In addition to this, Colombian law abides by the legal principle referred to as “subsidiary rigor” pursuant to which the local environmental authorities may establish special norms and regulations that are stricter than the ones existing on the national level.

Citizen participation8.3.

Any person may participate in administrative proceedings regarding the (i) granting, modification or cancellation of environmental licenses, permits, authorizations or concessions, or (ii) imposition of environmental sanctions in connection with violations of environmental regulations.

If the project, activity or work will impact on the indigenous or Afro-Colombian territories, it will be necessary to undertake a prior consultation process with these communities. They must be offered the opportunity to participate in the benefits derived from those commercial activities and receive proportional indemnification whenever damage has been caused by any such activities.

Natural resources and protected areas8.4.

In Colombia, the environmental authorities have created the“System of National Parks”. It is defined as a set of areas with exceptional value for the national natural heritage and, due to their natural, cultural and historical characteristics, they have been declared as protected areas. There are different kinds of areas within this system, some of which are: (i) National Natural Parks, (ii) Nature Reserves, (iii) Unique Natural Areas, (iv) Fauna Sanctuaries, (v) Flora Sanctuaries, and (vi) Park Ways. The activities that may be undertaken within those areas are limited to preservation, investigation, education, recreation, culture, recuperation and control. Most types of commercial activities, including mining and hydrocarbons exploration and exploitation, cannot be undertaken in such protected areas.

It is important to mention that, according to Law 1450 of 2011 by means of which the National Development Plan was enacted, the moorland ecosystems will be areas in which no agribusiness, exploration and exploitation of hydrocarbons and minerals or the construction of refineries of hydrocarbons may be developed. These moorland areas must be delimited and so the MADS will publish the cartography with a 1:25,000 scale. While this delimitation occurs, it will be used as a minimum reference the cartography contained in the Moorlands of Colombia Map Book of the Alexander von Humboldt Institute.

In addition to the system of Natural Parks, the CARs may also declare protected areas within their jurisdiction, such as the Regional Parks and Regional Forest Reserve Areas. The environmental regulation contemplates the so-called “Civil Society Natural Reserves”, by which private property is protected with the purpose of preserving the environment and natural resources, together with the participation of a nonprofit environmental organization. The Colombian government may also declare certain private properties as protected areas.

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Compensatory fees and costs of obtaining an environmental license8.5.

When water, air or soil is used for the purpose of disposing waste, the owner of the environmental permit, concession or authorization granted is required to pay a special fee in order to compensate for any damage caused to the environment.

The granting of an environmental license is also subject to the payment of certain fees payable by the applicant. These fees are calculated in accordance with specific formulas established by law, which take into account the amount of the investment made for the project, operation or activity.

Furthermore, the use of water for the execution of activities that is taken directly from the source implies the payment of 1% of the total investment made in such activity. This payment is for the purpose of preservation of the river basin.

Main environmental international treaties ratified by Colombia8.6.

The most significant international environmental treaties ratified by Colombia include, among others: (i) Convention on Biological Diversity, (ii) Ramsar Convention, (iii) Convention on International Trade in Endangered Species of Wild Fauna and Flora, (iv) Montreal Protocol on Substances that Deplete the Ozone Layer, (v) Vienna Convention for the Protection of the Ozone Layer, (vi) Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal, (vii) Basel Protocol on Liability and Compensation, and (viii) Cartagena Protocol on Biosafety to the Convention on Biological Diversity.

Colombia is also a party to the Kyoto Protocol on Climate Change. For this reason, the development of projects of Clean Development Mechanism for the reduction of emissions is a great investment alternative as it offers important customs and tax benefits, as well as the possibility of negotiating internationally the certified emission reduction (CER) credits with certain industrialized countries that require them in order to comply with their environmental obligations.

Sanctions8.7.

If there is a violation of the environmental regulations, the persons affected by such violations or the appropriate environmental authority may initiate judicial or administrative proceedings against the alleged perpetrator including actions for the protection of civil rights, torts, popular actions, group actions, police and/or administrative measures as well as criminal proceedings.

The relevant environmental authorities may, in order to ensure compliance with the environmental regulations, impose injunctive relief and sanctions, penalties or fines. In some instances, certain violations of the environmental regulations may constitute a criminal offense. Indeed, acts such as the illegal use of natural resources, improper disposition of hazardous waste, illegal use of biological natural resources and the illegal exploration and exploitation of mines are some examples of criminal activities with respect to the country’s natural resources.

In addition to the imposition of fines, sanctions, fines and penalties, persons found guilty or liable for violating environmental regulations will be registered in the Unique Environmental Offenders Registry.

INTELLECTUAL PROPERTY

Five things an investor should know about intellectual property:

The mere use of a trademark does not give rights to its exclusive use. Thus, registration must be 1. sought in order to qualify for protection.

A trademark registration can be cancelled upon request from an interested party, provided that 2. the corresponding trademark has not been used in at least one of the CAN countries during the three-year period prior to the date the action was filed.

As for copyrightable works created in the performance of an employment agreement, Colombian 3. legislation does not explicitly provide for the assignment of the rights thereto. Thus, the parties must execute an additional agreement, along with the necessary formalities for such purpose.

Any IP agreement through which IP rights are licensed, assigned or otherwise transferred must 4. be registered with the competent office, in order to become effective vis-à-vis third parties.

Patents protect technical innovation, which may be products or processes. Improvements upon 5. such products and processes may eventually become patentable.

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INTELLECTUAL PROPERTY 9.

The applicable intellectual property regulations in Colombia are mostly those enacted by the Andean Community of Nations (CAN), whose member countries include Colombia, Bolivia, Ecuador and Peru, although certain aspects are regulated by local legislation. Even though regulations issued by the CAN are common and prevail over national legislation, each member country has independent agencies and registration systems.

Consequently, although a single intellectual property framework is in place for CAN member countries, there is no single registration system for intellectual property rights providing protection in all countries. Thus, applications must be filed in each of the CAN member countries to ensure adequate protection of such rights.

Industrial property9.1.

Decision 486 of 2000 of the CAN unified applicable regulations for industrial property pertaining to distinctive signs for products and services (trademarks, slogans, trade names, emblems and denominations of origin), as well as new creations (patents, industrial designs and circuit layouts). Regarding patents, it is important to bear in mind that Colombia also is a member of the Patent Cooperation Treaty (PCT), which eases the attainment of patent protection.

Distinctive signs9.1.1.

As a general rule, in CAN member countries industrial property protection and rights may only be attained through registration before the competent agency (which in Colombia is the Superintendence of Industry and Trade (SIC)). Thus, the use of a distinctive sign in itself does not confer any rights or protection whatsoever in Colombia. Exceptionally and exclusively for trade names and emblems, protection is granted in the absence of registration if continuous and public use is properly shown.

Exclusive right to use a distinctive sign is ensured by means of its registration, which entitles its owner to prevent third parties from using identical or similar distinctive signs, if such use is likely to cause confusion or give the impression of affiliation.

Trademarks

Trademarks are signs that distinguish goods and services from one manufacturer and allow differentiating them from other goods and services in the market. Since in Colombia the Nice International Classification of Goods and Services applies, a trademark must be registered in the relevant class of such products or services.

