The economic crisis caused by COVID-19 can be a source of opportunities to restructure companies and thus prepare to compete in the post-pandemic economy.
A tax opportunity is found in education aid not constituting salary. In effect, companies may deduct from their income the payments they allocate to total or partial scholarships and forgivable credits for education for the benefit of their employees or members of their family nucleus. Furthermore, such payments will not be considered indirect payments made to the worker.
In this way, the company will be able to benefit its employees and their families with education, and reduce its income and the corresponding tax. In turn, the employee will not be subject to withholdings at source or income taxes on the value of the aid, thereby generating a benefit at the level of his net income.
From the labor point of view, these payments may be agreed as an extra-legal education aid and not constitutive of salary. Consequently, the company will not pay parafiscal contributions on such aid (ICBF, SENA and Family Compensation Fund). Nor will it pay contributions to the social security system (Pension, Health and Occupational Risks) to the extent that the aid, added to the other existing non-salary recognitions, does not exceed 40% of the worker’s total income (salary and non-salary payments). Because it does not constitute a salary, the employee will not pay contributions to the social security system (Pension and Health) on the aid, with the same limitation of 40% mentioned above.
Any collateral effect of the education aid not constituting a salary (eg, which will not be the basis for calculating contributions to the mandatory pension system, or social benefits, or vacations, or compensation for termination of the employment contract) may be compensated through company contributions to a worker’s voluntary pension fund.
These contributions also offer tax incentives for both the company and the employee, since the company may deduct contributions from income up to the annual limit of 3,800 UVT (Year 2020 = $ 135,307,000) per employee; and this will not be subject to withholdings at source or income taxes, up to an amount that added to the value of the contributions in AFC Accounts does not exceed 30% of the year’s labor income and up to a maximum annual amount of 3,800 UVT ( Year 2020 = $ 135,307,000).
These contributions may also be agreed as non-salary assistance, so the company will not pay parafiscal contributions or the social security system on them; and the employee will not pay contributions to the social security system either. In both cases (company and employee) with the same limitation of 40% mentioned above.
Each company will have to modulate these incentives to align them with its purpose and thus avoid falling into abuses in tax matters. For this, in addition to the requirements and conditions that must be met in each case to access them, keep in mind that their purpose is not to reduce the taxation associated with the existing payroll to the detriment of the Treasury, but to contribute to promoting the generation of employment, increase the purchasing power of the population and reduce poverty. All aimed at the reactivation of the post-pandemic economy.
By Ignacio Vélez , partner of the Practice Group Tax & amp; Customs of Gómez-Pinzón Abogados.