The Entrepreneurship Law (Colombia)

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Law 2069 of 2020 in Colombia, otherwise known as the “Entrepreneurship Law”, provides a legal framework for new ventures and micro, small and medium-sized enterprises (MSMEs) to develop their business projects with legal and tax benefits.
What are the main aims and objectives?

The Entrepreneurship Law aims to promote entrepreneurship and business growth in Colombia by reducing bureaucratic processes and providing incentives for the development of new ventures and micro, small and medium-sized enterprises (MSMEs). The law also seeks to promote cooperatives with an entrepreneurial spirit, simplify the tax regime for MSMEs, and ultimately foster a more dynamic economy.  

How does the program work?

The new legislation contains five main pillars: 

1. Reduced fees and simplification: The law reduces rates and includes measures that facilitate the registration and operation of businesses. 

  • Modifies National Food and Drug Surveillance Institute (INVIMA) fees, with differentiation for SMEs and payment exception for micro-enterprises. 

  • Adjusts tax rate ranges for the registration of micro-enterprises across departments. 

  • Implements an exploratory regulation mechanism for innovative models (Sandbox). 

  • Establishes a differentiated accounting system for microenterprises. 

2. Public procurement: Expands markets and promotes new ventures and micro, small and medium enterprises (MSMEs) by facilitating public procurement market access. 

  • Inclusion of MSMEs in low-value contracting ("mínima cuantía") processes and the State's virtual store. 

  • Adjusts new tiebreaker criteria in favor of MSMEs, companies led by women and Benefit and Collective Interest Commercial Corporations (BICs) and production chains. 

  • Creates a Public Procurement Information System. 

3. Financing: Facilitates the resource pipeline, and improves conditions for entrepreneurs to access financial instruments. 

  • Modifies the mission of the National Guarantee Fund (FNG) allowing it to expand its product portfolio and offer guarantees to new sources of financing. 

  • Financial inclusion of micro-businesses through microcredits. 

  • Tax incentives that promote donations for ecosystem development through iNNpulsa. 

4. Institutional strengthening: Updates the regulatory framework for entrepreneurship according to the needs of entrepreneurs and leveraging the National Competitiveness and Innovation System (SNCI) and regional ecosystems. 

  • Consolidates public sources of financing for entrepreneurship and business development. 

  • Aligns government bodies relevant to entrepreneurship and MSMEs vis-á-vis the SNCI. 

  • Identifies iNNpulsa Colombia activities including those related to productivity and business development. 

  • Establishes a fund at the Institute of Educational Credit and Technical Studies Abroad (ICETEX) to benefit entrepreneurs who have obtained educational loans with the institution. 

5. Education and skills development for entrepreneurs: Facilitates the appropriation of entrepreneurship and culture through schools and higher education institutions. 

  • Supports entrepreneurship education at the basic, middle and secondary education levels. 

  • Provides for teacher training programs on entrepreneurship and business development for basic and intermediate levels. 

  • Encourages SENA (National Learning Service) programs to promote an entrepreneurial mindset in financial, legal and market access issues. 

  • Includes entrepreneurship and innovation projects as a degree option in higher education. 

  • Creates service offices to support entrepreneurs with their businesses. 

What is the overall cost?
The Entrepreneurship Law was passed without any direct financial cost, however, the law provides for certain measures that will require additional funding such as tax relief, expansion of finance schemes and training programs. No information is currently available on these additional programmatic costs.  
How was it implemented?

In December 2020, Colombia's government enacted a new Entrepreneurship Law that modernizes its regulatory framework for new ventures and companies. 

The Entrepreneurship Law is designed to be the main enabler for the implementation of the National Entrepreneurship Policy (CONPES). It is also an essential part of Colombia's National Development Plan 2018-2022, which declared entrepreneurship to be a key part of the formula to achieve greater equity.  

With its enactment, the law elevates entrepreneurship as one of the pillars of Colombia's post-pandemic economic recovery. The executive branch has declared the implementation of the Entrepreneurship Law a matter of national urgency. Despite pandemic-related induced emergencies, the Congress prioritized enacting the legislation in 2020 so that its support measures would come into effect in 2021 and inject dynamism into the economy. 

Iván Duque, President of the Republic of Colombia, elevated entrepreneurship as a key pillar of his administration. José Manuel Restrepo, Minister of Commerce, Industry & Tourism: championed the importance of this legislative initiative as a key instrument for social wellbeing and achieving greater equity. Several National Government agencies, entrepreneurship ecosystem stakeholders and private sector actors (e.g., trade associations, entrepreneurs and experts) participated in drafting the legislation. 

Timeline 

July 20, 2020: The executive branch submits the original version of the legislative proposal to Congress. 

October 31, 2020: The legislation was approved after the first debate of a joint House-Senate Committee. 

November 26, 2020: The House of Representatives approves the Law. During the floor debate, Representatives presented more than 140 amendments to modify or add to the project. The approved version of the legislation included 19 new articles to the original text as well as several modifications. 

The House version incorporated changes related to supporting regional entrepreneurship through the CEmprende strategy and territorial funds to support entrepreneurship within the framework of economic recovery. In addition, it recognizes social enterprises priorities, green enterprises and those that favor clean energies as well as enterprises in the agricultural and sports sectors, which are projected to generate economic impact in the regions.  

December 11, 2020: The Senate approves the Entrepreneurship Law. 

What impact has been measured?
There is currently no information available on the impact of the Entrepreneurship Law. It is expected that the law will increase the number of startups in Colombia, however, no analysis has been published to substantiate this claim.  
What lessons can be learned?
While the Entrepreneurship Law has been well received it’s worth contrasting its policy mechanisms with those contained in other Startup Acts such as those in Italy, the Philippines and Nigeria. In particular, it’s notable that the Entrepreneurship Law does not contain a significant new source of funding for startups which is commonly cited by entrepreneurs as the most urgent barrier in need of address.  

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