The National Government, through Decree 639 of 2020, created the Formal Employment Support Program (PAEF), with the purpose of granting the beneficiary a monthly monetary contribution of a state nature, and up to three times, in order to support and protect formal employment in the country during the new coronavirus COVID-19 pandemic, under the following terms:
Requirements: First, it should be noted that legal entities that, in principle, meet the following requirements may be beneficiaries of the subsidy:
- Having been incorporated before January 1, 2020;
- Having a commercial registration that has been renewed at least in 2019. This requirement only applies to legal entities incorporated in 2018 and prior years.
- Demonstrating the need for the state contribution, by certifying a decrease of twenty percent (20%) or more in their income, compared to April 2019; or compared to January and February if the company was incorporated after April 2019.
These three requirements must be met to access the first of three payments to be made; for the second and third payments, they must additionally comply with the following:
- That they have not received the contribution on three occasions; and
- That they have not been obliged to return the state contribution of the Formal Employment Support Program (PAEF), due to not having used it to pay the salaries of the workers corresponding to the number of employees; when, having received the contribution, it is evidenced that at the time of application they did not meet the aforementioned requirements; and/or it is proven that there was falsehood in the documents presented to prove the requirements established for the allocation of the contribution.
Additionally, beneficiaries must have a deposit product in a financial institution supervised by the Financial Superintendence of Colombia.
If your payroll is not banked, you must certify that you have paid the social security of your workers through the PILA form.
Exceptions to the requirements
Non-profit entities (ESAL) are not obliged to comply with the commercial registration requirement; instead, they must provide a copy of the Single Tax Registry (RUT) showing that the applicant is a taxpayer under the Special Tax Regime.
Amount of the contribution
The contribution will finance the equivalent of FORTY PERCENT (40%) of a Current Legal Monthly Minimum Wage (SMLMV), that is, THREE HUNDRED FIFTY THOUSAND PESOS MCTE ($350,000) per employee.
For purposes of quantifying the number of employees, this will correspond to the lower value between:
- The number of employees reported in the Integrated Contribution Settlement Form (PILA) corresponding to the contribution period of February 2020, for which the beneficiary is responsible; or
- The number of workers that the beneficiary states it plans to protect and for which it requires the state contribution, that is, the number of formal jobs that will be maintained in the corresponding month thanks to the state contribution.
IMPORTANT: Employees shall be understood as dependent workers for whom the beneficiary contributes to the general social security system in the Integrated Contribution Settlement Form (PILA), with a contribution base income of at least ONE (1) current legal monthly minimum wage, and to whom, in the month of application, the novelty of temporary suspension of the employment contract or unpaid leave (SLN) has not been applied.
Procedure for applying beneficiaries
Legal entities that meet the aforementioned requirements must submit the following documents to the Financial Entity where they have their deposit product:
- Application signed by the legal representative of the company, stating the intention to be a beneficiary of the Formal Employment Support Program (PAEF).
- Certificate of existence and legal representation, stating the name and document of the legal representative.
- Certification, signed by the legal representative and the statutory auditor, or by a public accountant in cases where the company is not obliged to have a statutory auditor, certifying:
- The number of formal jobs that will be maintained in the corresponding month through the state contribution subject of this program. This information must be updated monthly.
- The decrease in income of twenty percent (20%) or more compared to April 2019; or compared to January and February if the company was incorporated after April 2019.
- That the requested and actually received resources will be used solely and exclusively for the payment of salaries of the beneficiary's formal jobs.
By applying, the beneficiary accepts the conditions under which the state contribution is granted. The mere application does not imply the right to receive the contribution.
Duration of the state contribution: Compliance with the procedure will allow obtaining ONE (1) monthly state contribution. The contribution may be requested up to THREE (3) times, complying each time with the procedure described above.
The program will be in effect during the months of May, June, and July 2020. Beneficiaries may only request, once per month, the state contribution up to a maximum of three times.
What happens if a beneficiary receives the contribution without meeting all the requirements?
Those who receive one or more state contributions under this Legislative Decree, without meeting the requirements established for such purpose and do not inform the competent authority, or receive them fraudulently, or use them for purposes other than those established herein, will incur disciplinary, fiscal, and criminal liabilities as applicable.
Likewise, the state contribution must be returned to the State by the beneficiary when:
- It has not been used to pay the salaries of the workers corresponding to the number of employees.
- Having received the contribution, it is evidenced that, at the time of application, the requirements were not met.
- It is proven that there was falsehood in the documents presented to prove the requirements established for the allocation of the state contribution.
- The beneficiary states that the contribution received was higher than that actually used to pay the salaries of its workers for the respective month. In this sole case, the restitution of the contribution will correspond to the difference between what was received and what was actually disbursed.
Exemption from the tax on financial movements and exclusion of VAT
No taxes will be applied to financial movements for the transfers of funds corresponding to state contributions; likewise, the commission or service charged for the disbursement of resources by Financial Entities to beneficiaries will be excluded from VAT.
In conclusion, it is expected that this program of state contributions will be implemented starting from the first fortnight of May 2020, so it is recommended to begin the procedures for applying as beneficiaries as soon as possible.
Author: Ana María Silva Z. Attorney Consultant AZC