Trademarks, depending on how they are meant to be perceived, may be: solely nominative, solely figurative, nominative with a visual device, or 3-D. Likewise, Decision 486 foresees the possibility of registering as trademarks certain sounds, odors, the combination of colors defined by a given shape, and the shape of a product, its package or container.

The exclusive right to use a trademark becomes effective once the registration is granted and throughout an initial ten-year term, which may be renewed indefinitely for subsequent ten-year terms.

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In addition, according to Decision 486, the following provisions apply in CAN member countries:

Priority claim

A priority claim is granted to the holder of a trademark application originally filed in any member country of the CAN or the Paris Convention for the Protection of Industrial Property. Thus, within a six-month term as of the date of the initial application, the holder may file an application for the same trademark in any other member country, whose filing date will be that of the first application.

Andean opposition

The holder of a trademark registration or application in any of the CAN countries can file oppositions against applications filed in any other CAN country, within thirty days following publication. The opponent must also file an application in the country where the opposition is filed to evidence its legitimate interest.

Cancellation of a registration due to non-use

The non-use cancellation action is a proceeding by which any interested party may seek the removal of a trademark registration, provided that its owner cannot evidence any significant use in any of the CAN countries during the three-year period prior to the date when such proceeding is initiated, with respect to goods or services within the scope of such registration. The trademark owner has the opportunity to submit evidence showing the use of its trademark. The SIC may order the total cancellation, if use is not evidenced for any of the goods or services covered by the registration, or the partial cancellation of the trademark, in the event that use of only certain goods and services is shown.

Use of the trademark by an authorized third party (through franchise, distribution agreements, etc.) will be acknowledged as valid use, in the event a non-use cancellation action is initiated against the trademark holder.

Whoever obtains a favorable decision in a non-use cancellation action in a CAN country may claim a preferential right, which will allow such person to apply for an identical trademark, within the date when the cancellation action was commenced and three months following the date on which the respective non-use cancellation decision became final.

Slogans

A slogan is the word, phrase or wording which is utilized together with a trademark. Any slogan application must identify the trademark registration or application with which it will be used.

The provisions of Decision 486 regulating trademark use, exclusive rights and grounds of refusal are applicable to slogans.

Trade names and emblems

Trade name is the designation under which an entrepreneur publicly undertakes its commercial activities and is acknowledged by consumers and competitors, regardless of whether or not such designation corresponds with the name recorded before the commercial registry. Emblems, in turn, identify the commercial establishment, understood as a unit of goods assembled by the respective entrepreneur, in order to undertake a given business objective and activities.

The rights on trade names and emblems are acquired by their first use in the market and end upon termination of (i) their use, (ii) the entrepreneurs’ activities or (iii) the commercial establishment as such.

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From the recordation of trade names and emblems no rights arise. The recordation of trade names and emblems furnishes a presumption regarding the date as of when the use of the sign began, which for all purposes shall be the date when the corresponding application was filed.

Designation of origin

The designations of origin refer to a geographical indication by the name of a country, a region or a specific place, or by a name that generally refers to a geographical area, which indicates that a product originated in such place and whose quality, reputation or other characteristics are exclusively or essentially due to the geographical location in which it is produced, including natural and human factors. The authorization for a protected designation of origin shall have a term of ten years, renewable for equal periods.

The protection of designations of origin is obtained through a declaration on behalf of the SIC. This declaration grants the right of the exclusive use of the designation of origin to the producers in such geographic region, and encompasses the possibility to prevent unauthorized third persons from using the sign, or similar signs for the same types of competing goods.

Likewise, the registration of a trademark or slogan improperly reproducing, containing or imitating a name of origin may be challenged within thirty days after its publication in the Industrial Property Gazette.

New creations9.1.2.

New creations can be protected through patents of invention, utility models, industrial designs and circuit layouts. Such titles granted by the government confer on their holders an exclusive right of enjoyment and the timely privilege to forbid others from manufacturing, selling and/or using in commerce the protected creations. Due to their importance in the technological development of Colombia and in order to assure their appropriate use, Colombian legislation grants such new creations a paramount position within the realm of intellectual property.

Patents of invention

Patents of invention are granted with respect to products or processes which are novel, are not obvious for a skilled artisan and have an industrial application. The exclusive right on a patent is granted for twenty years, as of the moment the application is filed (not when it is granted, as is the case with trademarks).

For purposes of patentability, CAN legislation foresees that the following shall not constitute inventions: discoveries, scientific theories and mathematical methods, the biological or genetic processes isolated from their natural environment, copyright protected works, software and any form of presenting information. Likewise, therapeutic and surgical methods or treatments for humans and animal and uses or secondary uses of already patented products and processes, among others, shall not be patentable.

Utility model patents

Utility model patents refer to any new form, configuration or composition of elements of any device, tool, instrument, mechanism or other object, or part thereof, which allows an improved or different utilization of the object, or which provides any use, advantage or effect which it did not have before. The exclusive right of use is granted for ten years, as of the moment the application is filed.

Art works, architectural works or objects of mere aesthetic character which may be protected by copyrights are not within its scope.

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Compliance of formal requirements

Response to oppositions and �ling of evidence

AppealOpposition term

O�cial fees are paid and application is �led

Decision granting or denying application

Final decision: appeal is decided

Publication for third parties

Industrial designs

Industrial designs refer to the particular appearance of a product resulting from any collection of lines, or combination of colors, or of any external bi-dimensional or tri-dimensional form, line, outline, configuration, texture or material, without changing the function or purpose of the product. The exclusive right of use is granted for ten years, as of the moment the application is filed.

Rights conferred by patents

Patents generally grant their holders the exclusive right to exploit the invention and to prevent third parties from manufacturing, utilizing, selling, using or marketing such invention.Decision 486 foresees the possibility for applicants to “claim priority” of an initial foreign application. Consequently, with respect to any patent and industrial design applications originating in any of the CAN or Paris Convention member countries, applicants will be afforded a term during which they will be able to file additional applications for which the earliest filing date will be acknowledged. Priority terms are one year for patents and six months for industrial designs.

Commercial use9.1.3.

Rights conferred by way of registration of distinctive signs and new creations are exchangeable and assignable. Consequently, their holders will be able to make use of their rights through different means, such as assignment by sale, concession of use, production or license, and use them to secure third-party financing.

According to Law 1450 of 2011, effective as of June 16, 2011, provided that the corresponding agreement is in writing, rights on industrial property which is created within the scope of an employer-employee relationship or on a work-for-hire basis are presumed to have been assigned to the employer or hirer, unless agreed otherwise.

Bearing in mind that ownership on trademarks and patents is recognized upon registration, any act or use such as those previously described must be recorded before the competent agency, so as to become effective vis-à-vis third parties.

Applicable proceeding and fees9.1.4.

The proceeding for the registration of trademarks and patents is of an administrative and not judicial nature. Such proceeding is made with the SIC, by fulfilling the following steps:

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As for distinctive signs, this proceeding can take between eight months to one year until a final decision is rendered. Regarding new creations, such proceeding can take between five to seven years.

Applicable fees can be found on www.sic.gov.co

Copyright 9.2.

General features9.2.1.

