Through Decree 770 of June 3, 2020, the State of Colombia established a financial support system for the payment of the service bonus corresponding to the first semester of the current year, in order to mitigate the impact that, within the current situation and circumstances, employers may suffer when making such payments while their income and corporate growth have been diminished.
Now, given the issuance of Resolution 1361 of 2020 by the Ministry of Finance and External Circular No. 003 of July 6, 2020 by the Special Administrative Unit for Pension Management and Parafiscal Contributions of Social Protection (UGPP), documents through which the pillars of Decree 770 of 2020 are regulated, it is necessary to highlight in a practical and clear manner the scope and content of the PAP for the Colombian business sector:
- VALUE OF THE SUPPORT: The PAP is a one-time payment made to the employer, equivalent to the sum of TWO HUNDRED TWENTY THOUSAND PESOS ($220,000) multiplied by the number of employees recognized as beneficiaries of the measure.
- BENEFITED AND QUALIFIED WORKERS: The workers to be qualified or assessed as eligible for the measure will be only those who have contributed to the SGSSI for the periods of April, May, and June 2020 in full and whose base contribution income (IBC) was ONE (1) MINIMUM MONTHLY LEGAL WAGE in force up to ONE MILLION PESOS ($1,000,000).
If a worker has more than one employer, the state contribution will be granted to the first one that, as a result of the respective application, is verified by the UGPP.
For purposes of verifying the number of employees and calculating the state contribution of the PAP, the UGPP, in addition to the above, will count those approved under the Formal Employment Support Program (PAEF). This applies provided that the PAP applicant has been a beneficiary of the PAEF.
- BENEFICIARIES OF THE PAP: Beneficiaries of the service bonus subsidy of the PAP are legal entities, natural persons, consortia, and temporary unions that meet the requirements set forth in Decree 770 of 2020 and Resolution 1361 of 2020.
- REQUIREMENTS TO BE A BENEFICIARY: Beneficiaries will be those who were incorporated before January 1, 2020, have registration in the commercial registry made or renewed at least in 2019, have a decrease of 20% or more in their income, and have a deposit product in a financial institution supervised by the Superintendence of Finance of Colombia or the Superintendence of Solidarity Economy with the respective authorization to offer deposit products.
For non-profit entities, registration in the commercial registry will not be required; however, they must present the RUT. Only those that must file an income tax return or, failing that, an income and asset declaration, as well as exogenous information on magnetic media for the 2019 tax year, will be beneficiaries of the measure.
For natural persons, there would be no talk of "incorporation" but rather of registration in the commercial registry prior to January 1, 2020. Additionally, they must have THREE (3) or more workers reported in PILA as of February 2020, with only those who meet the IBC and contribution periods required by the regulation being beneficiaries.
- DEADLINE TO APPLY FOR THE MEASURE: In accordance with Resolution 1361 of 2020, Resolution 1129 of 2020, and the Operational Manual, there will be a deadline to apply from July 8, 2020, until July 16, 2020.
- CALCULATION OF INCOME REDUCTION: As highlighted in Resolution 1361 of 2020, the calculation of the income reduction will be carried out in the same manner as for the PAEF, that is, in accordance with Article 3 of Resolution 1129 of 2020, the demonstration of a decrease in income may be accepted by comparing the income of the month immediately preceding the application with the same month of 2019, or by comparing the income of the month immediately preceding the application with the arithmetic average of income for January and February 2020.
- DOCUMENTATION TO SUBMIT: It was established in Resolution 1361 of 2020 and External Circular No. 003 of 2020 that the documents to be submitted to apply for the PAP will be the same as those implemented for the PAEF, regulated in Article 2 of Resolution 1129 of 2020.
Only for the month of July may the same form and certifications be used for concurrent application to both programs.
Without prejudice to the foregoing, it is clear that the employer must provide, for the particular case, the application signed by the legal representative or natural person employer stating the intention to be a beneficiary of the PAP, and the certification of income decrease indicating the number of service bonuses that will be subsidized with the state contribution.
If in a particular case one wishes to apply to the PAEF and PAP simultaneously, this application must be submitted to the same financial institution and through the same standardized form issued by the UGPP in External Circular No. 003 of July 6, 2020. Thus, for the application for August 2020 to the PAEF, the form officialized in Circular No. 002 of June 9, 2020 must be used.
- REGARDING FINANCIAL INSTITUTIONS: Financial institutions may not reject the receipt of documents when the applicant does not have a payroll agreement with said institution.
Additionally, the financial institution has the obligation to verify that the deposit product belongs to the applicant and, in particular, that it is active and without any restriction to receive the funds when applicable, allowing the applicant to freely dispose of said funds. Thus, if during the time between the application and recognition of the PAP there is any affectation on the deposit product that affects or prevents access to the PAP funds, the financial institution must offer an alternative mechanism for the transfer or delivery of the funds, without this implying any cost to the beneficiary.
- NON-SEIZABILITY OF FUNDS: From the moment of delivery of the single state contribution of the PAP to the beneficiary and for up to thirty (30) calendar days thereafter, it shall be non-seizable. Except for those beneficiaries who are involved in the status stated in the paragraph of Article 17 of Decree 770 of 2020.
Now, Decree 770 of June 3, 2020, in addition to providing support to the business sector and subsidizing the first payment of the service bonus corresponding to the first semester of the current year, as already reported, indicated the existence of an alternative for its payment, where the worker and employer may agree that it be paid until December 2020, that is, a period of six (6) months would be extended, and regarding the form of payment, they may agree on up to three (3) installments.
In line with the above, those who are beneficiaries of the PAP may also apply to the payment facilitation agreements for the service bonus just mentioned, but the three (3) installments to be agreed until December 2020 with the worker(s) must be for equal amounts.
Author: Valentina Martinez – Consulting Attorney at AZC