We will find out about the legal competition of cryptoassets in Colombian companies from Sebastián Béndiksen, managing partner of BéndiksenLaw and specialist in corporate law. Sebastián shares with us his experience and key advice on the subject, guides us through the legal implications and responsibility of administrators in this constantly evolving area.
In this exclusive webinar we explore the current legal landscape of cryptocurrencies in Colombia, the necessary security measures, and the tax implications that must be taken into account.
Do not miss the opportunity to obtain valuable information and clear your doubts about the compliance of cryptoassets in Colombian companies.
Remember that at BéndiksenLaw you will find the support and advice you need to successfully navigate the legal implications and responsibilities. Do not hesitate to contact us!
Watch the webinar (in Spanish)
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Are you interested in learning more about cryptoasset legal compliance and how it applies to businesses in Colombia? If so, we have great news for you! We are organizing an exciting webinar (in Spanish) that will take place on June 6 at 10:30 am, where we will delve into the essential knowledge that every Colombian company must consider in the world of cryptoassets. If you want to keep your business up to date and make sure you comply with all regulations, this webinar is for you. Keep reading to learn more!
Details of the event:
Date: June 6, 2023
Time: 10:30 am (Colombia time)
In this webinar our managing partner, Sebastián Béndiksen, will give us valuable and practical information on how companies in Colombia can address the challenges and opportunities related to cryptoassets safely and in compliance with regulations.
Who should attend?
This webinar is designed for entrepreneurs, directors, managers, legal professionals and anyone interested in understanding the legal and regulatory aspects of cryptoassets in the Colombian context. It does not matter if you already have experience in the subject or if you are new to the world of cryptoactives, this event will give you valuable and updated information.
Do not miss this opportunity to acquire essential knowledge about legal compliance of cryptoassets and how to apply them to your company in Colombia. The webinar on June 6 at 10:30 am will be an invaluable opportunity to stay updated and ensure you comply with regulations in the world of cryptoassets. Register now and reserve your spot. We are waiting for you!
On December 13, 2022, Colombia enacted Law 2277, embodying the most recent tax reform which came into effect on January 1, 2023 with some exceptions. In this article, our new Head of Tax explains several topics of the reform of interest to our clients.
I. Alternative Minimum Tax.
Inspired by the OECD BEPS global anti-base erosion (GloBE) rules Pillar Two recommendations, the tax reform introduces a new 15% alternative minimum tax for corporate taxpayers, including taxpayers operating in free-trade zones (“zonas francas”). This minimum tax does not apply to non-resident foreign entities.
This minimum tax, called Net Tax Rate (Tasa de Tributación Depurada or “TTD” for its acronym in Spanish) is based on the taxpayer’s book profits (with certain adjustments), called Net Book Profit (Utilidad Depurada or “UD” for its acronym in Spanish).
The TTD paid by any given taxpayer, that is, its effective tax rate, is arrived at by dividing the taxpayer’s Net Income Tax (“ID”) by its Net Book Profit (“UD”). It is expressed in the law with the following formula:
Whenever the TTD computed under the above formula is lower than 15%, taxpayers must determine the amount of Additional Tax Due (“IA”) by multiplying the Net Book Profit (UD) by 15% and subtracting the Net Income Tax (ID):
For purposes of these calculations:
The Net Income Tax (ID) is the actual income tax paid (“INR”), increased by tax discounts or credits originating from tax treaties and by foreign tax credits (“DTC”), minus the income tax paid on passive income from foreign controlled entities (computed by applying the general 35% corporate tax rate to the taxable passive income) (“IRP”). The formula is:
The Net Book Profit (UD), in turn, is calculated under the following formula:
Where:
UC
is the book profit before taxes.
DAPARL
refers to permanent differences set forth in the law that increase taxable income.
INCRNGO
refers to income that is neither taxable income nor capital gains income and which affects book profits.
VIMPP
is the income determined under the equity method for the corresponding tax year.
VNGO
this is the net value of capital gains income affecting book profits.
RE
stands for exempt income originating from tax treaties, income received under the Colombian holding regime, exempt income on certain sales of social interest and priority interest housing and income received under certain pension funds
C
compensation of prior years’ net operating losses or excess of presumptive income, taken during the tax year and which did not affect the book profit for the tax year.