Copyright protection is granted to creations in the artistic and literary fields (including software). The protection is granted on the form in which the ideas of the author are described, explained, illustrated or incorporated in the respective works, rather than on the ideas themselves.

Colombia has a protection system based on the concept of droit d ‘auteur, which stems from the civil right tradition, in contrast to the copyright framework that exists in common law countries. Hence, the legislation protects the author of the work, that is, the individual who creates it, granting such individual moral and economic rights.

Moral rights refer to the perpetual, non-negotiable and non-transferable right the author has to his or her works, which allows the author to claim authorship, challenge the works’ transformation, mutilation or deformation, and maintain his or her anonymity and determine whether or not it can be published. Under such rights, the author is granted recognition and preserves the integrity over his or her work, thereby protecting the author’s honor and reputation.

These rights may never be transferred and any reference thereto in an agreement may only reaffirm such rights.

Economic rights refer to the exclusive right the holder has to perform, authorize or prohibit the use or exploitation of his or her work, in such a way that compensation has to be paid when the work is used. Economic rights arise once the work is used or has been disclosed through any means.

The registration of protected works has a declarative effect, in the sense that no rights arise thereof, as it solely provides publicity, eases its enforceability vis-à-vis third parties and represents evidence of its ownership, originality and creation date.

Protection of economic rights endures throughout the author’s life and eighty years after the author’s death. When the owner of the copyright is a legal entity, protection endures for fifty years, as of the date when the work is published or disclosed.

Framework9.2.2.

The copyright framework is found in Decision 351 of 1993 of the CAN, Law 23 of 1982 and Law 44 of 1993. It is important to note that in the event of a discrepancy between the CAN provisions and local legislation, the CAN provisions prevail, in accordance with the Colombian Constitution.

Furthermore, in Colombia both the Berne Convention and the WIPO Copyright Treaty (WCT), within which the World Intellectual Property Organization’s Performances and Phonograms Treaty (WPPT) is also found, may be applicable to matters of intellectual property.

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Commercial use9.2.3.

Due to their economic nature, economic rights may be the subject of contractual arrangements for the benefit of the author or owner. Since these rights are freely transferable, they may be assigned through donations, purchase, sale, inheritance, etc. These rights may likewise be assigned by virtue of law and upon the death of the copyright holder (mortis causa).

Pursuant to Law 1450 of 2011, unless agreed otherwise and provided that the corresponding agreement is in writing, economic rights on copyrightable works crafted within the scope of an employer-employee relationship or on a work-for-hire basis are presumed to have been assigned to the employer or hirer, to the extent necessary for the adequate performance of the employer or hirer’s regular activities at the time the work is created.

Law 1450 of 2011 also removed the existing formalities for the assignment of economic rights; in such a way that nowadays the only requirement is for the respective agreement to be in writing. However, in order to provide for the assignment’s enforceability vis-à-vis third parties, the corresponding instrument must still be recorded with the National Copyright Office (DNDA).

Applicable proceeding and fees9.2.4.

The recordation before the DNDA is sought by completing a form provided by said agency. From the recordation no rights arise, though entry in the register shall constitute a presumption that the facts and acts recorded in it are true, in the absence of proof to the contrary.

Recordation performed before the DNDA is free of charge. However, the applicant must assume certain incidental costs, which may be found on www.derechodeautor.gov.co

REAL ESTATE

Three things that investors should know about the real estate regime in Colombia:

Colombia is a state that protects private property.1.

Colombian nationals and foreign nationals have equal obligations and rights regarding the 2. purchase of real estate property. Real estate transactions do not present for foreign investors any additional tax, legal, or financial burdens.

The contemplated use must comply with urban regulations.3.

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REAL ESTATE 10.

This chapter describes the main considerations to be taken into account for the acquisition of real estate property in Colombia and, additionally, a brief description of the relevant urban regulations for the development of any real estate projects in Colombia.

Real estate acquisition 10.1.

Due diligence10.1.1.

When acquiring real estate property in Colombia, the following basic documents should be reviewed, in order to have a complete overview of the legal situation of the property at the time of the transaction: (i) Certificate of Conveyance and Good Standing (Certificado de Libertad y Tradición) of the most recent date possible (ideally no more than 10 days), (ii) acquisition title (título de adquisición) and any other legal acts that have been performed with respect to the property over the past 20 years, (iii) tax payment certificates, and (iv) the land use certificate.

The following aspects must be emphasized:

Title Search: It allows the investor to determine if there is any circumstance that may affect or limit ūthe right of ownership over the property. This study allows the investor to verify whether there are limitations or risks at the time of the transaction, as well as to verify if the seller is the true holder of ownership rights over the real estate property.

Study of land use: the investor’s due diligence should also include a land use study in order to ūdetermine what type of construction or development activities are allowed on the property being acquired.

It is important that the investor has a clear understanding of the conditions and limitations that may ūaffect the real estate property regarding land use regulation to determine if the property is appropriate for the activities for which it is intended to be acquired.

In connection with the acquisition of rural land, it is important to note that there are special regulations ūthat impose certain limitations on the acquisition and development of this type of real estate property.

Contracts10.1.2.

For the acquisition of a real estate property it is common to execute first a Promise to Sell Agreement before the conclusion of the purchase of real estate property. In the Promise to Sell Agreement, the future purchaser and seller agree on the fundamental aspects of the purchase agreement and bind themselves to execute a purchase agreement over the determined real estate property. The Promise to Sell Agreement is usually executed when the parties have satisfied all the conditions of the purchase agreement, which only lacks the legal formalities.

Subsequently parties execute a real estate property purchase agreement, which is executed by means of a public deed before a Public Notary. The cost of this procedure is approximately 0.3% of purchase price.

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Registration procedure and effects of the registration 10.1.3.

Property rights over real estate properties are transferred by means of the registration of the acquisition title in the Public Instruments Registry Office (Oficina de Registro de Instrumentos Públicos). This procedure produces a registration tax equal to a maximum of 1% of the value of the sale, and a registration fee equal to 0.5% of the value of the sale; such registration taxes and fees must be paid by the purchaser.

Use of real estate properties10.2.

It is not necessary to be the holder of the property rights of a real estate property to be able to exercise the rights of use over such property. Among others, the lease agreement gives such rights to the tenant in return for the payment of rent.

Lease agreements 10.3.

Lease agreements can be executed verbally or in writing and all that is required for their enforceability is an agreement between the landlord and the tenant regarding the amount of rent and the leased property. However, it is recommended that this type of agreement is executed in writing.

Landlord’s obligations10.3.1.

The landlord’s main obligations are: to (i) deliver the real estate property to the tenant, (ii) maintain the property in a state that allows the use for which it was leased, (iii) address any contingency which prevents the tenant to use the real estate property for the purpose for which it was leased, and to (iv) make any necessary repairs.

Tenant’s obligations10.3.2.

The main obligations of the tenant are: to (i) use the property in accordance with the provisions of the lease agreement, (ii) ensure at all times the preservation of the real estate property, (iii) pay the agreed rent, (iv) return the real estate property upon termination of the lease agreement, and to (v) make repairs related to minor upkeep, aesthetic reparations, and regular maintenance (reparaciones locativas) during the term of the lease.

Rent10.3.3.

