Colombia Global Payroll & Tax Information Guide

May 9, 2022 | 5 Mins Yana Todorova

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Payroll in Colombia – 2022 Updates

Minimum wages have been revised in Colombia, with effect from 01 January 2022. The national minimum wage has been increased as follows:

    • Minimum wage, from COP 908,526.00 to COP 1,000,000.00 per month
    • Transport allowance, from COP 106,454.00 to CO P117,172.00 per month
    • Total minimum wage per month, from COP 1,014,980.00 to COP 1,117,172.00 per month

Basic facts on payroll in Colombia

The currency in Colombia is the Colombian Peso (COP). The payroll cycle in Colombia is generally monthly, with payments being made on the last working day. However, it is also common in specific industries to pay bi-weekly with pay dates of the 15th and the last working day. Paying a 13th-month salary is mandatory in Colombia. It is acceptable to provide employees with online payslips. Payroll reports must be kept for 20 years.

Taxes

In Colombia, taxable income is expressed in units of COP 35,607, or 1 UVT (“unidad de valor tributario”). Those that make UVT 1,090 or less are except from income taxes.  Employees contribute to Colombia social security. The social security program includes a pension fund, healthcare benefits, and a general labor risks system (employee screening process).

The Colombian tax system comprises taxes at the national, departmental, and municipal levels.  Resident individuals and companies are taxed on worldwide income and assets.  Non-resident individuals, non-resident companies and permanent establishments of foreign companies are subject only to their Colombian-source income.  The corporate income tax rate applicable to resident companies and PEs of nonresident companies is 35% for 2022.

The tax year is the calendar year.

Rates and Thresholds

As noted above, Colombia taxes are applied in 1 UVT or COP 35,607. The beginning tax rate is 19% on incomes greater than UVT 1,090 and maxes out at 39%.

How Withholding Works

Most employees are paid on a monthly basis, and at that time, taxes are withheld. Employers withhold taxes from an employee’s paycheck on a monthly basis.

Returns and Tax Credits

Any citizen or resident (individual that lived in Colombia for more than 183 consecutive days, even if it occurred over more than one calendar year) is required to file their taxes by their tax identification number (NIT). Usually, taxes are filed somewhere in the time frame of late summer to mid-fall of the following calendar year.

Income Tax Rate Chart - 2022
Taxable income (TVU)
Tax rate (%)
Liability

0 – 1 090

0%

Income between 0-1,090 Tax Units

1 090 – 1 700

19%

Income between 1,090-1,700 Tax Units + 116 Tax Units

1 700 – 4 100

28%

Income between 1,700- 4,100 Tax Units + 788 Tax Units

4 100 – 8 670

33%

Income between 4,100- 8,670 Tax Units + 788 Tax Units

8 670 – 18 970

35%

Income between 8,670- 18,970 Tax Units + 2,296 Tax Units

18 970 – 31 000

37%

Income between 18,970- 31,000 Tax Units + 5,901 Tax Units

31 000 +

39%

Income above 31,000 Tax Units + 10,352 Tax Units

 

How Employees File Taxes at the End of the Year

Every employee has a tax identification number (NIT). During tax season (late summer to mid-fall), employees are assigned a tax filing due date. If they owe any taxes at the time of filing, they must pay those taxes by the due date or be charged an interest rate and late fees.

Social Security Contributions

The basis for contributions in determined by the monthly salary earned by the employee. The contribution amounts are currently 28.5% of the monthly salary. Out of this percentage, 75% (approx. 20.5% of the monthly salary) must be borne by the employer and 25% (approx. 8% of the monthly salary) must be borne by the employee.

Corporate Tax

The corporate income tax is 35%. This rate applies to Colombian entities, permanent establishments in Colombia and foreign taxpayers with Colombian-source income that must file income tax returns in Colombia. For financial institutions with taxable income of more than 120,000 tax units (approximately USD 1.1 million), the law imposes a 3% surtax on income from 2022 to 2025 (for a total income tax rate of 38%).

Foreign corporations are taxed on their Colombian-source income and capital gains only. As a general rule, the withholding tax rate on payments made to non-residents in respect of services rendered in Colombia is 20%.

Normalization Tax

Generally, the normalization tax rate is 17% and is applicable to income taxpayers that did not declare certain assets or claimed non-existent liabilities for tax purposes.

VAT

The general VAT rates are 19% and 5%. Colombia government announced the country will have three VAT-free days in 2022, on March 11, June 17, and December 2. During these days, sales of popular consumer goods, including clothing, toys, electronic goods, and home appliances, will be exempt from the 19% value-added tax.

Branch Tax

The branch tax rate is 35%, plus 10% rate on profits remitted abroad that have been taxed at branch level.

Capital Gains

The capital gains tax rate is 10%.

Dividends

Dividends that are not subject to tax at the corporate level will be taxed at 35% flat rate.

Compensation and Benefits

The payroll cycle is bi-weekly or monthly. Paying a 13th-month salary is mandatory in Colombia. Employees are entitled to a 13th salary equivalent to 1 month salary. It is paid in 2 installments (June and December).

Minimum Wage

The monthly minimum wage in Colombia is 1,000,000.00 COP.

Overtime

All employees are restricted to 2 hours of overtime daily or 12 hours weekly. Day employees are given pay and a quarter (1.25 times their hourly rate) for their overtime, unless they are temporarily working nights, and as such, their overtime rate increases to one and three quarters (1.75) their standard rate.

Hours of Work

All employees are entitled to paid Sundays off work. A regular work week is 48 hours/week. Employers are allowed to let employees to work a 5-day week if they wish to have Saturdays off, as well. An employee who has to work between 10 pm and 6 am must be paid 35% more than the equivalent daytime salary.

Holiday & Sick Leave

Employers pay the employee for 2 days, after which time, the government reimburses the employer for any paid sick leave.

Maternity leave is set at a minimum of 18 weeks, beginning one week prior to the due date. Paternal leave is granted in the amount of 8 days.

All employees are entitled to at least 15 days (not counting Sundays) of paid vacation each year.

Foreign Hires

Typically, foreign workers are easily granted work permits and visas, so long as they agree to pay taxes like any other Colombian employee. As such, employees on a work visa may also benefit from social security and other government benefits to employees.  All foreign hires must secure formal acceptance from the Colombian Consulate, Ministry of Social Protection, and the Administrative Department of Security (DAS). All foreign workers are given a work permit, Colombian ID, and NIT.

 

For more information about how our Global Payroll Control Platform integrates with local payroll providers in Colombia, contact us today.

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