Mazars’s position about when should be generated the electronic payroll support related to employee social benefits?

In response to this question, two opposing positions have been presented. The first one states that payments for social benefits must be recognized by the taxpayer through the electronic payroll system when the accounting accrual is made, that is, when the obligation is consolidated in the employer's head. On the contrary, a second position establishes that the payments made for social benefits must be related at the electronic payroll system when the benefit is effectively paid to the employee, in accordance with cash principle.

1. DIAN’s Position 

Initially, in Official Letter 908125 of August 2021, DIAN informed that in accordance with Ruling 13 of 2021, at the time of issuing the electronic payroll support document, the taxpayers must include the concepts of social benefits, vacations, food, lodging, as well as payments made in kind.

Additionally, through Official Letter 912416 of 2021, Tax Administration stated that the electronic payroll payment support document is generated due to the payments or accruals made by the employer. This statement is based on the accounting principle of accrual.

In this way, DIAN concluded that the recognition of unemployment aid and the interest on unemployment aid through electronic payroll support document should be made taking into account the concept of credit on account, due to the accounting principle of accrual, as long as the payment to the employee is not made first.

Likewise, Official Letter 100153157-03465 of 2021 was issued, which establishes that vacations must be reported according to the qualities of the employer. That is, if the employer is obliged to keep accounting books, must generate the electronic payroll payment support when the accrual is made, and in the case of being not obliged to keep accounting books, the support document must be generated with the payment.

Therefore, for DIAN, the electronic payroll support document related to social benefits must be generated when the employer consolidates the obligation to pay, but not when the benefit is actually paid to the employee.

2. Mazars’ Position

On the other hand, it is important to highlight that Mazars considers that the recognition of the deduction for payroll and social benefits must be recognized at the DIAN’s electronic system from the moment which the payment is made.

The previous statement is due to as a general rule, payroll payments are governed by cash system, so the deduction is imputed from the moment in which the remuneration has been effectively paid to the employee, which is the same moment in which the employee will recognize the labor income, in accordance with section 27 of Colombian Tax Code (CTC).

Therefore, law must be interpreted in its natural and obvious sense, so from the analysis of Ruling 13 of 2021, and its technical annex, under our understanding we recommend to the interested taxpayers that the recognition of social benefits through the electronic payroll system must be made from the moment in which the legal bonus for services, unemployment aid, interest on unemployment aid and endowment, are effectively paid.

Finally, in accordance with section 131 of Law 2010 of 2019, concepts issued by DIAN will constitute official interpretation for its public employees, therefore, they will be mandatory for them, which means that, in the event of an eventual audit, the entity employees will take into account the official doctrine, and in that sense, they must apply it, unless the position of DIAN is subsequently modified.

Notwithstanding, there are sufficient legal arguments to support the viability of our position in the event of an audit, in accordance with the arguments set above.