Rent is the price that the tenant must pay to the landlord for the use of the real estate property. The rent can be stipulated in the lease agreement in any foreign currency, but ultimately it must be paid in Colombian pesos at the market representative exchange rate established on the agreed date.

Renewal of the contract10.3.4.

In connection with the lease of real estate properties that are part of a commercial establishment, the tenant who has leased such property for two or more years has the right to renew the contract at the time of its expiration.

Urban regulations10.4.

Municipalities have the authority to establish zoning regulations pertaining to their territories, the rational and equitable use of land and the preservation and protection of ecological and cultural heritage located in such

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territories. Municipalities are required to establish a territorial zoning plan (Plan de Ordenamiento Territorial POT) for the regulation of potential developments and land use.

General aspects of the territorial zoning plan (POT)10.4.1.

The POT is an instrument that sets and describes the objectives, guidelines, policies, strategies, goals, programs, actions and regulations adopted to guide and manage the physical development of land and land use.

The territories of the municipalities and districts are classified as urban land, rural land or land for urban expansion. This classification should be taken into account by investors in order to establish whether according to the environmental aspects and the zoning and land use regulations the contemplated uses are permitted on the real estate property.

Regulation for the development of property in any territory10.5.

In general, the required planning instruments are: Partial Plans (Planes Parciales), Rural Planning Units (Unidades de Planeación Rural), Urban or Parceling Licenses - depending on the land categorization where the property is located - (Licencias de Urbanización o Parcelación) and Building Permits.

Partial plans10.5.1.

Partial Plans are planning instruments meant to develop and supplement the provisions of the POT for specific areas of urban land, including areas categorized for urban expansion and other areas to be developed through Urban Planning Units (Unidades de Actuación Urbanística), macro projects or other special urban operations.

In these partial plans, the urban regulations contained in the POT are developed for the portion of land within the scope of the POT. These instruments are approved by an administrative act issued by either the appropriate Municipality or District Administration (certain regions have a district administration in lieu of a municipality).

Rural planning units10.5.2.

Rural Planning Units are intermediate planning instruments for rural land. Through such instruments, the following aspects are developed: issues related to environmental management, activities that take place outside of city limits, decisions of occupancy and use, strategies and management instruments, and agricultural technical assistance.

Parceling licenses 10.5.3.

Parceling licenses are those that allow the creation of public and private spaces in one or several properties located on rural and suburban land. Also, by means of such licenses the planning authorities allow the construction of roads and the building of infrastructure to ensure the auto-provision of residential services, which will allow the resulting properties to establish the use determined by the POT.

In any event, a building permit would be required to perform any construction on such parceled properties.

Urban licenses10.5.4.

An urban license is the prior authorization to undertake, on one or several properties located on urban land, the creation of public and private spaces, roads and infrastructure and public services that facilitate adjustment,

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allocation and subdivision of these lands for future construction of buildings destined for urban uses, according to the POT.

The urban licenses ratify the rules of uses, elevation, volume, accessibility and other technical aspects based on which the building permits will be issued for new buildings in such urbanized properties. With the urban license, an urban map (Plano Urbanístico) is approved, and such map will contain a graphical representation of the urbanization, identifying all its parts to facilitate its understanding, such as encumbrances imposed by the POT, transfers to the planning authorities for the construction of public parks, facilities and local roads or useful areas, among others. The license of urbanization on urban expansion soil can only be issued after the adoption of the respective partial plan.

Building permits10.5.5.

A building permit is the prior authorization to develop buildings, circulation areas and communal areas in one or several properties, in accordance with the provisions of the POT, the Special Plans of Management and Protection of Cultural Interest and other rules that govern such matters.

The building permits will set forth the specific uses, elevation, volume, accessibility and other technical aspects approved for the respective construction.

Special payments that affect real estate property 10.6.

Surplus value (Plusvalía)10.6.1.

The surplus value is a contribution derived from zoning actions performed by planning authorities (such as the issuing of a new POT) destined to give the property a more profitable use or increase the utilization of land. It is caused by acts that involve transfer of the property rights and the issuance of building permits which are issued after the zoning action. Surplus value ranges between 30% and 50% of the higher value per square meter that the property derives from the abovementioned zoning action.

Recovery contribution10.6.2.

The contribution of recovery is a lien on real estate properties, which is imposed on owners or possessors of real estate property, who benefit from the implementation of public works carried out by the State.

GOVERNMENT CONTRACTING

Five things an investors should know about Colombian government contracting:

Contractor selection in Colombia is subject to an objective selection process, meaning that 1. public entities must choose the most favorable offer in furtherance of the public interest.

Foreign bidders may participate in selection processes to enter into contracts with state entities 2. in Colombia under the same conditions as a Colombian bidder.

Other than some exceptions set forth in the law, all local natural or judicial persons, or foreign 3. persons with domicile or branch in Colombia, that are willing to enter into contracts with state entities are required to register with the Single Proponents Register or RUP.

Contractors must submit a Single Performance Bond to ensure compliance with the 4. obligations that arise from the execution of the contract, with the exception of loan contracts, interadministrative contracts, insurance contracts, and those contracts in which the value is below a certain threshold (which will vary depending on the respective state entity involved).

Contractors bidding in state contracts may include other state entities, a natural or judicial 5. person (local or foreign), or a group of local or foreign persons, all of which may bid jointly through a Consortium, a Temporary Union or a promise to incorporate a company.

GOVERNMENT CONTRACTING

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GOVERNMENT CONTRACTING 11.

General aspects 11.1.

In Colombia, laws regarding government contracting aim to provide a transparent process to give all potential bidders the possibility to participate in the bidding process for public contracts. Furthermore, such laws aim to guarantee that under just, clear, and objective principles, the most competent bidders that have the required experience and expertise are selected to perform the purpose of the contract.

Scope of application of government contracting laws11.2.

Generally, all state entities are subject to the government contracting regulations, with certain exceptions under which some contracting processes and state entities are subject to a special set of rules, such as public utilities companies, which are subject to private law and regulated by special legislation.

Parties in state contracts11.3.

Generally, state contracts are entered between the contracting entity (i.e. state entities that are identified in the government contracting laws) and the contractor.

Contractors in state contracts may include any of the following: another state entity, a natural or judicial person (local or foreign), a group of local or foreign persons, some of which may bid jointly through a consortium, a temporary union or a promise to incorporate a company.

A natural or judicial person, local or foreign, that aims to enter into contracts with state entities must demonstrate the following: (i) that its term of duration will not be less than the contract term plus one additional year, (ii) that its legal representative has the legal capacity to enter into contracts, (iii) acknowledge the applicability of any commercial laws, (iv) that its corporate purpose allows it to perform the activity constituting the basis for the public contract, and (v) that it has, by itself or in conjunction with those associated with it, the required experience and technical and financial capabilities.

Consortiums and temporary unions are similar to the American “joint venture”. A consortium exists when two or more persons jointly submit a proposal for the granting, execution, and performance of a contract, being jointly and severally liable for each of the obligations derived from the proposal and the contract. On the other hand, the temporary union is defined as a consortium in which the persons that submit the proposal are individually liable for any sanctions that may be imposed based upon their participation in the project through a temporary union.

