If you are thinking about establishing or already operating a business in Colombia, it is crucial to understand the accounting obligations you must fulfill. Meeting these responsibilities will not only help you avoid legal penalties but also enable you to better manage your finances and make informed decisions. Here are the main accounting obligations that a company must comply with in Colombia.
1. Accounting Records
All companies in Colombia must maintain an accounting record of their financial operations. This record should include accounting books such as:
- Daily Journal (Libro Diario): Where all daily transactions of the company are recorded.
- General Ledger (Libro Mayor): Where the transactions recorded in the daily journal are grouped by accounting accounts.
- Inventory and Balance Book (Libro de Inventarios y Balances): Which shows the company's assets, liabilities, and equity.
2. Financial Statements
Companies must prepare and present annual financial statements that reflect their economic and financial situation. The main financial statements are:
- Income Statement: Which shows the company's revenues, costs, and expenses, as well as its net result.
- Balance Sheet: Which presents the company's financial situation in terms of assets, liabilities, and equity.
- Statement of Changes in Equity: Which shows changes in the company's equity during the accounting period.
- Cash Flow Statement: Which details the company's cash inflows and outflows.
3. Tax Declarations
Companies in Colombia are required to file various tax declarations, including:
- Income Tax Return: Filed annually, detailing the company's income and expenses to determine the income tax.
- VAT (Value Added Tax) Return: Which must be filed monthly or bimonthly, depending on the company's regime.
- Withholding Tax Return: Which must be filed monthly, detailing withholdings made to suppliers and employees.
4. Payment of Taxes
In addition to filing tax declarations, companies must pay the corresponding taxes, which may include:
- Income and Complementary Taxes
- VAT
- Industry and Commerce Tax (ICA)
- Withholding Taxes
5. Updating the RUT
The Single Tax Registry (RUT) is a mandatory document for all companies and must be updated whenever there are changes in the registered information, such as address, economic activity, or legal representative.
6. Electronic Invoicing
Since 2019, electronic invoicing has been mandatory for all companies in Colombia. This involves issuing invoices through an electronic system authorized by the DIAN (National Tax and Customs Directorate), ensuring the validity and authenticity of issued invoices.
7. External Audit
Companies that exceed certain thresholds in terms of assets or revenues must hire an annual external audit. The auditor will review the financial statements and ensure compliance with International Financial Reporting Standards (IFRS) and local regulations.
8. Retention of Accounting Documents
Colombian law requires all companies to retain their accounting documents and supporting documents for a minimum period of 5 years. These documents include invoices, receipts, payment vouchers, and any other document related to the company's financial transactions.
9. Compliance with IFRS
Companies in Colombia must prepare their financial statements in accordance with International Financial Reporting Standards (IFRS). These standards ensure the transparency and comparability of financial statements at an international level.
Conclusion
Complying with accounting obligations is essential for the legal and efficient operation of a company in Colombia. In addition to avoiding penalties, maintaining orderly accounting will give you a clear view of your business's financial health and enable you to make informed decisions. If you need help complying with these obligations, consider hiring the services of a professional accountant or a consulting firm that can guide you through the process.
Contact Us for more information or get an Appointment
