If you plan to bring money into Colombia, you need to become familiar with the Form 4 and Form 5 - Formulario 4 y 5. These are the documents that record every legal penny that is moved into Colombia. It is a requirement of the law that you have this form filled out properly or pay a substantial penalty, if the government deems that you are in the wrong. As in most countries, being unfamiliar or ignorant of the law is no excuse.
The challenge is many people here, lawyers and bankers included, are not really certain of all of the protocol. If the bank makes a mistake, rarely do they take the blame. You, as the owner of the funds will sign the form, and as a result take any consequences.
There have been some changes over the past fews years making this form filling and filing a bit more flexible. Before, if you needed to change the document after a very short period of time, it was not possible. Now you do have the opportunity to refile.
The Form 4 is for foreign investment. What ever amount that is filled in on this form, the government of Colombia expects that it is duly recorded and can be shown as an investment.
Where this can cause a problem is in registering the value of a purchased property. Properties in Colombia, contrary to law but according to custom are often registered at below their sales value in an effort to avoid taxation. We do not recommend this.
If you intend to bring 100,000 usd into the country to buy a property and the real and declared value is 100,000 usd, the Form 4 is easy. It is filled out for the entire amount. If the real value is 100,000 usd but the declared amount is 70,000 usd then the other 30,000 must be registered somewhere else. If you make the mistake of registering all 100,000 usd on the Form 4 and the government then asks to see your escritura/deed and only 70,000 usd is showing you will have a problem. More often than not the fine is double the original amount.
That other 30,000 usd should have been registered on a Form 5 which are funds used for just about anything else - furniture, cars, living expenses.
Some words of advice. It is safer not to play the ''numbers game''. If you decide to do it, then before your money arrives, you should know exactly how it will be registered. If you have negotiated an alternate deed value then make certain that you know precisely what that is before you exchange your funds for pesos. Now, at least you are able to make some changes to the forms but if you are having someone else fill out the forms for you, obviously there will be an additional charge.
Some words of caution. Lots of people feel that they do not want to use a lawyer to do a real estate closing. They will use a family member or a friend or perhaps an accountant. They may bring in the funds in their name and then disburse it to a corporation that they have created. This is a mistake to try and take the short and inexpensive route around filing these forms. Why ?
As stated earlier, improperly filled out forms can lead to large fines. Improperly filed forms can delay or negate a visa request when it is based on an investment in real estate or a Colombian corporation.
Some law firms will charge you 0.5% to 1.5% of the value of your transaction. Their reasoning is that they know the proper process and they guarantee their results. At Steckenreiter Serna and Associates, we manage matters of foreign exchange and will charge you a flat fee for managing the document.