Another method to submit a contract proposal with a state entity is through the promise of incorporating a company pursuant to which the parties submit a memorandum of intention to incorporate a company once the contract is awarded to them. What distinguishes this method from the temporary union or the consortium is the need to incorporate an entity once the contract is awarded.

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Grounds for incompatibility or ineligibility 11.4.

Grounds for incompatibility or ineligibility may arise due to the personal circumstances of the bidder (e.g. family relationships, pre-existing business dealings, etc.) or as a consequence of misconduct in a prior unrelated bidding process or performance of a public contract. These limitations will limit the disbarred or ineligible person from entering into future public contracts with state entities.

Some of these events arise when a contractor has breached a previous state contract to the point that an early termination with future incompatibility (caducidad) has been declared, or when such contractor has refused to perform a previously awarded state contract or when such contractor has close family ties with the directorate level public servants within the contracting state entity.

Also, the Colombian anti-corruption statute , provides as a cause of disbarment, to have been found liable in court for committing crimes against the public administration and being charged with imprisonment, to have affected the assets of the State, or to have been convicted of crimes related to membership, promotion or financing illegal groups, crimes against humanity, drug trafficking in Colombia or abroad, or transnational bribery , with the exception of negligent offences.

Single proponents registry 11.5.

The Single Proponents Registry (Registro Único de Proponentes) or RUP (for its Spanish initials) is a mandatory registry for all local natural or judicial persons, or foreign persons with domicile or branch in Colombia, that are willing to enter into contracts with state entities.

The RUP registration must be filed with the Chamber of Commerce in the principal domicile of the interested party. The Chamber of Commerce is responsible for the corresponding verifications, prior to issuing a certification that sets forth the contractual capacity of a contractor to participate in a contractual selection process with state entities.

RUP is not necessary to enter into contracts with state entities in the following events:

In the event of direct contracting ū

Contracts that do not exceed 10% of the “minor amount” (a certain threshold which will vary depending ūon the respective state entity involved)

Contracts for the rendering of health services ū

Concession contracts ū

Contracts for the sale of government property ū

Contracts which have as their purpose the purchase of agricultural origin or destination products ūoffered on legally organized commodities exchanges.

Acts and contracts which have as their direct purpose the commercial and industrial activities of the ūindustrial and commercial enterprises of the State and mixed economy corporations.

When the foreign natural or judicial person with no domicile in Colombia or the foreign judicial person ūthat does not have a branch in Colombia aims to enter into contracts with state entities.

In the aforementioned events, the respective state entities are in charge of verifying the proponent’s qualifications.

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Government contracting principles 11.6.

Government contracting is based on a series of principles that rule on all its procedures. Therefore, the contracting process must abide by the principles of transparency, reciprocity, economy, responsibility, objective selection, planning, economic equilibrium and due process. Some of the most important aspects of such principles include:

The objective selection principle that aims to select the most favorable offer submitted to the state ūentity without considering any subjective factors.

The reciprocity principle that implies that foreign bidders may participate in selection processes to ūenter into contracts with state entities in Colombia under the same conditions as a Colombian bidder may participate in contractor selection process in the foreign bidder’s country of origin.

The right to due process in the event that any state entities wish to use their powers to impose fines or ūdeclare a breach of the contract, i.e. guaranteeing the right to defend against government action.

Modes of contractor selection 11.7.

To guarantee transparency and objective selection principles, a series of modes of selection have been established with the intention that state entities may ensure themselves of selecting the best offer.

The established modes of contractor selection include the following four: the public tender, the abbreviated selection, the merits-based selection, the direct selection and the minimum amount selection. As a general rule, the selection of the contractor must be made via public tender unless the law permits an alternative mode of selection.

Public tender 11.7.1.

The public tender is a procedure by means of which a public invitation is made by the public entity so that those interested in entering into a contract with it submit their proposals, from which the most favorable one for the purposes of the contract is selected, subject to certain criteria and conditions established by the public entity seeking such tender.

The tender process must abide by the following rules:

The entity that intends to enter into a public contract must undertake “prior feasibility studies” to 1. illustrate necessity and public good of the respective project.

Based on these prior feasibility studies, the state entity will then draft the contemplated terms 2. of reference, and both will be published in the “Electronic System for the Public Contracting” (Sistema Electrónico para la Contratación Pública) or SECOP (for its Spanish initials), for any interested parties to understand the scope of the proposed project and submit their comments to the proposed project.

Acknowledging any such comments, the public entity may amend the terms of reference with the 3. intention of correcting errors or performing the necessary modifications.

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The representative of the state entity will then order the opening of the selection process 4. indicating the object of the contract, the selection mode, the process schedule, the physical or electronic location where the terms of reference and previous documents may be accessed, the issuance of a summons to the citizens’ organizations that oversee the process, and the budget availability certificate.

The state entity then publishes the definitive terms of reference, indicating the requirements to 5. participate in the process, the definition of the objective rules for the presentation, evaluation and weighing of the proposals, the reasons and causes of rejection of the proposals, the rules for awarding, the purpose of the contract and its conditions of performance, its legal regulation, the estimation, classification and allocation of foreseeable risks involved in the contract, the rights and obligations of the parties, as well as all the other circumstances that are considered necessary to guarantee objective, clear and complete rules for the contracting process. The terms of reference and its attached documents are binding upon the parties and all the rules and conditions of the process must be included therein.

At such point in time, before the submission of the proposals, a public hearing must be held to 6. discuss the risks inherent in the proposed project and allocate such risks among the interested parties.

The proposals presented must refer and be subject to all the items contained in the terms of 7. reference.

During the following three working days after the initial date set forth to submit proposals, 8. a hearing (Public Hearing of Clarifications) is held to clarify the content and scope of the aforementioned documents and to hear the views of any interested parties, after which meeting minutes are prepared by the participating persons. As a result of the debate during the hearing, when convenient, the chief or representative of the state entity will enact the corresponding modifications to such documents, and will extend, if necessary, the term of the tender for six working days.

Once finalized, the established terms for receiving tenders will be closed and the contracting 9. state entity will evaluate the proposals.

Thereafter, the state entity will draft the evaluation reports of the proposal to determine the 10. order of eligibility to which the proponents may present the observations that they consider relevant.

Once the observations are presented by the proponents, the state entity may ratify the initial 11. evaluation report with its order of eligibility, or modify it. Thereafter, in a public hearing to award the contract, the winning proponent will be notified for it to execute the contract. The awarding act is irrevocable and thus legally obligates both the state entity and the winning bidder.

Abbreviated selection 11.7.2.

This mode of selection is quicker than the public tender, and is available in the following instances: for those types of projects in which the object to be contracted has uniform technical characteristics, for the purchase of agricultural destination products, for “minor amount” contracts (below a certain threshold, which will vary depending on the respective state entity involved), contracts for the rendering of health services, the sale of

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government property, contracts which have as their object certain activities inherent to the industrial and commercial state entities, the contracting of goods and services for defense and national security, and when a public tender has been opened and the same had been declared deserted (“desierto”) due to the absence of qualified bidders.

Merits-based selection11.7.3.

The merits-based selection is a procedure for the selection of consultants, for the performance of projects that in which the work to be undertaken is mostly intellectual. Accordingly, in a merits-based selection the state entity will primarily consider the bidder’s technical expertise and professional qualities and attribute lesser significance to the economic criteria to participate in the project.

