BICs and taxes

The pandemic generated by Covid-19 has demonstrated the importance of the principle of solidarity in the economic ecosystem. Many companies in Colombia have refocused their priorities to protect stakeholders other than their owners, namely the community, their employees, their suppliers and their contractors, among others. Having already declared the second economic emergency, and with the President having the power to create and modify existing taxes (Political Constitution, art. 215), it is important to create a fiscal stimulus regime that allows companies to develop their philanthropic activity and stimulates the creation of "benefit and collective interest" companies (BIC). Once this juncture has passed, such a regime may be submitted to Congress for discussion so that it may be adopted as permanent legislation.

The possibility that, in Colombia, any commercial company may adopt the status of BIC exists since the issuance of Law 1901 of June 18, 2018. Such regulation indicates that such companies, "in addition to the benefit and interest of their shareholders, shall act in the interest of the community and the environment".

In order to adopt BIC status, the company must incorporate in its corporate purpose -at least- one activity for each of the five dimensions established in Regulatory Decree 2046 of 2019, namely: business model (acquiring goods or contracting services from local companies, implementing fair trade practices); corporate governance (creating manuals for employees to know the vision and values of the company, expanding diversity in the boards of directors and management team, disclosing financial statements to workers); labor practices (reasonable remuneration, training subsidies, share ownership democratization plans for workers, flexible working hours and compensation for workers); environmental practices (environmental audits for proper use of energy, water and waste, monitoring of gas emissions, environmentally sustainable means of transportation); and community practices (job options for unemployed people, social volunteer activities).

The adoption of this BIC status implies certain obligations for the entrepreneur, such as adopting the corresponding statutory reform, submitting to the highest corporate body the report (made in accordance with an independent standard) on the impact of the management of the respective company and adapting corporate policies to the collective interests. Although Decree 2046/2019 brings some incentives for BICs (preferential portfolio in terms of industrial property, preferential access to credit lines and tax treatment of profits distributed in shares to workers), these turn out to be insufficient to really stimulate a massive refocus towards corporate solidarity.

The new regime to be created should have tax benefits greater than those existing today for companies that adopt BIC status on: (i) donations made to non-profit entities and vulnerable communities; (ii) the hiring of the structurally unemployed population (reinserted, ex-prisoners, homeless individuals, among others);

(iii) payments made to employees who telework; (iv) food and education plans for workers and their families; (v) the acquisition, adaptation and installation of equipment and appliances that generate environmental benefits in electricity, water and atmospheric gas emissions; (vi) payments made to employees who dedicate their time to works of interest to the community; and (vii) the acquisition of goods and services from local suppliers.

In a country like Colombia, companies often replace the State in the fulfillment of certain essential purposes, such as serving the community and promoting general prosperity. For this reason, companies should be fiscally empowered to adopt BIC status and generate even more benefits for the community.