Colombia: New Subsidy to Help Businesses Continue Paying Workers During Coronavirus Pandemic

Colombia: New Subsidy to Help Businesses Continue Paying Workers During Coronavirus Pandemic

On 5 May 2020, President Iván Duque declared a second state of emergency in order to support sectors of the economy that will remain closed for an extended period of time to slow the spread of coronavirus.

Following on from the second state of emergency declaration, the government published Decree 639 on 8 May 2020, detailing the economic relief that will help small and medium sized businesses in Colombia.

In the newly announced measures, the national government will pay businesses $90 (COP350,000), which is 40% of the country’s minimum wage, in order to continue paying workers’ wages during the pandemic. Businesses can claim the subsidies for a three-month period, under the condition that they do not fire any of their workers.

What type of business can apply?

  • Any business that has had a 20% reduction in turnover or sales, when compared with April 2019
  • For businesses created after April 2019, it will be compared to the income of January and February 2020, when coronavirus was not yet in the country

Other requirements include:

  • That the business has been established before 1 January 2020
  • That the business has carried out the renewal of the minimum commercial registration in 2019
  • That the business has not received benefits from the Formal Employment Support Program (PAEF) of this decree on three or more occasions

Non-profit entities must only provide a copy of the Single Tax Registry stating that the applicant is a contributor to the Special Tax Regime. Entities whose participation of the nation and/or its decentralised entities is greater than 50% of their capital may not be beneficiaries of the Formal Employment Support Program (PAEF).

The Special Administrative Unit for Pension Management and Parafiscal Contributions of Social Protection, UGPP (by its Spanish acronym), within the inspection tasks, may verify compliance with all the requirements to apply for subsidy.

How do businesses apply for the payroll subsidy?

A business wishing to apply must present to their financial institution:

  • An application signed by the legal representative of the business, requesting to apply for the subsidy
  • Certificate of existence and legal representation
  • Certification issued by an accountant or statutory auditor that validates the 20% reduction in income

Bankable payroll – the employee will receive the subsidy through the financial system

Unbankable payroll – the employer must certify that they have paid the social security, through a PILA invoice.

How much is the amount of the subsidy and when will the measure take effect?

The amount of the subsidy is three hundred and fifty thousand pesos for each employee. The Government of Colombia expects the measure to apply from the first fortnight of May 2020 (15 May) and hopes to help over six million employees with the subsidy.

For more information on Colombia’s labour laws, tax, and payroll landscape, browse activpayroll’s Colombia Global Insight Guide: find background on Colombia’s global economic profile, major industrial sectors and common business practices.

For more news and information on how the coronavirus pandemic is impacting payroll across the globe, check out our News Section.