Direct Contracting 11.7.4.

Direct contracting is an exceptional selection mechanism, by virtue of which state entities can enter into contracts without the need to previously carry out a competitive selection process. The only established reasons for direct contracting mode of selection are as follows:

Contracting of loans ū

Interadministrative contracts ū

Manifest urgency ū

Rendering of professional services and support of management for the execution of artistic works that ūcan only be entrusted to certain individuals.

Goods and services for the defense sector, and in the Administrative Security Department ū(Departamento Administrativo de Seguridad) or DAS (for its Spanish initials) that require confidentiality in connection with their acquisition.

Trust agreements entered into by certain territorial entities (i.e. Departments or municipalities) in ūconnection with restructuring proceedings.

Contracts for the development of scientific and technological activities ū

When there is no plurality of bidders in the market ū

Lease or purchase of real property ū

Minimum amount selection11.7.5.

The minimum amount procurement procedure is applicable when the value of the contract does not exceed 10% of the minimun amount of the organization according to the procurement law, considering that each public entity has its own minimum amount.

This procurement procedure must be performed in accordance with the following rules:

The public agency must develop simplified previous studies according to the law. ū

Based on the studies an invitation will be published and shall specify the subject to contract, the ū

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budget allocated for this purpose, the technical conditions, the timing of the process and the respective enabling requirements.

The term provided in the invitation to present the offer can not be less than one business day; ū

The entity will select (by notice of acceptance) the offer with the lowest price, which complies with the ūconditions;

The notice of acceptance, together with the offer, is for all intents and purposes the contract based on ūwhich registration shall be the respective budget.

In this procurement procedure, the state agencies must refrain from applying rules and procedures established for other modes of selection, as well as add steps, requirements or rules to those expressly set forth in special regulations. In turn, in this procedure, the request for guarantees to contractors is optional by the respective public agencies, and will not require the Single Proponents Registry (RUP).

Contracting by electronic means 11.8.

Government entities must publish all the information required by law of the different selection processes they are conducting, with the purpose that the general public has knowledge thereof and may present observations or participate in the bidding process.

If the entity does not have the technological resources necessary to do so on its own portal, the publication will be made through the Electronic System for the Public Contracting – SECOP.

Content of the state contract11.9.

The state contract is comprised of the following: the contract document executed with its corresponding amendments, appendices, the terms of reference and its amendments, previous studies, risk matrix, the proposal submitted by the awarded proponent, as well as all other documents issued during the contractor selection process. Thus, the state contracts are comprised of a group of documents that regulate the contractual relationship, mainly in the following respects:

Contract’s term

State contracts generally contain a term for their performance and a term for their liquidation. However, state entities may execute additional contracts with the only limitation that such addition may not exceed 50% of the initial contract value, with the exception of public work concession contracts where there can be an extension or addition of up to 60% of the initial estimated term, disregarding the amount of the investment, as long as the addition relates to additional work directly related to the object given in concession or to the recuperation of the investment duly supported in technical and economical studies.

Guarantees

During the government contracting process, contractors are required to submit for purposes of risk mitigation one of the following types of guarantees: (i) insurance policies, (ii) trust as a guarantee (fiducia en garantía), iii) guarantee issued by a bank, (iv) securities endorsement as a guarantee, or iv) cash deposit. In addition, in the contracting processes, foreign natural or judicial persons without domicile or branch in Colombia may submit, as guarantees, stand-by letters of credit issued abroad.

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Whoever enters into contracts with state entities is required to submit in essence a sole performance bond to ensure compliance with the obligations that arise from the execution of the contract, with the exception of loan contracts, interadministrative contracts, insurance contracts, and those in which its value is below the 10% of the “minor amount” (a certain threshold, which will vary depending on the respective state entity involved).

Sole guarantee shall cover the risks that may arise in connection with any breach of the terms of the bid or the bid contract. The coverage amounts of the guarantees are determined by law.

Exceptional clauses

The exceptional clauses are powers bestowed on the public state entities in order to give them greater control over the contract and to look after the general public’s interest.

These clauses include: (i) the power to unilaterally interpret the contract provisions, (ii) the power to unilaterally modify the contract, (iii) the power to unilaterally terminate the contract, and (iv) the power to declare an early termination of the contract, imposing future incompatibility (caducidad) and ordering the contract’s immediate liquidation. These powers can only be exercised by the entities in the events determined by law with the intention of avoiding the work stoppage or severe impairment of the contract, and therefore of the public interest that is meant to be preserved though such powers.

There are some contracts in which it is mandatory to establish exceptional clauses: (i) the contracts which have as their purpose the exercise of an activity that constitutes a state monopoly, (ii) the rendering of public services, (iii) the exploitation and concession of State goods, and (iv) in public work contracts.

On the other hand, the state contracts in which exceptional clauses are prohibited include those to be entered into with international public persons, or with multilateral agencies or charities. In addition, such exceptional clauses are not permitted in interadministrative contracts, in any loan, donation or lease contracts, insurance contracts, and in contracts which have as their object commercial and industrial activities of state entities; however, this last exception is subject to certain limitations as set forth by law.

In the supply and rendering of services contracts, the contracting entity may in its sole discretion establish exceptional clauses.

Fines and penalty clauses

Acknowledging the duty of control and vigilance over the contracts bestowed on public entities, they have the power to impose fines with the intention of motivating the contractor to comply with its obligations. Also, public entities may declare a breach by the contractor with the aim of triggering the pecuniary penalty clause in the corresponding contract.

Assignment of the state contract

The state contracts take into account the qualities of the contractor and acknowledging this, once executed, they cannot be assigned without prior written authorization of the contracting state entity. In the event of incompatibility or determination of ineligibility affecting the contractor, such contractor may assign the contract only with the prior written authorization of the contracting state entity, and if this consent is withheld, such contractor shall withdraw from the contract.

In any event, there cannot be an assignment of the contract between members of a consortium or temporary union.

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For the contracting state entity to approve the assignment of the contract, the assignee must comply with all prerequisites set forth in the terms of reference of the awarded contract.

Method of payment

In contracts with state entities, such entities are permitted to make an advanced payment (anticipo) or down payment (pago anticipado) but such advances may not exceed 50% of the contract’s value. Accordingly, advanced payment means the first payment of the contract agreed by the parties in a successive execution contract, and down payment means the first payment made to a contractor in an instant execution contract. Conflict resolution

Government entities and contractors will seek to resolve disputes arising from their contracts in a flexible, rapid and direct manner, using contract conflict resolution mechanisms provided for these types of matters, such as domestic and international arbitration, reconciliation, mediation and settlement. If the parties decide to revert to ordinary courts, the judges sitting in the administrative courts would resolve any conflicts arising from government contracts.

Final accounting of state contracts

The final accounting of state contracts is mandatory, with the exception of contracts to be performed in an instant manner and such final accounting can be agreed upon or be unilaterally made by the contracting public entity.

Types of state contracts11.10.

There exists a great variety of state contracts that have been developed to meet different needs of the public entities with the aim of achieving the goals that the Colombian Constitution promotes. Following below, please find a list of typical government contracts, without limiting other potential types of such contracts that by virtue of the nature of the parties can be also considered state contracts.

