How foreign investors focused on the artistic, cultural, tourism and innovative sectors can benefit from Colombia’s Orange Economy
Fabian Acosta
fa.acosta@legalnova.co
William Oviedo
w.oviedo@legalnova.co
What Is Colombia’s Orange Economy?
Colombia’s Orange Economy is a term and policy that was introduced by the current Colombian government, led by President Duque. This policy aims to incentivize the creation of new businesses that produce goods and services that add value to creative industries. Notable examples are arts, cultural legacy, tourism, digital design and software development.
Importance of the cultural, tourism and creative sectors during the Covid-19 crisis
The cultural and creative industries are one of the world’s most rapidly growing economic sectors, providing around 29.5 million jobs globally and with a global revenue of 2,250 billion $US (EY, 2015).
Additionally, the OECD stated that the availability of cultural content contributes to mental health and well-being. As a consequence, many institutions have provided free online content in recent months for that exact purpose. However, the current challenge is how to design sustainable business models during and after the Covid-19 crisis, identifying new opportunities to help this purpose.
Furthermore, the exponential growth of worldwide connectivity and the digitalization of the economy has also proven effective to tackle the Covid-19 threat and economic consequences. Health tech companies are offering early and accurate results that help trace the disease and prevent the expansion of the pandemic. Web applications (apps) facilitate the observance of social distancing measures. For instance, Colombian’s Orange company, Rappi, is providing an effective solution by allowing its customers to place their orders online and receive their products without having to leave their houses.
Colombian path to Orange Economy
Since the beginning of his run term, President Iván Duque, a passionate and very criticized pro-business politician who assumed Colombia’s presidency in 2018, since the beginning of his run term was seeking to boost growth through investment, technology and innovation. His political flag was the Orange Economy or “Creative” Economy initiative, a series of policies that come together in promoting the artistic, cultural, tourism and innovative sectors of the Colombian economy. The Orange Economy encompasses several commercial areas, such as: digital media, software development, digital design, e-commerce, among others.
With innovative policies supporting old and new businesses in the Orange Economy fields, the Colombian government aims to excel the remarkable potential of these sectors. The goal is to create an attractive option for investors that will help to develop new ways to tackle the Covid-19 crisis.
What are the benefits of the Orange Economy?
Entrepreneurs, SMEs and investors can find a robust framework to boost their businesses locally and internationally with the Orange Economy policies.
Colombia’s Orange Economy framework provides tax incentives, intellectual property rights protection and access to credit capital at favorable rates.
How can foreign investors benefit from Colombia’s Orange Economy policies?
Foreign investors can benefit from the tax incentives and the IP protection policies provided by the Colombian government to enhance their business worldwide. In addition, foreign investors are also encouraged to take advantage of the low cost of Colombian’s workforce and the improved IP protection policies.
Want to get the benefits?
What are the tax incentives?
Entrepreneurs can obtain the following unique tax incentives within the current Orange Economy legal framework:
- A full income tax exemption for the first 7 years of business.
- Exemption from VAT (Sales tax) on the import, production or purchase of fixed assets and on the export of services to non-Colombian residents.
Income tax exemption
To qualify for the 7 years income tax exemption, the business must comply with the following criteria:
- The company’s principal domicile must be in Colombia.
- The corporate purpose has to promote the artistic, cultural, touristic and innovative sectors.
- The company must start its economic activity before December 31st, 2021.
- The company must have at least 3 employees.
- The company must present their business before the Ministry of Culture for its approval.
- The company must invest or make a capital contribution of USD 45.000 (approx.) into the venture within a minimum period of 3 years.
The income tax exemption gives a helpful hand to investors and entrepreneurs, as operating the business over a seven-year period without income tax gives the company the opportunity to boost their commercial activity before full tax requirements are implemented.
VAT incentives
There is no application needed to obtain VAT incentive. However it is important to fulfill a set of rules before the Tax Authorities to claim the benefits. The following conditions must be met:
- Services should be provided in Colombian territory.
- Services must be exclusively used or consumed abroad.
- The beneficiary of the services must have no activities or businesses in Colombia.
VAT exemptions help businesses to provide clients with competitive prices and allow the company to get tax refunds on the acquisition of services and goods from Colombian providers, when charged with VAT.
Legalnova’s services include assisting businesses with the filing of their projects before the Colombian Government, in order to obtain this tax exemption. Additionally, Legalnova’s ensures these companies are operating within Colombia’s legal tax framework, to maximize the economic benefits of the Orange Economy.
How can I apply for intellectual property rights protection?
As it is highly important for the Orange Economy activities to create intellectual property (IP) to ensure their work remain profitable, local institutions such as the Ministry of Industry and Commerce, Colciencias and the Superintendence of Industry support companies to protect their inventions with patents, trademarks and other legal resources defined by Colombian Law.
Legalnova’s has a true understanding of the importance of IP for cultural, tourism and creative sectors. That is why the firm offers a successful, business-oriented and cost-efficient centralized service for IP filing and prosecution in Latin-American countries.
New job opportunities
The Orange Economy coupled with the low cost of Colombian workforce, aims to bring new job opportunities, including remote working as well as other innovative business solutions.
