September 17

Managing Colombian Employees: Legal and Regulatory Obligations

Managing Colombian Employees: Legal and Regulatory Obligations

We have previously discussed tax obligations applicable to companies doing business in Colombia. This article aims to broaden the discussion by focusing on certain legal and regulatory obligations facing Colombian companies in an ever-changing changing business landscape. Note that this is a select list of obligations; actual legal and regulatory obligations will vary depending on the industry involved.

PAYROLL TAXES (“PARAFISCALES”)
As discussed previously, under Colombian law, businesses are generally obligated to pay certain payroll taxes when hiring employees. These businesses typically contribute approximately 9% of total payroll amount. These payments are distributed as follows:

  • • SENA (“National Learning Service”): 2%
  • • ICBF (“Colombian Family Welfare Institute”): 3% as mandated by Law 89 of 1988.
  • • Family Compensation Fund: 4% as mandaded by Law 21 of 1982.

Please check with your local accountant as these obligations may not apply to your business following the promulgation of Ley 1607 of 2012.

INTERNAL LABOR REGULATIONS
Pursuant to Articles 104 and 105 of the Substantive Labor Code companies are required to establish workplace policies and certain management guidelines that are intended to regulate labor relations within your business (“Workplace Policies”). Workplace Policies essentially serve as an internal regulatory framework that codifies specific rules, rights and obligations for both employer and employee. The documentation that is developed to comply with these regulations may specify certain sanctions in cases where employees do not comply with Workplace Policies. Note that employers can only apply sanctions mentioned in the Code of Labor and/or in the Workplace Policies documentation so long as these are consistent with local law.

Content
Below is a select list of issues that your company Workplace Polices should address:

  • •Work hours, overtime and nightshift policies;
  • •Training policies;
  • •Payment processing;
  • •Vacation policies;
  • •Medical examinations;
  • •Work safety rules; and
  • •Sanctions for failure to comply with Workplace Policies.

Applicability
In general, companies will be required to develop Workplace Policies where the total number of employees exceed:

  • • five (5) employees in commercial businesses;
  • • ten (10) employees in industrial companies;
  • • twenty (20) employees in agriculture livestock and forestry business; and
  • • Ten (10) employees for companies operated in a variety of industries.

Failure to Comply
It should be noted that a failure to establish Workplace Policies could lead to substantial penalties levied by Colombian government agencies. However, in practice, this only becomes an issue when a company faces legal action by former employees bringing unrelated claims.

OCCUPATIONAL HEALTH PROGRAM
Pursuant to resolution 1016 of 1989, Colombian companies are required to implement a general “occupational health program” in order to ensure that they are meeting certain expectations within the much more general categories of Preventive Medicine, Labor Medicine, Industrial Hygiene and Safety. These programs are designed to preserve, maintain and improve the individual and collective health of employees utilizing a comprehensive and interdisciplinary approach. Employers will be required to invest both financial and human resources to ensure the safety of their employees based on (i) the specific industry involved and (ii) applicable laws and regulations.

MEDICINE, HYGIENE, AND INDUSTRIAL SAFETY COMMITTEE
Pursuant to resolution 2013 of 1986, Colombian companies employing ten (10) or more employees are required to organize and manage a Medicine, Hygiene, and Industrial Safety Committee. As its name suggests, the principal focus of this committee is to promote measures that facilitate and encourage the health and safety of employees. The work of this Committee tends to go hand in hand with the “occupational health program” discussed above. Note that for companies that have less than ten (10) employees, the company must coordinate with such employees to implement policies that would have been managed by a formal Committee under different circumstances.

COMMITTEE OF LABOR COEXISTENCE
Pursuant to resolution 652 of 2012, Colombian companies are required to create and operate a so-called, “Committee of Labor Coexistence” which has as its main focus the prevention of workplace harassment. This obligation applies to all companies, regardless their number of employees.

We hope this information is helpful to you.  If you have additional questions regarding the subject matter in this post please access our Contact Form.

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The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. The law changes frequently and varies from jurisdiction to jurisdiction. Being general in nature, the information and materials provided may not apply to any specific factual and/or legal set of circumstances.  We cannot guarantee that commentary posted by third parties is accurate. No attorney-client relationship is formed nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction. If you require legal advice, please consult with a competent attorney licensed to practice in your jurisdiction.