Construction contract11.10.1.

Construction contracts are those entered into by government entities for the construction, maintenance, installation and the performance of any other material work on real property, whatever the mode of execution and payment may be.

Consulting contract 11.10.2.

Consulting contracts are those entered into by state entities for studies related to the execution of investment projects, diagnostic studies, pre-feasibility or feasibility for specific programs or projects, as well as technical assistance for coordination, control and supervision. Consulting contracts also include contracts that have as their purpose inspection (interventoría), works or project management, direction, programming and performance of designs, drawings, pre-projects and projects. The consulting contract is characterized by its obligations having a predominantly intellectual quality.

Rendering of services contract11.10.3.

This contract develops activities related to the administration or operation of state entities, and can only be entered into with individuals and not with judicial persons, provided that the government entity does not have sufficient or qualified personnel to carry out the contracted job.

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Concession contract 11.10.4.

Concession contracts are those that are entered into by state entities with the intention of granting a person a partial or complete right to perform an operation, exploitation, organization or management of a public service, or the total or partial construction, exploitation or conservation of a project for public service or use, as well as with all those activities needed for the adequate rendering or functioning of the project at the concessionary’s own risk. The concessionary’s performance will be subject to the supervision and control by the granting entity. The concessionary’s remuneration can consist of rights, tariffs, rates, valorizations, or derive from profit-sharing arrangements with the respective state entity, or in any other manner of remuneration as may be agreed between the parties.

The models of concession have been addressed under various project finance schemes in the following models:

BOT (BUILD, OPERATE AND TRANSFER): under this model, the company finances, builds, and operates the project which generates income that covers the operational and investment costs. On a predetermined date, the company transfers (returns) all the usage rights of the asset to the state.

BOO (BUILD, OWN AND OPERATE): under this model, the contractor is contractually bound to build, own, and operate the assets, with the corresponding financing of the works as required by the regulator and its specifications. In this case, the useful life of the project shall match the time to pay off the debt and pay any of its contractors. Its main difference with the BOT is that the assets will always remain property of the private entity.

BOOT (BUILD, OWN, OPERATE AND TRANSFER): under this model, the contractor is bound to build, own, operate and transfer the assets, with the corresponding financing. Its difference to the BOT is that the assets remain the contractor’s property during the term of operation.

BLT (BUILD, LEASE AND TRANSFER): it encompasses the same characteristics of the BOT but the financing is made through leasing.

Public trust and trusteeship contracts 11.10.5.

The trusteeships are those contracts that are entered into between state entities and trust companies authorized by the Superintendence of Finance and that have as a purpose the administration and management of resources linked to the contracts that the state entities enter into.

Other contractual arrangements11.10.6.

Colombian laws do not limit the types of contractual arrangements in government contracting, thereby permitting the creation of new contractual arrangements, as long as they comply with the law and the Constitution.

Following, please find a list of other contractual arrangements not expressly regulated in the Government Contracting law: supply, sales, loan, natural resources exploration and exploitation, leasing, factoring, franchise, joint ventures, merchandising, putting out system, just-in-time, swap, forward, and option contracts.

Residential public utilities 11.11.

The regime of residential public utilities is regulated by a special set of norms different from those of government contracting. Due to the importance of this sector, and the extensive development that it has had in the past twenty years in Colombia, the most relevant aspects of such regulations are as follows.

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General aspects 11.11.1.

Residential public utilities are subject to the rules determined by law, and may be provided either by the State, directly or indirectly, by organized communities or by individuals. Nonetheless, the State maintains, as a public function, the guarantee of its provision, its regulation, its control and its vigilance. Thus, the State’s intervention is justified to ensure the provision of public utilities allowing the private parties, local or foreign, to compete in their provision under free market conditions.

The public utilities are considered essential for the social interest and therefore the right to work stoppages (e.g. strikes) is not permitted, because the conflict between employees and employers in such instances would adversely affect the public interest.

The rules on this matter list as residential public utilities the following : (i) water, (ii) sewage, (iii) waste management, (iv) electric energy, and (v) combustible gas distribution. Thus, the residential public utilities are considered as essential, and therefore enjoy certain privileges.

There exists a special legal regime applicable to the activities of generation, interconnection, transmission, distribution and marketing of electric energy from which the following characteristics can be pointed out: (i) the Nation or the territorial entities may grant the provision of the public utility of energy through a concession contract to a private or public judicial person, or to a mixed economy company, (ii) the contract’s remuneration consists of rates, or price, that the users pay pursuant to the rules defined in the law, and (iii) the companies incorporated after 1994, with the purpose of rendering the public utility of electricity, cannot perform more than one of the activities related to such service, with the exception of any marketing activities that can be performed simultaneously with the generation or distribution activities.

General principles of the residential public utilities11.11.2.

The provision of residential public utilities is regulated by a series of principles that rule the performance of such activity. These principles include: economic freedom, equality, continuity, regularity, efficiency and freedom of entry to the sector. Some of the most remarkable aspects of such principles include:

Economic freedom implies that duly incorporated and organized public utilities companies do not ūrequire any permit for the development of their activities in Colombia.

In the context of economic freedom, public utilities companies can declare an asset as public utility or ūsocial interest with the objective of procuring its expropriation or the imposition of rights of way.

The principle of equality in the residential public utilities is reflected in the concept of “rate neutrality” ū

The provision of the public services cannot be interrupted except for reasons of force majeure, acts of ūGod, scheduled rationings or technical reparations.

It is forbidden to transfer to the users the costs of a company’s inefficiencies ū

Any person (local or foreign) has the right to organize and operate companies that have as their ūcorporate purpose the provision of residential public utilities in Colombia as long as the Colombian Constitution and the law are respected.

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Applicable legal regime11.11.3.

The regime applicable to acts and contracts of the residential public utilities provider is private law. This implies that government contracting law or the provisions applicable to government contracting processes are not applicable to residential public utilities.

Authorized providers of public utilities11.11.4.

Persons permitted to provide public utilities in Colombia are: companies incorporated as public utilities (ESP for its Spanish initials), the commercial and industrial state companies (EICE for its Spanish initials), any organized communities, marginal producers and municipalities. It should be noted that it is possible that any ESP with the purpose of rendering public utilities or their complementary activities may be formed through capital contributions from both local and/or foreign investors.

