Payroll subsidy: Corrections to benefit more companies

Jaime Cabal indicates that 336,000 entrepreneurs, natural persons, were left out of the subsidy.

Alberto Carrasquilla acknowledged the error and natural person employers are already taken into account.

Salomón Kalmanovitz says that the subsidy falls short because the Government did not want to impose taxes on large companies.

The Minister of Finance, Alberto Carrasquilla, said in a Facebook Live on May 11, 2020, together with the president of Fenalco, Jaime Alberto Cabal, that they are considering extending the payroll subsidy of $350,000 per worker to employers registered as natural persons.

For his part, Cabal expressed the concern on the part of approximately 336,000 entrepreneurs who operate under this figure and employ more than 800,000 workers, since they were not included in Decree Law 639 of May 8, 2020, which created the Formal Employment Support Program -Paef-.

Payroll subsidy for employers who are individuals

Cabal’s concern was echoed by the national government and on May 13, 2020 it was announced that the subsidy will also apply to employers and entrepreneurs who do not have their company as a legal entity, which is intended to benefit close to 600,000.

Thus, the payroll subsidy of $350,000 per worker will be extended to companies or employers registered as natural persons, as long as they have three or more employees.

The announcement was made by the Vice Minister of Finance, Juan Alberto Londoño, who said that the measure will benefit close to 600,000 people.

“There are many natural persons who are engaged in commercial activities, that is, who have companies, but were never incorporated as legal persons, but natural persons. We came to the conclusion to include natural persons who have more than three employees,” said the official.

Carrasquilla accepted that this decree benefited only legal persons and that it was a mistake not to take into account natural persons; but made it clear that including natural persons who are formalized traders represents a “challenge” for the Ministry.

For Cabal it was necessary not to limit the subsidy to legal persons, as this would discourage the formalization of small businesses.

A mean-spirited and tax-flawed measure

For the leader of accounting and tax research of Actualícese, Diego Guevara Madrid, a real help for payrolls would be to reduce the income advance for 2020.

“I don’t see the logic in asking for high advances for 2020, which for many will turn into a balance in favor at the end of this year,” he says.

In addition, it is understood that this payroll allowance does form an ordinary taxable income to the legal entity that receives it, and then if such legal entity is in the ordinary regime, it will be subject to a 2.5% withholding. Additionally, that legal entity in the ordinary regime will also have to make the special self-withholding of 0.4%, 0.8% or 1.6%.

“This situation will result in a higher balance in their favor at the end of 2020, which could be avoided if they had said that this allowance is a non-taxable income and that’s it,” he warns.

“Payroll assistance will be small all because the government does not want to impose a tax on large companies and individuals”.

Guevara echoes what Salomón Kalmanovitz wrote on May 11, 2020 in his column “Mezquindad fiscal y monetaria”, in El Espectador, where he indicates that the payroll aid will be small all because the Government does not want to impose a tax on large companies and individuals.

“That happens for having made a perverse tax reform in December 2019 where the tax was reduced too much for many rich people”, pointed out Guevara.

Points to take into account of the decree<

Carrasquilla clarified a number of points related to Decree Law 639 of May 8, 2020:

1.legal entities accepted are those incorporated before January 1, 2020.

2.Commercial Registry required is the one renewed in 2019, that is, the one corresponding to the year 2018, since for the renewal of 2019 there is a deadline until July 3, 2020.

3.Decree refers to income without any specification (nothing of the concepts of accrual, cash, occasional gains, etc.).

4.ESAL that are in the special tax regime may apply to the subsidy.

The calculation for the payment is made by multiplying the number of employees by 40% of the minimum wage.

6.The Pila to be applied for is that of February 2020.

7.The payment will be made in 3 “occasions”, between the months of May to August 2020.

8.Payment will be made through the banking system, whether or not the company’s payroll is banked.

9.The calculation of the 20% decrease in income must be regulated to clarify the cut-off point for the measurement.

10.The first payment will be made in the last week of May, which indicates that the document management should be done no later than next week.

11.There will be a double requirement for payments: the first one corresponds to the request with the requirements established in article 4. For the second and third payment there are other requirements established in paragraph 5 of article 4 of the decree.

12.The UGPP will be the guarantor and control agent of this whole process.

13.Money paid to the company is unseizable.

14.Commission earned by banks is excluded from VAT.

Source: Actualícese: Actualícese