August 27

Business Taxes in Colombia: A Primer

Business Taxes in Colombia: A Primer

Anyone doing business in Colombia should have a working knowledge of their company’s potential tax obligations.  Structuring an optimal tax strategy for your business is crucial to minimizing regulatory requirements and overall tax liability while maximizing your actual profits.  The following is a general summary of tax obligations for a typical business operating solely in the Colombian market.  We will go further in depth into each of these requirements in future posts.

 

INCOME AND SUPPLEMENTARY TAX

  • Applicability: Applies to profits and other miscellaneous income earned by taxpayers arising from ordinary operations (ordinary income or “renta líquida ordinaria”) as well as non-ordinary activities outside standard operations.
  • Standard Rate: Approximately 25% following 1607 law in 2012. Note that for some small businesses (“Sociedades por Acciones Simplificadas” or “S.A.S.” being an example) this rate drops down to 0% for the first two taxable years and gradually increases back to 25% through the fifth year of operations (25% of normal tax liability during the third year, 50% during the fourth year, 75% during the fifth year, and 100% during the sixth year)

IMPUESTO SOBRE LAS VENTAS (IVA)

  • Applicability: This is Colombia’s answer to Europe’s VAT regime. It’s essentially a value added tax that increases the selling price for goods and services.
  • Standard Rate: Exempt, 5%, or 16%, depending on the goods and services being sold, as specified by the local tax statute.

CONSUMPTION NATIONAL TAX

  • Applicability: This is essentially a quasi-luxury tax Imposed on the end-consumer/importer.  This tax targets things like mobile phone services, restaurant outings and the purchase of certain vehicles.
  • Standard Rates: From 4% (mobile phone service) and 8% (restaurants/bars) to 16% (specific products specified in Article 512-4 of the tax statute).

EQUALITY INCOME TAX (CREE)

  • Applicability: This tax was recently created by the 1607 Act of 2012. Broadly conceived as a tax on income which benefits workers, encourages employment generation and social investment. This tax was created as a way to offset the elimination of “parafiscales” tax obligations  (ICBF, SENA, Social Security Health System, etc…).
  • Standard Rates: 9% for the fiscal years 2013-2015 and 8% thereafter.

PAYROLL TAX

  • Applicability: These are mandatory contributions that a taxpayer must pay whenever it hires employees under Colombian law. These include (i) payments to the Family Compensation Fund; (ii) contributions to the Colombian Family Welfare Institute (ICBF); and (iii) contributions to the National Learning Service (SENA).  Contributions to the general social security system are also included in this category. It’s important to mention that following tax reform legislation passed in 2012 (ley 1607 of 2012) corporate/legal entities may no longer be required to pay these contributions.
  • Standard Rates: Variable but approaching 13.5% for each salaried worker.

INDUSTRY AND TRADE TAX

  • Applicability: This tax applies to all commercial/business activities that occur within a specific municipal jurisdiction.  Tax applies whether (i) taxpayer is a legal entity or a natural person; (ii) activity occurs as part of a ordinary operations or not; or (iii) taxpayer has a physical presence or not.
  • Standard Rate: Subject to specific formula.  For example, in Medellin, hotels and guesthouses that are registered in the National Register of Tourism incur a tax rate of 10 per 1000.

PROPERTY TAX

  • Applicability: Taxable by the municipal authorities
  • Standard Rates: Rates are set by each municipality separately.  It’s a progressive tax obligation that generally ranges between 5 per 1000 and 16 per 1000.

We hope this information is helpful to you.  If you have additional questions regarding the subject matter in this post please access our Contact Form.

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The information and materials on this blog are provided for general informational purposes only and are not intended to be legal advice. The law changes frequently and varies from jurisdiction to jurisdiction. Being general in nature, the information and materials provided may not apply to any specific factual and/or legal set of circumstances.  We cannot guarantee that commentary posted by third parties is accurate. No attorney-client relationship is formed nor should any such relationship be implied. Nothing on this blog is intended to substitute for the advice of an attorney, especially an attorney licensed in your jurisdiction. If you require legal advice, please consult with a competent attorney licensed to practice in your jurisdiction.