Special calculations apply for taxpayers consolidating financial results. In essence:
The Net Tax Rate for the Group (“TTDG”) is calculated by dividing the sum of the Net Income Tax of each Colombian resident taxpayer in the consolidation (“SID”) by the sum of the Net Profit of each such taxpayer (“SUD”):
Where the result is lower than 15%, the Additional Tax Due for the Group (“IAG”) is determined by the difference between the sum of the Net Book Profit for each Colombian resident taxpayer in the consolidation (SUD) multiplied by 15% less the sum of the Net Tax of each such taxpayer (SID):
In order to determine the Additional Tax (IA) for each Colombian resident taxpayer, the above result is multiplied by the factor resulting from dividing the Net Book Profit of each taxpayer higher than zero (“UDB”) by the sum of the Net Book Profit of all taxpayers in the group with Net Book Profits higher than zero (“SUDB”):
These alternative minimum tax rules do not apply to the following taxpayers:
Taxpayers who do not consolidate financial results and their Net Book Profit (“UD”) is zero or lower.
Taxpayers who consolidate financial results and the sum of all Net Book Profits (“SUD”) is zero or lower.
Entities incorporated as Special Economic and Social Zones (“Zonas Económicas y Sociales Especiales or “ZESE”).
Certain government-owned entities engaged in gambling or alcohol and liquor monopolistic activities.
II. Capital Gains
The rate for capital gains (“ganancias ocasionales”) generated by Colombian entities and by non-resident entities alike was increased from 10% to 15%.
III. Dividends
Dividends paid to nonresidents are subject to a 2-tier withholding tax calculation, as follows:
If the dividends originate from earnings that have not been previously taxed, then they will be taxed at the general 35% corporate tax rate.
The balance remaining after payment of the above tax is further subject to withholding tax. Here the tax rate was doubled by the tax reform, increasing from 10% to 20%.
IV. Free-Trade Zones
Entities carrying on operations in specified free-trade zones are entitled to a preferential 20% corporate tax rate, except for commercial users, to whom the general 35% tax rate applies.
Effective 2024, the tax reform sets the following distinctions:
Industrial users:
The ratable portion of taxable income corresponding to exportation of goods and services will be taxed at the preferential 20% rate. This will include health services provided in certain specific free-trade zones to patients residing outside Colombia.
This benefit is subject to the industrial free-zone users signing, with the Ministry of Commerce, Industry and Tourism, in 2023 or 2024, an internationalization and annual sales plan for each tax year, setting forth maximum goals for net income from operations of any kind within Colombia and income from activities other than their authorized activities.
Such a plan will be mandatory for entities securing free-trade zone authorization as from 2025.
Failure to sign the plan or to reach the maximum income goals will result in the benefit of the preferential tax rate being lost and thus being subject to the general 35% rate.
The ratable portion of all other taxable income will be subject to the general 35% corporate tax rate.
Commercial users:
Commercial free-zone users will continue to be taxed at the general 35% corporate tax rate.
Rules of Exception:
Industrial free-zone users with an increase of at least 60% in gross revenues in 2022 as compared to 2019 shall be entitled to apply a 20% tax rate through 2025.
Free-trade zone users who have signed with the Colombian government a so-called “legal stability agreement” (agreements basically freezing the tax provisions in place at the time they are signed and thus protecting against future changes in the tax law) will be subject to the tax rate called for in such agreement.
The preferential 20% corporate tax rate also applies to the following: offshore free-trade zones; industrial users of special permanent free-trade zones of port services, industrial users of port services in free zones (“zonas francas”), industrial users of special permanent free zones (“zonas francas”), whose main corporate purpose is refining of petroleum-derived fuels or refining of industrial biofuels; industrial users of certain qualifying logistics services and free zone (“zona franca”) operator users.
V. Research and Development Investments
The tax credit for investments in qualifying research and development is increased from 25% to 30%.
Cost and expenses qualifying for this tax credit cannot be capitalized or claimed as costs or deductions.
VI. Amnesties
The reform includes the following few amnesties:
Late-payment interest: the late payment interest on overdue taxes and customs dues paid on or before June 30, 2023, and on extensions granted by the tax administration on or before that same date is reduced by 50%. Applications for extensions must be filed not later than May 15, 2023.
VAT returns: VAT returns filed up to November 30, 2022, stating an incorrect tax period and thus null and void, may be filed up to April 30, 2023, with no late-filing penalty and no late-payment interest.
Taxpayers may, before May 31, 2023, file returns not filed up to December 31, 2022, paying the corresponding amounts due, with a reduction of 60% of the penalty that would apply after the reductions in Article 640 of the Tax Code and a 60% reduction in the interest rate. The same benefits apply where, in lieu of payment, these taxpayers request a payment agreement with the tax administration before May 31, 2023, and sign such agreement before June 30, 2023.
