Medium-Sized Company in Colombia: Classification, Obligations & Key Legal Aspects

What Is a Medium-Sized Company in Colombia?

A medium-sized company in Colombia is a legally defined category established by Decree 957 of 2019, which updated the classification of micro, small and medium-sized enterprises (MSMEs or Mipymes) originally created by Law 590 of 2000 and amended by Law 905 of 2004. Unlike the previous classification —which combined employee headcount and total assets— Decree 957 adopted an exclusively quantitative criterion based on annual gross revenues expressed in Unidades de Valor Tributario (UVT), Colombia's tax value unit.

Under Article 2.2.1.1.1. of Decree 1074 of 2015, as modified by Decree 957 of 2019, a company is classified as medium-sized when its annual gross revenues exceed 204,000 UVT but do not exceed 1,735,000 UVT. For 2025, with the UVT set at COP $49,799 (annually determined by DIAN, Colombia's tax authority), this translates to an approximate range of COP $10.16 billion to COP $86.4 billion in annual gross revenues.

This classification is far from academic: it determines the applicable tax regime, accounting obligations, whether a statutory auditor (revisor fiscal) is mandatory, exposure to Superintendencia de Sociedades oversight, and eligibility for incentives under Law 2069 of 2020 (the Entrepreneurship Law).

Why Classification Matters for Your Business

Understanding where your company falls has concrete legal and operational consequences. A medium-sized company in Colombia faces obligations that do not apply to micro or small enterprises, but does not yet reach the compliance level of a large corporation. Correctly identifying your business size allows you to:

• Adopt the proper tax regime. Medium-sized companies generally fall under the ordinary income tax regime (Law 2277 of 2022) and, with limited exceptions, cannot access the Simple Taxation Regime (RST) under Law 2010 of 2019, which is capped at 100,000 UVT.
• Manage the statutory auditor requirement. Under Law 43 of 1990 and the Commercial Code, medium-sized companies exceeding certain asset or revenue thresholds must appoint a revisor fiscal — a requirement many overlook.
• Prepare for Superintendencia de Sociedades oversight. Depending on assets and revenues, a medium-sized company may be subject to permanent surveillance or control, requiring periodic financial reporting and administrative inspections.
• Choose the right corporate vehicle. Whether a simplified joint-stock company (SAS), a limited liability company, or a corporation, the legal structure must align with the business's current and projected size.

Legal Framework Governing Medium-Sized Companies

Several laws directly or indirectly regulate the medium-sized company in Colombia. The most relevant are:

Classification and Promotion Laws

• Law 590 of 2000 — The MSME Law, which established the framework for promoting micro, small and medium-sized enterprises.
• Law 905 of 2004 — Amended Law 590 and adjusted classification criteria.
• Decree 957 of 2019 — Current classification based solely on annual gross revenues in UVT.
• Law 2069 of 2020 — The Entrepreneurship Law, strengthening support instruments for MSMEs including medium-sized companies.

Corporate Laws

• Law 1258 of 2008 — Creates the SAS (Sociedad por Acciones Simplificada), the most widely used corporate type for medium-sized companies due to its flexibility.
• Decree 410 of 1971 — The Commercial Code, governing traditional corporate types (corporation, limited liability, partnership).
• Law 222 of 1995 — Corporate reform introducing the directors' duties and corporate governance regime.

Tax and Accounting Rules

• Law 2277 of 2022 — Current tax reform affecting income tax rates and dividend treatment.
• Law 2010 of 2019 and Law 2155 of 2021 — The Simple Taxation Regime (RST), capped at 100,000 UVT.
• Decree 1074 of 2015 — Single Regulatory Decree for Commerce, compiling business classification rules.

Risk Prevention Regulations

• External Circular 100-000016 of 2020 (Superintendencia de Sociedades) — SAGRILAFT, requiring medium-sized companies above certain thresholds to implement anti-money laundering and counter-terrorism financing systems.

General Operating and Compliance Framework

While each business has its own reality, a medium-sized company in Colombia must address a set of ongoing compliance obligations that require careful legal management. The general framework includes initial registration with the Chamber of Commerce (obtaining the NIT and mercantile registration), implementing accounting systems under IFRS for SMEs or full IFRS depending on size, issuing electronic invoices (mandatory since 2020 for all businesses), and filing tax returns (income tax, VAT, ICA, withholding tax).

