Join our webinar on Legal Compliance of Cryptoassets: Essential Knowledge for Colombian Companies

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.

Inscription:

To join our webinar, simply go to https://eventograma.com/compliance-legal-de-criptoactivos/ and complete the registration form. Registration is free, but space is limited, so be sure to reserve your spot as soon as possible.

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!

Tax reform: is the taxation of multinationals disproportionate?

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Jaime G. Béndiksen, founder of BéndiksenLaw, affirms that multinational corporations have maintained, for many years, important investments in Colombia, contributing to the financing of the expenses and investments of the State, paying taxes and contributing to the economic growth and development of the country. He warns that with the Tax Reform Law 2277 of 2022 this will surely change.

For this graduate in Law from the Autonomous University of Mexico, with a master’s degree in Comparative Jurisprudence from the University of New York and a doctorate in Law, the tax burden currently borne by multinational companies, both affiliates or subsidiaries of national companies and foreign parent companies, and the additional charges that the 2022 tax reform imposes on them, will surely impact their operations.

He reminds readers that the income rate paid by national companies in Colombia is 35%. In his words, “it’s a horrendous percentage.”

He notes that the OECD last year analyzed tax rates in a sample of 117 countries. Colombia is one of the countries with the highest rates in said sample. Other countries’ average fee is 20%.

Ours is supremely high. The taxation of multinational companies was already disproportionate, a situation that is aggravated by the additional burdens imposed by the tax reform.

He explains that, taken together and simultaneously, all the taxes set forth by the tax reform can have a cascading effect that translates into a confiscatory effect, prohibited by our Constitution:

This will discourage investment and saving. In addition, it could have adverse repercussions on economic growth and job creation in the country.

Although some of the purposes of the tax reform, such as the protection of the environment, the promotion of health or the reduction of social inequality, are laudable, this does not justify that the reform neglects or completely ignores the constitutional principles of taxation.

The positive of the tax reform for national companies and foreign entities

A positive point of the tax reform, as Béndiksen points out, is article 240 on the reduction of rates for certain taxpayers and the reduction of rates for national companies and foreign legal entities.​

There is a reduced rate of 15% for 10 years for certain new projects or remodeling or expansion of existing projects in hotels, ecotourism theme parks and / or agrotourism.​

Similarly, a reduced rate of 15% for publishing companies, legal persons incorporated in Colombia, whose economic activity and corporate purpose is exclusively book publishing under the terms of Law 98 of 1993.

Rate increase as a negative point

For Béndiksen, it is very serious that the tax reform presents an increase in income tax rates for national companies and foreign legal entities:

A rate of 40% for financial institutions, insurance and reinsurance entities, stock brokerage firms, stock market infrastructure providers and others. For the periods 2023 to 2027, the taxable income will be the same or greater than 120,000 UVT, with advance payment of 100% in two equal installments.

On the other hand, there are rates of 40% or 45% for the extraction of hard coal (stone coal) and extraction of lignite coal. This is a “taxable income equal to or greater than 50,000 UVT in an aggregate manner with a related parties”.

Watch the webinar (in Spanish) here

If you want to know more, do not hesitate to contact us

Podcast: Why does the Labor Reform not cover contractors and state workers?

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Did you know that the Labor Reform does not require of the State the same obligations that it imposes on private companies, such as the termination of contracts for the provision of services or the payment of overtime and night and Sunday surcharges?


According to the lawyer specialized in corporate law, Sebastián Béndiksen, the Labor Reform imposes obligations on the private sector that the government itself is not willing to comply with.

Other aspects to consider are the legal effects that this reform will bring to the relationship between employers and workers, including the Right to Strike in the provision of essential public services, the types of contracts that may be signed according to the needs of companies and the stability of formal employment.

Sebastián Béndiksen, is a lawyer and Magister of Laws from Universidad de los Andes, Managing Partner of BéndiksenLaw.

Listen the podcast here (in Spanish):

Remember, at BendiksenLaw, we are here to counsel you and provide the best legal representation for any labor-related matters you may face. Feel free to contact us!

