IBC regulation of self-employed workers: a clear example of legislative negligence

Regulatory context of the IBC of self-employed workers.

Let us recall that Article 244 of Law 1955 of 2019 - National Development Plan 2018-2022 "Pact for Colombia, Pact for Equity" - was declared unenforceable by the Constitutional Court in Ruling C-068 of 2020 for violation of the principle of unity of matter, but the effects of such declaration were deferred until the expiration of the following two ordinary legislatures, i.e. until June 20, 2022, in accordance with the legislative calendar of the 2018 - 2022 quadrennium, in order for the Congress of the Republic to regulate the matter and thus avoid affecting constitutional rights and principles. In spite of the above, and after 2 years of the ruling, the legislature did not do the same.

Likewise, the previous applicable rule, i.e., Article 135 of Law 1753 of 2015 - National Development Plan 2014-2018 "All for a new country" - had been declared unenforceable by judgment C-219 of 2019 for the same reason.

Consequently, since June 21, 2022 the different self-employed workers (self-employed, with service provision contract and those with contract other than service provision contract) had no clarity regarding the calculation of their IBC for purposes of payment of contributions to the General System of Integral Social Security (SGSSI), nor regarding the term to make the payment since such regulations were the ones that introduced the payment month in arrears since previously it was made month in advance.

The situation is even more worrisome if we take into account that the Pension and Parafiscal Management Unit (UGPP) establishes heavy penalties for those contributors who present omissions or inaccuracies in the payment of their contributions, prior compliance with an inspection process, of up to 200% of the omitted or inaccurate amounts, without taking into account the moratory interests caused until the date of payment.

In view of such legal uncertainty, on August 2, 2022, the Ministries of Finance and Public Credit, Labor and Health and Social Protection undertook the task of issuing a unified concept to clarify the matter, or that was the idea.

Unified Concept: more questions than answers.

In the aforementioned concept, the ministerial portfolios made a brief review of the regulations that have governed the IBC of self-employed workers, concluding that in order not to affect the fundamental right to Social Security that these workers have, and thus allow the fulfillment of their contribution obligations, it was necessary to apply the figure of reviviscence, that is, to bring to legal life norms that despite being repealed or without effect regulate the matter under discussion, avoiding or reducing the adverse consequences due to legal insecurity that would be produced by the normative vacuum in the legal system.

Thus, then, they pointed out that for the specific case operated the reviviscence of Article 18 of Law 1122 of 2007, a provision repealed by Law 1753 of 2015, which established the following:

"The independent contractors for the rendering of services shall contribute to the General Social Security Health System the mandatory percentage for health on the basis of a maximum contribution of 40% of the monthly value of the contract. The contractor may authorize the contracting entity to discount and pay the contribution without this generating an employment relationship.

For the other contracts and types of income, the National Government shall regulate a system of presumption of income based on the information on the economic activities, the region of operation, the stability and seasonality of the income.

PARAGRAPH: When the contractor can prove that he is already contributing over the maximum contribution ceiling, the provisions of this article shall not be applicable to him."

Likewise, and considering that the rule in question only regulates contributions to the Social Security Health System, they indicated that for pension and labor risk contributions, the general rules that determine the calculation of the IBC would apply, being Article 19 of Law 100 of 1993 and Article 17 of Decree Law 1295 of 1994.

Finally, they indicated that these contributions should continue to be made month in arrears, in accordance with the provisions of the first subsection of Article 3.2.7.6. of Decree 780 of 2016.

Although the intention with all the above was to clarify how all self-employed workers should make the calculation of the IBC, and this was made clear by the Minister of Labor, Angel Custodio Cabrera Baez, in his various interventions before the media, the reality is that many fundamental aspects on the subject were omitted, and mistakes were made in others, which in the end left more doubts than answers because.

• The article on which the reviviscence operated only regulates what refers to the IBC of self-employed workers for rendering services, but nothing is said about the IBC of self-employed workers on their own account or with a contract other than rendering services.

• The payment month in arrears of the contributions indicated in article 3.2.7.6. and article 2.2.1.1.1.1.7 of Decree 780 of 2016 should not be in force since this was established by Decree 1273 of 2018, on which, as the Ministry of Labor and the Ministry of Health had indicated in numerous concepts , the legal figure of the decay of the administrative act operated since the rule that served as its support (article 135 of Law 1753 of 2015) had disappeared, thus losing its enforceability. Thus, the rule that would come to regulate the issue would be Article 35 of Decree 1406 of 1999, partially compiled in Article 2.2.1.1.1.1.7 of Decree 780 of 2016, which states that self-employed workers should make the payment of their contributions for monthly periods and in advance.