HeadquartersBogota, Colombia Calle 28 No. 13A -15, Piso 35 Phone: +57 (1) 5611804 Fax: +57 (1) 3415689 [email protected]

u.s.a. OFFICesCalifornia (West Coast), usa Phone: +1 (562) 2179712 Investment Specialist: Alejandro Botero [email protected]

Chicago (Mid West), usa Phone: +1 (312) 3162266 Investment Specialist: Alejandro Tribin [email protected]

Miami (south east), usa 601 Brickell Key Drive, Suite 608 Miami, FL 33131 Phone: +1 (305) 3743144 Fax: +1 (305) 3729365 Director General E.E.U.U.: Carmenza Jaramillo [email protected] Investment Specialist: Sergio Rodríguez [email protected]

New York (North east), usa 140 East 57th Street, 2nd Floor New York, NY 10022 Phone: +1 (212) 9229114 Fax: +1 (212) 9229115 Investment Director: Sara Bojanini [email protected]

OtHer OFFICes IN aMerICa

sao Paulo, BrasilAlameda Santos 1800,Andar 10BSao Paulo, Brasil CEP 01418 200Phone: +55 (11) 31710165Fax: +55(11) 2882614Director: Carlos Eduardo Rodrí[email protected]

toronto, Canada2 Bloor Street West, Suite 1005Toronto, ON M4W 3E2Phone: +1 (416) 3639225Fax: +1 (416) 3630808Director: Rodolfo Mó[email protected] Investment Specialist: Diego [email protected]

Caribbean601 Brickell Key Drive, Suite 608Miami, FL 33131Phone: +1 (786) 3154260Fax: +1 (786) 2725900Director: Carlos Gonzá[email protected]

santiago, ChileAv. Vitacura No. 3568, Of. 508Phone: +56 (2) 9535066Fax: +56 (2) 9535067Director: Jorge Gutiérrezjgutierrez@ proexport.com.co

san Jose, Costa ricaOficentro la Virgen No. 2Pavas San JosePhone: +50 (6) 22134876Fax: +50 (6) 22314933Director: Alvaro Gó[email protected]

quito, ecuadorAv. 12 de Octubre 1942 y corderoWorld Trade CenterOf. 1408, Torre APhone: +593 (2) 2222969Fax: +593 (2) 2504077 Director: Adriana Gutié[email protected]

Proexport has Investment Promotion Teams in 20 cities around the World. We will be delighted to assist you.

Contacts Proexport

Guatemala City, GuatemalaBoulevard Los Próceres 24-69 Zona 10Edificio Empresarial Zona Pradera, Torre 1 Of. 401Phone: +502 (2) 2696771Fax: +502 (2) 2696775Director: Álvaro [email protected]

Mexico City, MexicoPaseo de la Reforma #379, Piso 6Colonia CuauhthtemocMéxico DF, CP 06500Phone: +52 (55) 55333760Fax: +52 (55) 55250383Director: Juan Carlos [email protected] Specialist: Ancízar [email protected]

Lima, PeruAv. Jorge Basadre 1580 San IsidroPhone: +51 (1) 2221358/ 2221359 / 2221360Fax: +51 (1) 2222074 Director: Juliana Villegas [email protected]

Caracas, VenezuelaAvenida Francisco de Miranda,Edificio Parque Cristal, Torre Oeste,Piso 5, Of. TOP-05-04Urbanización Los Palos GrandesPhone: +58 (212) 2866333Fax: +58 (212) 2851235Director: José Abril [email protected] Specialist: Joan [email protected]

eurOPe OFFICesFrankfurt, GermanyFürstenbergerstrasse 223 60323 Frankfurt am MainPhone: +49 (69) 13023832 Fax: +49 (69) 13024719 Director: Sergio Calderón [email protected]

Paris, France22 Rue de L´Elysée, 75008 ParisPhone: +33 (1) 42654608 Fax: +33 (1) 42661860Director: Camilo Martí[email protected]

Madrid, spainC/Claudio Coello, 8 - 40 Izquierda Madrid 28001 Phone: +34 (91) 5776781 Fax: +34 (91) 5779736 Director: Juan Gabriel Pérez [email protected] Specialist: Paola Garcí[email protected]

London, united KingdomColombian Government Trade Bureau 2 Conduit Street, 6th Floor London, W1S 2XB Phone: +44 (207) 4913535 Fax: +44 (207) 4914295 Director: Juan Guillermo Pérez [email protected] Specialist: Nicolás Ingram [email protected]

Moscow, russiaEmbassy de Colombia, Commercial Office119121, Ulitsa Burdenko, 20Phone: +7 (499) 2483417 Fax: +7 (499) 2483003Investment Specialist: Andrei [email protected]

asIa OFFICes Beijing, China Guang Hua Lu 34, 100600 Beijing Phone: +86 (10) 65321969 Fax: +86 (10) 65323377 Director: Alejandro Ossa [email protected] Investment Specialist: Estella Sun [email protected]

New delhi, India Embassy of Colombia, Commercial Office3 Palam Marg, First Floor Vasant Vihar New Delhi 110057 Phone: +91 (11) 41662106 Investment Specialist: Alejandro Peláez [email protected]

tokio, JapanInvestment Specialist: Hiroshi [email protected]

Customs and International tradeJosé Francisco [email protected]

Andrés Vásquez [email protected]

Litigation, arbitration and restructuringLuis Alfredo Barragá[email protected]

Irma [email protected]

Banking and Financial servicesCarlos [email protected]

Carlos Fradique - Méndez [email protected]

Manuel [email protected]

Carolina [email protected]

Foreign exchange, derivatives and structured FinanceCarlos Fradique - Méndez [email protected]

Ana María Rodrí[email protected]

antitrust and Competition LawCarlos Umañ[email protected]

Alejandro Garcí[email protected]

telecommunications, Media, entertainment and technologySergio [email protected]

Andrés Umañ[email protected]

Mergers & acquisitionsCarlos Umañ[email protected]

Sergio [email protected]

Manuel [email protected]

trust and estatesJosé Andrés [email protected]

Richard [email protected]

taxJosé Andrés [email protected]

María Catalina [email protected]

real estateCarlos Umañ[email protected]

Francisco [email protected]

Infrastructure and Public utilitiesCarlos Umañ[email protected]

Claudia [email protected]

Calle 70 A No. 4 - 41Bogotá, Colombia Phone: +57 (1) 3462011 Fax: +57 (1) [email protected]

Contacts Brigard & urrutia abogados

Calle 70 A No. 4 - 41Bogotá, Colombia Phone: +57 (1) 7442200 Fax: +57 (1) [email protected]

ImmigrationLuis Gabriel Pé[email protected]

Connie Nuñ[email protected]

Labor & employmentÁlvaro [email protected]

Juliana [email protected]

Capital Markets, securities and Private equityCarlos Fradique - Mé[email protected]

Luis Gabriel [email protected]

Natural resources and environmental LawLuis Gabriel Pé[email protected]

Eduardo del [email protected]

Insurance and reinsuranceCarlos [email protected]

Carolina [email protected]

Corporate LawÁlvaro [email protected]

Laura Carreñ[email protected]

María Carolina [email protected]

LitigationJuan Pablo Cadena [email protected]

María Fernanda [email protected]

trademarksMartín Torres [email protected]

Nelson Urrego [email protected]

Health registrationsAndrea Pieschacón [email protected]

PatentsJulián Ricardo Dí[email protected]

Copyrights Juan Nicolás [email protected]

technology transferJulián Ricardo Dí[email protected]

Juan Nicolás [email protected]

Contacts Brigard & Castro

Lega

l Guid

e to

Doin

g Bus

iness

in Co

lombiaBeijing

Caracas

QuitoSan Jose

Guatemala City

Miami* Caribbean**

Toronto

Lima

Santiago

Sao Paulo

London

FrankfurtMadrid

New Delhi

Paris

Moscow

Mexico City

*Miami - Chicago, Dallas, Houston, Los Angeles, New York City and Washington D.C.**Caribbean - Puerto Rico, Trinidad and Tobago, Dominican Republic

Proexport Colombia in the World