Labor Reform in Colombia: 6 Implications for Companies

The Labor Reform in Colombia is shaping up to be a crucial issue that will have a significant impact on the relationship between companies and their employees in the country. In light of this perspective, BéndiksenLaw, a law firm specialized in counsel for national and multinational companies, has conducted an informative webinar where the most relevant aspects of this reform were analyzed, revealing six key elements that will affect labor relations in companies.

1. Higher labor costs: One of the direct consequences of labor reform, according to Sebastián Béndiksen, lawyer and master of law from Universidad de los Andes and managing partner at BéndiksenLaw, will be the increase in labor costs for companies. All labor surcharges and indemnities will be affected, as well as payments associated with apprenticeship contracts. Additionally, the extension of paternity leave will also impact the operational costs of companies. An important change is the modification in the night shift surcharge payment schedule, which will start from 6 p.m. instead of 9 p.m., implying an additional cost in companies’ operations. There will also be limitations on working hours and the total time a worker can work, which will require some companies to hire new personnel to cover vacant shifts.

2. Greater job stability: The labor reform aims to provide greater job stability for workers, which will imply changes in the way companies hire. The general rule will be indefinite-term employment contracts, granting greater stability to employees. However, this will also entail higher costs for employers. Furthermore, stricter restrictions will be imposed on dismissals, including the prohibition of arbitrary or discriminatory dismissals, in which case workers will have the right to request reinstatement.

3. Limitation on outsourcing: Another relevant aspect of labor reform is the limitation on outsourcing and the hiring of temporary services. Once the provision of temporary services, which will have a maximum duration of one year, is completed, it will not be possible to extend the contract or hire with a different temporary services company. Additionally, in case of disputes, there is a possibility that the company hiring the services will be considered the true employer of the temporary workers, despite the outsourcing. This means that companies outsourcing services will have to assume greater responsibility and be prepared to face possible legal disputes questioning their role as employers.

4. Review of internal policies: Implementing the Labor Reform will require all companies to review their current contracts and internal regulations. It will be necessary to adjust dismissal processes and include aspects related to inclusion and labor rights in companies’ internal policies. For example, special attention must be given to the non-discrimination of non-binary individuals and the protection of those who change their gender identity. Additionally, almost any form of inappropriate behavior will be considered workplace violence, and companies will be required to offer flexible schedules in certain cases. These aspects, which are currently not present in most company regulations, must be incorporated to comply with updated labor regulations.

5. Job formalization: The Labor Reform includes a chapter dedicated to the formalization of jobs in various areas, such as digital platforms, agricultural work, employment for migrants, professional athletes, and domestic workers. This measure aims to promote the formalization of different economic sectors and encourage compliance with labor and social security obligations.

6. Strengthening of labor unions: The Labor Reform also aims to strengthen workers’ associations and labor unions, granting them greater facilities for their creation and operation. It is expected to be easier to establish unions and carry out strikes, with fewer opportunities for companies to declare strikes as illegal. Additionally, the consequences for those participating in illegal strikes will be reduced, and their dismissal is prohibited.

Despite the progress represented by the Labor Reform in terms of formalization and worker protection, BéndiksenLaw’s lawyers express concern that the public sector is not included in these modifications. They consider it essential to address abuses in the hiring of services in the public sector. Furthermore, the need to provide support and subsidies to companies during the transition process towards labor formalization, especially for small and medium-sized enterprises that will face a significant burden, is emphasized.

The Labor Reform in Colombia presents significant challenges and opportunities for companies. It is essential for companies to be informed and actively participate in the process of debating the legislation. There are still four pending debates in Congress, so it is crucial to stay attentive, communicate with representatives, and exert social pressure to ensure that the interests and needs of companies are taken into account in this reform. BéndiksenLaw positions itself as a source of specialized advice for companies seeking to adapt to the new legal and labor requirements.

Remember that at BéndiksenLaw, you will find the support and counsel you need to successfully navigate labor changes in Colombia. Do not hesitate to contact us for more information and to protect the interests of your company with this new labor regulation!

