Through Law 2040 of July 27, 2020, a tax benefit was created for companies that hire older adults, also called the “Senior Friendly Seal” program, in order to promote the employability, autonomy, and economic self-sufficiency of older adults who do not receive a pension within the Colombian territory.
What does the tax benefit consist of?
The tax benefit referred to in Article 2 of Law 2040 of 2020 consists of a deduction from the Income Tax of 120% of the value of salaries and social benefits paid to older adults hired during the taxable years in which they remain employed by the contributing employer.
Who does the benefit apply to?
It applies to those contributing employers who are required to file income tax returns and complementary returns, who hire persons who are not beneficiaries of old-age, family, or survivor pensions and who have met the pension age requirement established by law.
What are the conditions to access the tax benefit?
The conditions and requirements that employers must meet to access the tax benefit are the following:
- The older adults hired must be persons who are not beneficiaries of old-age, family, or survivor pensions.
- The older adults who meet the above requirement must also have reached the pension age established by law.
- The older adults hired under these conditions must represent at least 2.5% of the workforce for employers with fewer than one hundred employees. This requirement will increase by 0.5% for each additional 100 employees, without exceeding 5% of the workforce.
- The employer must hire the older adult for at least one (1) year.
- Employers who meet these requirements must demonstrate and certify them before the Ministry of Labor in accordance with the provisions of External Circular No. 004 of January 18, 2021.
What happens if an older adult who meets these requirements is dismissed with just cause before the term of 1 year?
In cases of dismissal with just cause, that is, in those cases where the dismissal of the worker is duly supported and any of the causes contained in the Substantive Labor Code or the Internal Work Regulations of the company to terminate the contract with just cause is duly proven, and the older adult who was dismissed did not complete one year of employment, this time may be completed with the working time of another older adult who comes to fill the vacancy, meaning that the time the initial worker was employed is not lost.
How can the employer lose the tax benefit?
The employer may lose the tax benefit of Law 2040 of 2020 if it ceases to fully comply with the aforementioned requirements. In the event that the hired older adult resigns, motivating their decision based on employer breaches, however, such breaches must be duly established by a final judicial decision, that is, the mere motivated resignation of the worker is not sufficient, but rather a judicial process must be involved and with it a judgment that so declares or establishes.
Juliana Tobón T. – AZC CONSULTING ATTORNEY