• Es importante resaltar, además, que lo señalado en este concepto solo constituye una solución temporal, pues aún es necesario que el legislativo emita una ley que regule el asunto de manera definitiva.

Decree 1601 of 2022: resolving inconclusive answers

Coincidentally, on August 5, the Ministry of Health issued Decree 1601 of 2022 by which it regulated the presumption of income system for self-employed workers or workers with a contract other than the provision of services, a pending task since the issuance of Article 33 of Law 1438 of 2011, thus complying with Ruling 3120 of May 5, 2022 of the Council of State.

Likewise, it resumed the scheme of presumption of costs established in Resolutions 1400 of 2019 and 209 of 2020 of the UGPP which had been left without effect due to the unenforceability of Article 244 of Law 1955 of 2019.

Thus, the Decree in question established:

1. The presumption of the obligation to the Social Security Health System for those self-employed workers on their own account or with a contract other than the rendering of services with net income equal to or higher than one (1) Minimum Legal Monthly Wage in Force (SMLMV).
2. The procedure for the determination of the IBC of these workers, being this: (i) calculate the gross income; (ii) deduct the costs associated to the economic activity in accordance with the provisions of article 107 and following of the Tax Statute (ET) and other applicable rules, or the application of the percentage of costs indicated in the scheme of presumption of costs; and (iii) calculate and make the contribution to the SGSSI.
3. The term for the payment of contributions, being this due month.

There is no doubt that this Decree was necessary and essential in order to duly regulate the IBC of self-employed workers, since the unified concept mentioned above had left many answers unresolved. However, it is necessary to highlight at this point that such legal uncertainty could have been avoided if the Congress of the Republic in compliance with its functions had legislated on the matter as it should have, which it did not do in more than 2 years if we take into account that since the declaration of unenforceability of Article 135 of Law 1753 of 2015 this scenario was seen coming. The above shows the lack of diligence and total disinterest on the part of the Congress to regulate such an important matter that has been the subject of so many controversies.

Additionally, the question arises as to whether in fact the present regulation fully complies with the provisions of the ruling issued by the Council of State, since according to the provisions of paragraph 2 of Article 204 of Law 100 of 1993, the income presumption system issued by the National Government for the calculation of the IBC of independent workers should take into account: the level of education, work experience, economic activities, region of operation and assets of the individuals; which in the present case is not complied with since to a greater extent what was done was to compile the aforementioned cost presumption system.

And now, after all that has been said above, it remains to resolve the question ...

If I am self-employed, how do I calculate my IBC for the payment of SGSSI contributions?

Well, nowadays you should take into account the following:

1. Self-employed workers with a service contract: They must make their contributions on a maximum basis of 40% of the monthly value of the contract, as opposed to before, which was on a minimum basis with respect to the same percentage. As regards the term for making the payment, and in accordance with the provisions of the unified concept, this must continue to be made month in arrears, without prejudice to the aforementioned with respect to the advance payment.
2. Self-employed workers on their own account or with contracts other than the rendering of services: Those who receive net income equal to or greater than one (1) SMLMV shall be obliged to contribute. For the calculation of their IBC they must deduct from their gross income the costs associated to their activity - according to article 107 ET and following - or apply the cost presumption system. The payment of the contribution must be made on a monthly basis.

It must be said that, without detriment to the discussion that may arise regarding the term for the payment of contributions of independent workers with service provision contracts, we consider that it is advisable to apply the provisions of the concept and make them month in arrears because, although the law and jurisprudence indicate that the concepts issued at the request of an interested party are not mandatory or enforceable, Likewise, the Constitutional Court has pointed out that there are exceptional cases where the concepts issued within the administration may be binding, as this may well be the case since it is a concept issued by the Ministry of Finance and Public Credit, the Ministry of Labor and Health and Social Protection, addressed to the Pension and Parafiscal Management Unit - UGPP, the entity in charge of carrying out the control processes for the correct payment of Social Security and parafiscal contributions.

Finally, it must be taken into account that the tax reform bill filed last August 8 by the current Minister of Finance and Public Credit, Jose Antonio Ocampo, reincorporates in its article 67 the content of article 244 of Law 1955 of 2022, thus indicating the IBC of the three types of independent workers already mentioned, for which reason special attention must be paid to the final text of this reform that will greatly affect all Colombians.