Additionally, the medium-sized company must define its corporate governance structure: appoint legal representatives, establish boards of directors if required by the corporate type, and appoint a revisor fiscal when applicable. To incorporate a company in Colombia is only the first step; the real challenge lies in maintaining day-to-day compliance.

On the labor front, the medium-sized company must formalize employment contracts under the Substantive Labor Code (CST), enroll employees in the social security system (health, pension, occupational risk), pay statutory benefits (severance, service bonus, vacation), and manage payroll taxes. Outsourcing through independent contractors must be handled carefully to avoid misclassification risks.

Common Mistakes of Medium-Sized Companies in Colombia

Based on our experience advising companies in Medellín and nationwide, here are the most frequent errors:

1. Failing to update company classification. Many companies grow in revenue but do not update their Chamber of Commerce registration or adjust their obligations to the new size. A company moving from small to medium may need a revisor fiscal, new tax obligations, and more robust compliance systems.
2. Underestimating the revisor fiscal requirement. Under Law 43 of 1990 and Article 13 of Law 1258 of 2008, a medium-sized SAS that exceeds asset or revenue thresholds must have a statutory auditor. Omitting this can trigger Superintendencia de Sociedades sanctions.
3. Confusing the Simple Taxation Regime with a viable option for medium companies. The RST is capped at 100,000 UVT (Law 2155 of 2021). A medium-sized company with revenues above 204,000 UVT does not qualify, yet many transition-stage companies attempt to enroll improperly, exposing themselves to exclusion and penalties.
4. Ignoring transfer pricing obligations. Medium-sized companies with transactions with related parties abroad must file an informative transfer pricing return with DIAN. Non-compliance results in fines and the risk that DIAN will adjust transaction prices.
5. Neglecting SAGRILAFT compliance. Many medium-sized real-sector companies do not realize they must implement anti-money laundering systems (External Circular 100-000016 of 2020). The Superintendencia de Sociedades has intensified inspections, and penalties for omitting this system can reach 200 times the minimum monthly wage.
6. Using generic corporate bylaws. Relying on templates without customizing the SAS bylaws leads to shareholder disputes, especially regarding profit distribution, share transfers, and dispute resolution mechanisms.

Frequently Asked Questions About Medium-Sized Companies in Colombia

How do I know if my company is medium-sized in Colombia?

Calculate your prior year's annual gross revenues and compare them to the ranges set by Decree 957 of 2019. If your revenues fall between 204,001 and 1,735,000 UVT (approximately COP $10.16 billion to COP $86.4 billion for 2025), your company is medium-sized. To incorporate a company in Colombia also means understanding from the outset which classification range you will occupy.

Which corporate type is recommended for a medium-sized company?

The SAS (Law 1258 of 2008) is the most widely used due to its statutory flexibility, limited liability, and private document incorporation. However, depending on the number of shareholders, business purpose, and investment plans, a corporation (S.A.) or a limited company may be more suitable. This decision requires legal advice.

Does a medium-sized company need a revisor fiscal?

It depends on the asset or revenue thresholds set by Law 43 of 1990. If your company exceeds those thresholds —which is the case for most medium-sized companies— appointing a certified public accountant as revisor fiscal is mandatory. An SAS may also voluntarily include a revisor fiscal in its bylaws even without exceeding the thresholds.

Can a medium-sized company elect the Simple Taxation Regime?

No, if its revenues exceed 100,000 UVT (approximately COP $4.98 billion for 2025). Medium-sized companies, by definition, are above that cap and must file under the ordinary income tax regime. For companies in a growth stage that have not yet reached medium size, the RST can be an attractive option.

What penalties does a medium-sized company face for non-compliance?

Penalties vary by the obligation breached: from DIAN fines for not filing returns (up to 5% of the tax due), to Superintendencia de Sociedades sanctions for lacking a revisor fiscal or SAGRILAFT, to potential dissolution for failing to renew the mercantile registration. Each non-compliance must be assessed individually.

Have questions? Contact us for a personalized consultation.