Taxpayers who have been served notices to file or amend tax returns or to pay taxes assessed, may pay the corresponding amounts on or before June 30, 2023, with a 20% reduction of the amount assessed. The reduction also applies to taxpayers who file for a payment agreement with the tax administration no later than May 15, 2023, and sign the corresponding agreement by June 30, 2023.
Should you have any questions, do not hesitate to contact us.
Through Law 2101 of 2021, the gradual reduction of the weekly working day in Colombia was ordered. This reduction, however, does not decrease or negatively affect workers’ salary and / or acquired rights. Thus, the maximum duration of the ordinary weekly working hours was reduced by six (6), from forty-eight (48) hours per week to forty-two (42). This law allows the employer to implement this reduction in the weekly working hours automatically, that is, to reduce all six (6) hours immediately. However, the law also authorizes employers to implement this reduction gradually, as follows:
Date
Number of Hours to Reduce
Legal Maximum Working Hours
As of July 16, 2023
One (1) hour
47 hours per week
As of July 16, 2024
One (1) hour
46 hours per week
As of July 16, 2025
Two (2) hours
44 hours per week
As of July 16, 2026
Two (2) hours
42 hours per week
According to the above, as of July 16 of the current year, it will be mandatory for employers to modify the duration of the weekly working hours of their workers so that it does not exceed a total of forty-seven (47) hours per week. These hours may be distributed in five (5) or six (6) days a week, according to what is mutually agreed between employers and workers, and in all cases one (1) day of rest per week must be guaranteed. However, Law 2101 establishes the following exceptions:
1. Tasks that imply a high risk to workers health in accordance with the provisions of Decree 2090 of 2003, may be subject to a different maximum weekly working hours if the government decides so. However, to date there is no special regulation in this regard, so at present they must be subject to the maximum ordinary weekly working hours of forty-two (42);
2. Adolescents over the age of fifteen (15) and under seventeen (17) years who have authorization to work, may only perform their work during a maximum daytime shift of six (6) hours a day and thirty hours (30) a week and until 6:00 p.m.;
3. Adolescents of seventeen (17) years of age may only work a maximum of eight (8) hours a day and forty (40) hours a week and until 8:00 p.m.;
4. In case of successive work shifts that allow the company to function without interruption every day of the week, the shifts may not exceed six (6) hours per day and thirty-six (36) hours per week;
5. In case of flexible daily shifts, the forty-two (42) hours may be distributed in a maximum of six (6) days a week, with a minimum of four (4) continuous hours and a maximum of nine (9) hours per day without any surcharge for supplementary work.
In case you have doubts about this matter, do not hesitate to contact us.
The Registry of Beneficial Owners (“RUB”, by its Spanish acronym) is the registry through which corporations or similar structures that do not have legal personality must provide information on their beneficial owners before the Colombian National Tax Authority (DIAN, by its Spanish acronym). In this regard, the DIAN recently issued Resolution 1240 of 2022 by which it modifies the deadline to comply with this reporting obligation, as follows:
The deadline for making this report through the RUB is extended for those already required to comply with this obligation. Thus, although initially the deadline established was September 30, 2022, according to this new resolution the obligation to provide information on beneficial owners may be fulfilled until July 31, 2023.
Corporations or similar structures that do not have legal personality that are created before May 31, 2023 must provide information regarding their beneficial owners no later than July 31, 2023.
Corporations or similar structures that do not have legal personality that are created as of June 1, 2023, must make this initial registration no later than two (2) months following: (i) its registration in the Tax Registry (RUT, by its Spanish acronym), or (ii) their registration in the identification system of structures without legal personality (SIESPJ, by its Spanish acronym), as applicable.
Remember that in the event that this information is not provided, is done erroneously or incompletely or the information previously provided is not updated, the DIAN may impose penalties. If you want more information about this obligation you can consult our blog here or you can contact us.
The Colombian Superintendence of Corporations recently resolved a query regarding the change of domicile of a company, specifically regarding the process of “cross-border re-domiciliation”. In this regard, it stated that this process consists of a company that is domiciled in a certain country, changing its domicile to another country without undergoing a liquidation process or merging or splitting-up with a foreign company. In accordance, it stated that in Colombia, national companies, those which have their domicile in the country, do not have the possibility of changing their domicile to a foreign country without carrying out any of the aforementioned processes. That is, there is no possibility to carry out a cross-border re-domiciliation. Likewise, it is also not possible for a foreign company to change its domicile to Colombia without liquidating, merging or splitting-up.
