Formal Employment Support Program (PAEF)

1. Who can apply?

Legal entities may apply to obtain this benefit if they: 

• Have been incorporated before January 1, 2020. Companies created in 2018 or before must have a commercial registry renewed in 2019. Non-Profit Entities (ESAL) do not have to comply with this requirement but must provide a copy of the RUT showing their status as a taxpayer of the Special Tax Regime.
• Demonstrate a decrease of 20% or more of their income, by means of a certification signed by the legal representative and the statutory auditor, or by a public accountant when they are not required to have a statutory auditor.
• Have not received this contribution on 3 occasions. It may only be requested once a month, in the months of May, June and July 2020.
• Have not been obliged to reimburse the contribution for: (i) not having used the contribution to pay the salaries of the workers listed in the application; (ii) not complying with the requirements for their application; and (iii) having submitted false documents to obtain the contribution.

2. What is the amount of the contribution?

The amount of the contribution per worker will be equivalent to 40% of the value of the SMLMV, i.e.: $351,000 pesos.

To determine the total amount of the contribution, this amount must be multiplied by the total number of employees, considering the following:

• The number of employees will correspond to the lower value between: (i) the number of employees reported in the PILA for the February 2020 contribution period and (ii) the number of workers that the beneficiary intends to protect with this measure.
• Employees are understood as dependent workers for whom the employer contributes to the General Social Security System through the PILA, with an IBC of at least 1 SMLMV, and to whom the novelty of temporary suspension or unpaid leave (SLN) has not been applied in the month of application.

3. How can potential beneficiaries apply?

Beneficiaries must submit the following documents to the financial institution where they have a deposit product:

• Application signed by the Legal Representative.
• Certificate of Existence and Legal Representation of the company.
• Certification of the fiscal auditor or public accountant that demonstrates the decrease in income.
• When the contribution is requested for the second or third time, the following must be provided: (i) Certification of the tax auditor or public accountant of the correct use of the resources previously received and (ii) certification of the financial entity of the correct restitution of the resources when there is a surplus between the contribution received and the one effectively used.

4. What is the role of the UGPP?

The Pension and Parafiscal Management Unit (UGPP) will oversee:

• Verifying compliance with the requirements to access the contribution in exercise of its oversight functions carried out during 2021.
• Keeping a record of the beneficiaries and the number of jobs it intends to protect.
• Verify that the beneficiary has not applied to other financial entities for the same monthly contribution.
• Advance the coercive collection process against beneficiaries who have received one or more contributions without fulfilling the requirements.
• Verify the proper use of the contributions received by the company for the payment of its payroll, as well as the restitution of the contributions when there is a surplus between the contribution received and the amount used.

5. Final considerations

• The UGPP is working on an additional form to submit the application for PAEF support, which should be issued in the next few days.
• The Ministry of Finance and Public Credit shall regulate the maximum periods and deadlines for compliance with the requirements and delivery of documents. To date, the ABC issued by the Ministry of Finance indicates that the financial system is expected to receive the documentation as of May 18, 2020 and the delivery of the first contribution by the end of May.
• It is up to the Ministry of Finance to regulate the method of calculating the decrease in income. However, the ABC issued by the entity states that: (i) the comparison must be made between the month of April 2020 and the previous year; (ii) for companies created after April 2019, it must be made with the income of January and February 2019, with respect to the same months in the previous year.
• This benefit initially only applies to legal entities that comply with the conditions described above. However, some media have indicated that the Minister of Finance, Alberto Carrasquilla, will extend this program to individuals who have more than 3 employees, so we will have to wait for the regulations regarding this.
• The resources received by the PAEF are unseizable and will be used exclusively for the payment of the salaries of the employees listed by the beneficiary in its application, under penalty of being subject to tax and criminal penalties. However, the employer may continue to make the discounts previously authorized by the employee.
• If the company sees its personnel reduced due to the termination of contracts, and this generates a surplus between the amounts received and what is effectively used, these resources must be returned, in the manner indicated by the Ministry of Finance and Public Credit in the resolution issued for such purpose.
• Transfers of funds from the financial entities to the beneficiaries shall be exempt from the tax on financial movements. Likewise, the commission or service charged by the financial entities for the dispersion of the resources will be excluded from VAT.
• Companies that have received funds from the payroll credit lines announced by the National Government may also apply for the PAEF state contribution. However, in these cases, the total amount of both resources may not exceed the total value of the labor obligations payable by such beneficiary.