Watch the webinar (in Spanish)

To download the presentation (in Spanish) click here

Julian Molina, Former Superintendent, Joins BéndiksenLaw Colombia

In order to provide greater benefits and offer new services to our clients, we are proud to announce that Mr. Julián Molina, former Superintendent of Family Subsidy, joins our team. Throughout his more than 15 years of professional career, Mr. Molina has accumulated extensive experience in different branches of public law as an advisor and manager. We trust that him joining us will allow us to design solid strategies for the representation and protection of the interests and businesses of our clients against government actions, advise them in the processes of obtaining licenses, permits, concessions and other required authorizations from the national and territorial authorities and provide them with comprehensive legal counsel in public procurement processes. Additionally, Mr. Molina will be in charge of monitoring and identifying important policies at the national or local level that may impact our clients’ businesses, providing them with early warning regarding bills and other regulations relevant to their business, as well as impacting and altering these new regulations to protect our clients’ rights and interests. We present his résumé below:

Education

Mr. Molina is a lawyer graduated from Universidad La Gran Colombia (2005), Specialist in Public Procurement from La Sabana University (2010) and Master in Constitutional Law from La Sabana University (2019). Additionally, Mr. Molina completed a doctoral practice course at the University of Salamanca in Spain (2022) and is currently pursuing his Doctorate in Law at the Sergio Arboleda University.

Experience

Mr. Molina began his career as Ad-Honorem Judicial Assistant in the Council of State’s IV Section, in the office of the State Councilor Dr. María Inés Ortiz Barbosa (2005). Later he worked as Advisor-Attornet in the Administrative and Financial Area (2006) and as Attorney in Charge of the Petitions, Claims and Complaints Office (2008) of the Surveillance and Security Fund of Bogotá (FVS). Subsequently, he served as Substantiating Advisor in the Second Section of the Administrative Court 17 (2009), External Contractor Lawyer in the Surveillance and Security Fund of Bogotá (2010), Coordinator of the Legislative Work Unit in Colombia’s Senate (2010), Legal Coordinator in the Presidency of the Senate of Colombia (2016), Advisor to the Office of the Public Ombudsman (2017) and Head of the Office at the Superintendence of Industry and Commerce (2018). Finally, he served as Superintendent in the Superintendence of Family Subsidy from 2020 to 2022.

Practice Areas

Mr. Molina has extensive experience in Public Law, especially in matters of Public Procurement and Constitutional Law. He has coordinated the projection, review and follow-up of draft reform acts of the Colombian constitution, statutory, organic, framework and ordinary laws, has studied the development and effectiveness of public policies and actions of the different national levels and has provided his opinion on the legislative process, the review of administrative and contractual acts, the constitutionality of bills and on disciplinary, labor, constitutional and administrative law issues. Additionally, he has provided legal support in the approval and discussion of laws, as well as in the realization of political control debates and has advised special electoral-type legislative events. He has drafted rulings that resolve actions of nullity, nullity and restoration of rights in administrative labor matters and substantiation of interlocutory orders, as well as administrative sanctioning acts. In terms of Public Procurement, he has planned and structured Terms of Reference, Specifications, selection of bidders through evaluation and qualification of proposals in accordance with Laws 80 of 1993, 1150 of 2008 and their respective Regulatory Decrees.

Finally, in his performance as Superintendent, he exercised functions of inspection, surveillance and control of the family subsidy system, issued administrative acts of competence of the entity, including appeal decisions in sanctioning processes, intervention and injunctions and coordinated the administrative and regulatory modernization of the entity, with a focus on transparency and citizen participation.

Publications

Mr. Molina is the author of the article “Annotated Basic Legislation of the Family Subsidy System”. Superintendence of Family Subsidy and Ibero-American Center for Social Studies and Training of the Ibero-American Social Security Organization – OISS.  Editorial Tirant lo Blanch, published in 2022.

Memberships

Founding Member of the International Association of Public Law – ICON-S Colombia Chapter (2018).

In case you require legal counsel, do not hesitate to contact us.

Main Points of Colombia’s Latest Tax Reform

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.
DAPARLrefers to permanent differences set forth in the law that increase taxable income.
INCRNGOrefers to income that is neither taxable income nor capital gains income and which affects book profits.
VIMPPis the income determined under the equity method for the corresponding tax year.
VNGOthis is the net value of capital gains income affecting book profits.  
REstands 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
Ccompensation 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:

  1. If the dividends originate from earnings that have not been previously taxed, then they will be taxed at the general 35% corporate tax rate.
  2. 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.