Before Decree 1601 of 2022 came into effect, social security contributions for independent workers were made in accordance with the provisions of Articles 3.2.7.1 and 3.2.7.8 of Decree 780 of 2016, which established that for social security contributions, the income base for contribution (IBC) for independent workers with service provision contracts was forty percent (40%) of the monthly value of each contract, provided that this percentage was not less than one current legal monthly minimum wage nor greater than 25 current legal monthly minimum wages.
With the entry into force of Decree 1601 of 2022, the content of Articles 3.2.7.1 to 3.2.7.8 of Decree 780 of 2016 was replaced, and new parameters for making social security contributions were established instead.
This new Decree states that independent workers who are self-employed and those with contracts other than service provision contracts must make contributions according to the income presumption system based on the economic activity performed; that is, those “natural persons who carry out economic activities on their own account and risk, and whose activity may or may not involve subcontracting, purchase of inputs, and deduction of expenses for its execution” will make their contributions according to the “income presumption that corresponds to the information on presumed cost coefficients by economic activity, with which the presumed costs of the independent worker who is self-employed or has a contract other than a service provision contract are determined.”
It should be noted that the cost presumption scheme integrates the gross income determined by the obligor and the presumed costs determined in the “cost presumption scheme annex,” which are not subject to objection regarding the percentage established in said scheme.
| Activity | Percentage of costs relative to income (excluding VAT) |
| Agriculture, livestock, hunting, forestry, and fishing | 73.9% |
| Mining and quarrying | 74.0% |
| Manufacturing industries | 70.0% |
| Construction | 67.9% |
| Wholesale and retail trade; repair of motor vehicles and motorcycles | 75.9% |
| Transportation and storage (excluding road freight transport) | 66.5% |
| Accommodation and food services | 71.0% |
| Information and communications | 63.2% |
| Financial and insurance activities | 57.2% |
| Real estate activities | 65.7% |
| Professional, scientific, and technical activities | 61.9% |
| Administrative and support service activities | 64.2% |
| Education | 68.3% |
| Human health and social work activities | 59.7% |
| Arts, entertainment, and recreation activities | 65.5% |
| Other service activities | 63.8% |
| Other economic activities | 64.7% |
| Capital income earners (excluding income from dividends and participations) | 27.5% |
To determine the contribution settlement, self-employed independent workers and independent workers with contracts other than service provision contracts must: (i) determine gross income, understood as all income, excluding the value of Value Added Tax (VAT) generated in the development of the economic activity performed; (ii) deduct the costs associated with the economic activity under the terms of Article 107 of the Tax Statute and other regulations governing it, or apply the cost percentage established in the table above; and (iii) calculate and make the corresponding contribution to the comprehensive social security system on the corresponding income.
For practical purposes, a self-employed independent worker whose economic activity is real estate brokerage, with an approximate monthly income of $10,000,000 excluding VAT, must deduct the equivalent of 65.7% corresponding to the presumed cost, contributing to social security on the remaining 44.3%, that is, on $3,430,000.
It should be highlighted that independent workers with contracts other than service provision contracts are those who, being natural persons, enter into contracts with private or public legal entities and derive their income from this contractual relationship. They are presumed to be obligated to affiliate with the status of contributor.
Regarding these contributions, the UGPP may carry out monitoring and control activities, requesting the independent worker to provide supporting documents for the costs of their economic activities that served to determine net income. In this sense, an independent worker is presumed to be obligated to affiliate as a contributor if, through exogenous information from DIAN, tax returns, or any other means, it is possible to determine the existence of net income equal to or greater than one monthly minimum wage. However, in all cases, social security contributions, even for independent workers linked through service provision contracts, will be made on a monthly basis, and the IBC may not exceed 25 SMLMV.
Decree 1601 of 2022 is silent on social security contributions for independent workers with service provision contracts, creating a regulatory gap and uncertainty regarding the income base for contribution for this type of independent worker. In light of this regulatory gap, the Ministry of Labor, the Ministry of Finance and Public Credit, the Ministry of Health and Social Protection, and the Special Administrative Unit for Pension Management and Parafiscal Contributions of Social Protection – UGPP issued a unified concept on the contribution base for this type of independent worker, indicating that, by application of the revival doctrine, the regulation governing contributions for independent workers with service provision contracts remains in force, and consequently, contributions must be made on 40% of the monthly value of the contract.
It is worth noting that a bill is currently pending in the Congress of the Republic seeking to unify the method for establishing the Income Base for Contribution for independent workers for the payment of comprehensive social security contributions, maintaining the three types of independent workers: (i) self-employed independent workers, (ii) independent workers with contracts other than service provision contracts, and (iii) independent workers with service provision contracts, adding a differentiation regarding the obligation to keep accounting records.
This bill proposes that self-employed independent workers and independent workers with contracts other than personal service provision contracts with monthly income equal to or greater than one (1) legal minimum wage will make monthly contributions, with a minimum contribution base of 40% of the monthly value of accrued income. Likewise, it states that this type of independent worker, when not required to keep accounting records, may make their contributions by imputing costs in accordance with the criteria of the Tax Statute, without exceeding the values included in the income tax return for the respective fiscal year.
For independent workers with service provision contracts, the IBC may be determined from monthly net income, contributing on a monthly basis on a minimum base of 40% of the monthly value of the contract, excluding value added tax. If they have income from multiple activities, the contribution must be made for each contract.
Regarding the inspection carried out by the UGPP, it will apply the cost presumption when DIAN data so permits.
Nataly Muñoz P. – AZC CONSULTING ATTORNEY