In Decree 639 of May 8, 2020, the National Government created the Formal Employment Support Program, which was expanded by Decree 677 of May 19, 2020 under the framework of the State of Economic Emergency. This measure seeks to alleviate companies’ lack of cash flow by establishing a subsidy for the payment of salaries.
Any large, medium, or small company including individuals, consortiums, or temporary unions that have had a 20% reduction in their turnover or sales will be able to access this aid. The decrease in income or sales must be determined by comparing the variation between two periods. For May’s subsidy, April 2019 and April 2020 should be compared. For June’s subsidy, May 2019 and May 2020 should be compared. Finally, for July’s, June 2019 and June 2020 should be compared. For companies that were created after April 2019, a comparison will be made against revenue from January and February 2020, before COVID-19 reached Colombia.
Additionally, the decrease in income must be certified by a public accountant or statutory auditor. The company requesting the subsidy must have its payroll setup via a bank, and if not, it must certify that it has paid social security through the PILA form.
In order to access the subsidy, the application must be submitted to the financial institution in which the company holds a bank account. In the case that the company has accounts with several financial entities, it must submit the request to only one of them.
Furthermore, with the goal to reactivate the economy, Decree 962 of 2020 established the VAT exemption for certain goods that are sold within Colombia on June 19, July 3, and July 19 of this year.
The following goods are included, under the condition that the sale price per unit is equal to or less than the respective tax value units (UVT, as per its Spanish acronym) listed, not including VAT: clothing and accessories, twenty (20) UVT; household appliances and sporting goods, eighty (80) UVT; toys and games, ten (10) UVT; school supplies, five (5) UVT; agricultural goods and supplies, eighty (80) UVT.
To access this exemption, several requirements must be met. First, the person liable to pay VAT can only sell retail goods physically in Colombia, directly to a natural person who is the final consumer. Likewise, an invoice or equivalent document must be issued on the day of the final sale via the current invoicing systems, where the final consumer must be identified. As a third requirement, the goods must be delivered to the final consumer within the following two weeks, starting from the date on which the invoice or equivalent document was issued.
It is also important to mention that payments can only be made with debit cards, credit cards, and other electronic payment mechanisms. The final consumer can purchase up to three units of the same good, and vendors of exempt goods must decrease the public sale value to reflect the VAT exemption.
Legal Measures for the Industry 4.0 sector
In addition to the measures above, in the last week, Article 154 of Law 1955 of 2019 (PND) was established, which mandated that online video on demand services must offer Colombian users an easily accessible section of audiovisual content made in Colombia.
The Article also establishes that the video service provider must use the available technical mechanisms to incorporate this section in its platform as it sees fit—according to its particular design and how it chooses to present the content to its users—as well as determine whether the user accesses the service in Colombia.
The video on demand service provider must also identify the audiovisual content made in Colombia, in accordance with the available technical mechanisms. All these provisions must be implemented within 9 months of the issuance of the regulations.