Following the above, the Superintendence stated that, according to Colombian legislation, it is only possible to carry out the company’s change of domicile within the national territory. However, bear in mind that this decision to change the company’s domicile requires a by-laws reform so it is necessary for the highest corporate body (shareholders’ assembly or meeting of partners) to meet and approve it. Subsequently, the reform must be registered in the Mercantile Registry. For this, it is enough for the companies to register the corresponding minute in which the approval of the decision to change the domicile of the company is recorded before the Chamber of Commerce of the domicile of origin. Finally, the Chamber of Commerce will be in charge of transferring the inscriptions that are in its files to the Chamber of Commerce of the new domicile.
On August 5, 2022, the Colombian Superintendence of Industry and Commerce (SIC) issued Resolution 51804 of 2022, by which it added provisions related to applications for registration and transfer of distinctive signs of entities belonging to the same business group, to its Single Memorandum. In this regard, it establishes that when the authority carries out the examination of trademark registrability, it must take into account whether the precedents that prevent the registration or transfer of said sign belong to the same business group as the applicant, in which case, registration will not be understood as affecting the rights of a third party. (In this regard, bear in mind that there is a business group when: (i) there is a situation of control, that is, the decision-making power of a company depends on the will of another person or persons, and (ii) when there is unity of purpose and direction between members of the business group. Regarding this last requirement, the Colombian Superintendence of Corporations has established that it refers to all companies pursuing the same objective that has been set by the controlling company, without this preventing each of the companies from individually performing their corporate purpose and activities.)
For these cases, the resolution established that applicants have the obligation to inform the superintendence of the business group to which they belong. However, in the event that the applicant is a foreign person, they must provide: (i) a statement signed by the applicant’s legal representative or by any of the legal representatives of the member companies of the business group, in which the existing unity of purpose and direction is exposed, and (ii) a document issued by the competent authority of the country to which the foreign person belongs, which also specifies the existing unity of purpose and direction among the members of the business group. Finally, it’s important to bear in mind that this resolution will come into force on September 1st of the current year.
On July 18, 2022, Decree 1227 of 2022 came into force, which modifies and adds some provisions on teleworking. In this regard, bear in mind that teleworking is a form of work organization that consists of the performance of activities by the worker using Information and Communication Technologies “ICT” as support. Thus, the contact between the worker and the employer occurs through ICT without requiring the physical presence of the worker in a specific place of work. Additionally, there are three types of teleworkers: (i) autonomous, when teleworkers use their own home or a different place agreed upon with the employer and only sporadically go to the company; (ii) mobile, when they do not have an established workplace and use mobile devices to perform their functions; and (iii) supplementary, when depending on the needs of the service, they work two (2) or three (3) days a week at home and the other days they work in the company. With this in mind, below we detail the modifications that you must take into account as an employer if you want to implement this type of employment contract in your company in Colombia:
In the employment contract employers must indicate the necessary conditions for the performance of the functions assigned to the worker, the technological means required, the description of the equipment and computer programs and the responsibilities regarding the custody of work items and restrictions and responsibilities that the breaches of these conditions entail. Additionally, it must indicate the modality of telework that will be performed, the weekly working schedule that teleworkers will have, the security measures that they must know and comply with and the description of the minimum requirements in terms of ergonomics and technology that the workstation must comply with. Finally, the employment contract must indicate the procedure that teleworkers must follow to return the equipment that was delivered to them once the telework or contract ends.
The previous requirement to include in the Internal Work Regulations (RIT, by its Spanish acronym) the special conditions for teleworking to operate and the provisions related to the proper use of equipment, programs and information management applicable to these workers, has been eliminated.
The following obligations are established for employers: (i) affiliate teleworkers to the Labor Risk System and inform the workers’ compensation administrators (ARL, by its Spanish acronym) about the chosen telework modality, the weekly working schedule and the corresponding risk class. Additionally, for supplementary and autonomous teleworking, the chosen workplace for the teleworker to carry out their functions must be reported and for mobile telework, the conditions in which the contracted work will be performed; (ii) in the Annual Work Plan of the Occupational Health and Safety Management System (SG-SST, by its Spanish acronym) all the actions considered necessary to identify and control the dangers and risks of the company’s teleworkers must be implemented; (iii) order periodic medical evaluations that may be performed by telemedicine; (iv) adopt and publish a telework policy in which the terms, characteristics and conditions of teleworking are regulated in accordance with the needs and particularities of the service; and (v) inform the Colombian Ministry of Labor about the number of teleworkers that their company has.
