Subsidies to the Employees’ Payroll through the Formal Employment Support Program

Taking into account the new declaration of the State of Social, Economic and Ecological Emergency, through Decree 639 of 2020, the Formal Employment Support Program was created, with the aim of subsidizing the payrolls of employers:

1. What is the subsidy or benefit granted by the Formal Employment Support Program?

With the program, resources from the Emergency Mitigation Fund will be allocated to help finance the payrolls of some employers by giving them a subsidy of 40% of a current legal monthly minimum wage, equivalent to $ 351,121, for each worker they wish to protect during the month they access to the subsidy.

The benefit may be granted three times per employer during the months of May, June and July and it will be optional to apply in each of the months. However, those employers who are debtors in loans to finance payroll and have a guarantee from the National Guarantee Fund, may also use the benefit up to three times, but until August 2020, that is, in these cases they could use the benefits non-consecutively.

The subsidy will be transferred through entities supervised by the Financial Superintendence of Colombia and will be exempt from the tax on financial movements. However, this will not prevent the discounts authorized by the workers individually considered.

2. How will the amount of subsidies given by the number of workers to the employer be determined?

In each month that the employer wishes to access the benefit, the employer must provide a list of the workers he wishes to protect with the measure and who must keep their employment contract during the correspondent month. The number of employees to protect with the benefit will be determined according to the total number of workers in the PILA who are not on suspension, or in any case, the specific list that the Employer reports if this is less than that reported by PILA.

In both scenarios, the workers must have contracts in execution and be contributing to the PILA, and shall not be on suspension.

The subsidy received in the specific month will be taken as a total and therefore, the Employer may access to it in three different months.

3. What kinds of employers can get the benefit?
Legal entities established before January 1, 2020 that have the following conditions:

1. That they have a deposit product in an entity supervised by the Financial Superintendence of Colombia.
2. That they demonstrate a decrease in their income of 20% or more, in accordance with a method that will be determined by the Ministry of Finance and Public Credit.
3. That they have an update commercial registration, and that in case of companies created in 2018, they have renewed it for the year 2019, at least. In the case of non-profit entities, this registration will not be requested, but they must proof they contribute to the Special Tax Regime.
4. That they do not have in their capital participation of more than 50% of the Nation and / or its decentralized entities.

To the extent that the contribution will be delivered a maximum of three times, those who have already received it on these three occasions will not be able to access the benefit for the fourth time. Furthermore, if the legal entity was forced to return the contribution,  it will be unable to request it again, when the cause of restitution refers to falsehood, lack of compliance with requirements or the inappropriate destination of the contribution.

4. In which cases will the refund of the subsidies apply?
The restitution of the subsidy will correspond to individuals in the following cases:

1. When the subsidy was not used for the payroll.
2. When having received the contribution it is evident that at the time of receiving it, the company did not meet the requirements to receive it.
3. When falsehood is verified in the documents presented to prove the requirements established to obtain the subsidy.
4. When the beneficiary declares that the benefit received was higher than that actually used for the payroll. Only in this case, the employer will continue to be able to request the benefit again, if it has not already been used three times.

Without regarding the restitution of the subsidy, there may be administrative sanctions established in the Tax Statute.

5. What must be submitted to request the benefit?

Employers must deliver the following documents to the financial entities with which they have the deposit product, for which they must also have virtual and electronic means for processing:

• Application to receive the benefit signed by the Legal Representative.
• Certificate of Existence and Legal Representation stating the data of the Legal Representative.
• Certification signed by the Legal Representative and the Statutory Auditor or a public accountant when they are not obliged to have a statutory auditor, indicating:

1. The number of employees the employer wants to protect with the subsidy.
2. The decrease in income of at least 20%.
3. That the resources requested and received will be destined solely and exclusively to the payroll.

• When they request it a second or third time, the following must also be attached:

1. Certification signed by the Legal Representative and the Statutory Auditor or public accountant, when they are not obliged to have a statutory auditor, indicating that the resources received were destined to pay the payroll of the corresponding employees.
2.  If applicable, certification of the refund of the money received in higher value than used.

In addition to the above, the UGPP may determine a standardized form for the procedures.

6. Who will supervise the destination of the contribution?

The UGPP will be in charge of consolidating the information of the beneficiaries of the subsidies and will be able to cross data with the DIAN bases to verify that the decrease in income actually exists. In the same way, the UGPP will be able to acquire the restitution of the subsidies and will maintain the administrative faculty to impose sanctions.