Towards teleworkers, employers have the following obligations: (i) inform them of the communication mechanisms they have to report any updates related to the performance of telework, work accidents and occupational diseases; (ii) provide them with adequate work equipment and tools, ensuring that they receive training and information on the risks arising from their use. However, this does not prevent teleworkers from using their own equipment and work tools; (iii) respect human dignity, the right to privacy and access to information of teleworkers; (iv) guarantee the right to disconnect from work and protect the mental health and emotional balance of teleworkers; (v) train them in advance, virtually or in person, in terms of mental health care, ergonomic or biomechanical risk factors, use and appropriation of ICT and digital security; (vi) inform them about the restrictions on the use of computer equipment and programs, protection of personal data, intellectual property, information security and penalties for non-compliance with these provisions.
The possibility that the parties retain the right to reversibility of teleworking is established. That is, the parties may have the power to request at any time the definitive return of teleworkers to perform their functions in person at the company. However, this will depend on what the parties agree to in the employment contract and the possibilities that the employer has to locate the worker within their company.
This decree states that the parties must seek flexibility regarding the time and mode of performance of the teleworker’s functions, provided that the established weekly working schedule is met. For this, the parties will be able to agree on schemes of compliance and monitoring of functions. However, this flexibility cannot affect the effective rest of teleworkers or their right to disconnect from work.
The possibility that the parties agree that the teleworker use their own work equipment and tools is established. In this case, teleworkers must keep their equipment and tools in good functional condition to fulfill their functions and employers must refrain from subsequently requesting equipment other than those agreed upon. The parties can agree on a compensatory amount for the use of these tools, but it is NOT mandatory.
The parties can agree on a monthly aid to compensate for the teleworker’s expenses on Internet, land and mobile telephony and energy. This aid is NOT mandatory and will depend on the will of the parties.
The Colombian Superintendence of Companies recently reminded the public that, despite the fact that the health emergency has ended, Decree 398 of 2020 is still in force. Therefore, it is possible for corporations to continue to hold their partners’ meetings, general assembly of shareholders or meetings of the board of directors in a non-face-to-face manner and complying with the requirements established both in the law and in the company’s bylaws. In this regard, bear in mind that in order for non-face-to-face meetings to be held it is necessary that all members or partners participating in the meeting be able to deliberate or decide by simultaneous or successive communication, in accordance with the provisions of article 19 of Law 222 of 1995.
Additionally, the aforementioned Decree 398 establishes that the company’s legal representative must record in the minutes of the meeting on the continuity of the necessary quorum throughout the meeting. That is, they must certify that during the meeting the necessary number of participants were present to deliberate and decide in accordance with what is established in the law or in the bylaws of each company. Likewise, they must verify the identity of the participants to guarantee that they are in fact the partners, shareholders, or members of the board of directors or their proxies, as appropriate.
Finally, this decree specifies that legal and bylaw provisions on summons, quorum and majorities for in-person meetings are applicable to partners’ or shareholders’ meetings or the meetings of the board of directors held in a non-face-to-face or mixed manner (which allow the presence of participants both physically and virtually).
Contact us in case you require counsel regarding this or any other issue affecting your company.
According to article 306 of the Colombian Labor Code, employers have the obligation to pay their employees a social benefit called “Legal Bonus” corresponding to 30 days of salary per year, that is, for each year worked, 30 days of salary must be recognized. This Legal Bonus must be recognized in two payments: half by June 30th at the latest and the other half no later than the first twenty days of December. The recognition of this payment must be made for the entire semester worked or proportional to the time worked.
In addition, bear in mind that all workers who are bound by an employment contract are entitled to the Legal Bonus, including domestic workers, family service drivers, daily workers or farm workers and, in general, those who are considered as dependent workers.
In accordance with the above, by June 30th at the latest, you will have the obligation to pay an amount equivalent to half of the monthly salary received by your workers for those that began working on or before January 1st. For workers who began after January 1st, payment must be made in proportion to the time worked. In case you do not make the corresponding payment before this date, you must pay, as compensation, a sum equal to the last daily salary for each day of delay, up to 24 months. If after 24 months you have not yet made the payment, you must recognize default interests[1].
In case you have doubts about this or any other work obligation, do not hesitate to contact us.
