4 Resources I Wish I Knew About Before Starting CED Work in Colombia
TLDR:
While reliability and validity of any measurement is liable to error, DANE has a continuous improvement process in place to increase efficacy. Still, all data should be scrutinized due the difficulty of obtaining such a broad set of data, especially a largely informal economy such as Colombia.
2) Impuesto al Valor Agregado (IVA) - is the nationwide consumer tax on common goods. The tax targets “value added” goods ranging from breakfast to vegetable oil. Some essential good such as school supplies and medications are taxed at lower rates or excluded completely. The tax was most recently increased, effective January 2017, from 16% to 19% as part of a comprehensive national tax package.
Collecting the tax can be difficult in the informal economy though; a receipt from a formal business should detail how much the IVA charge was. It is standard that taxes are included in the advertised price of the item rather than added after sale like in the US.
Apart from IVA, some other interesting tax policies include:
3) The National Minimum Wage - in Colombia is $737,717 Colombian pesos a month. In Colombia, describing wage per month is more common than describing wages per year. Also noteworthy, is that workweeks are typically 48 hours over six days a week compared to the standard 40 hour US workweek. Pension and health taxes are paid by, both, the employer and employee. Pension and health taxes for the employer are 8.5% and 12% respectively, and for the employee are 4% and 4% respectively. 15 paid vacation day are also allowed a year. It is also worth noting that there are numerous national holidays (more than the US), which workers are excused from work. Further benefits include 12 weeks of maternity leave granted for pregnant mothers as well as to single fathers who chose to adopt.
The minimum wage has increased roughly 6-7% annually over the past decade and outpaced the normal rate of inflation (about 4%). The minimum wage is expected to increase another 7% effective January 2018.
Colombian Pesos (COP) U.S. Dollars (USD)
Annual $8,852,604 $3,052.00
Month $737,717 $254.00
Hour $3,074 $1.06
* Figures as of September, 2017
* Converted at 2,900 COP to 1 USD
Like other economic tools, regulation, and taxes, the efficacy is limited in a Colombia’s informal economy. In small and family business, where many employees/workers are relatives or trusted friends, real wages are difficult to track. The above provisions are ensured for public employees and those engaged in formal employment. Registering with the local and/or regional chamber of commerce is both an advantage and hurdle for businesspersons.
More details can be found at the Ministry of Work.
4) Colombia’s Social Stratification Policy - was made law in 1994 for the purposes of effectively administering public services and imposing taxes. All neighborhoods are codified according to
socioeconomic strata, between 6 (High, High) and 1 (Low, Low). 89% of the Colombian population occupies the lowest the lower strata (1,2 and 3), which are the only strata that receive direct public subsidies/benefits, while strata 5 and 6 pay additional fees (4 is neutral). Higher strata pay additional charges to balance out the subsidies given to lower strata. Generally strata 5 and 6 are found in metropolitan cities where there are concentrations of wealth and elude small municipalities.
The side effects of such a system are subject to continuous debate among politicians, economist and sociologist.
- DANE is the principal Colombian government department that collects and publicizes extensive amounts socioeconomic data for public use.
- The IVA a tax on certain consumer goods is up to 19% (2017)
- Minimum wage in Colombia is $737,717 COP ($254 USD) per month (2017) and increasing annually
- Colombian socioeconomic strata are between 6 (high) and 1 (low) and are assigned to all citizens based on where they live.
- Much of the Colombian economy is informal adding public administration and policy challenges.
While reliability and validity of any measurement is liable to error, DANE has a continuous improvement process in place to increase efficacy. Still, all data should be scrutinized due the difficulty of obtaining such a broad set of data, especially a largely informal economy such as Colombia.
2) Impuesto al Valor Agregado (IVA) - is the nationwide consumer tax on common goods. The tax targets “value added” goods ranging from breakfast to vegetable oil. Some essential good such as school supplies and medications are taxed at lower rates or excluded completely. The tax was most recently increased, effective January 2017, from 16% to 19% as part of a comprehensive national tax package.
Apart from IVA, some other interesting tax policies include:
- 20 peso tax on plastic bags (increasing 10 pesos a year to a max of 50 pesos)
- 700 peso (and rising) tax on tobacco products
- Mandatory 4 to 9 year prison sentence to those avoiding taxes over 179 million pesos
3) The National Minimum Wage - in Colombia is $737,717 Colombian pesos a month. In Colombia, describing wage per month is more common than describing wages per year. Also noteworthy, is that workweeks are typically 48 hours over six days a week compared to the standard 40 hour US workweek. Pension and health taxes are paid by, both, the employer and employee. Pension and health taxes for the employer are 8.5% and 12% respectively, and for the employee are 4% and 4% respectively. 15 paid vacation day are also allowed a year. It is also worth noting that there are numerous national holidays (more than the US), which workers are excused from work. Further benefits include 12 weeks of maternity leave granted for pregnant mothers as well as to single fathers who chose to adopt.
The minimum wage has increased roughly 6-7% annually over the past decade and outpaced the normal rate of inflation (about 4%). The minimum wage is expected to increase another 7% effective January 2018.
Colombian Pesos (COP) U.S. Dollars (USD)
Annual $8,852,604 $3,052.00
Month $737,717 $254.00
Hour $3,074 $1.06
* Figures as of September, 2017
* Converted at 2,900 COP to 1 USD
Like other economic tools, regulation, and taxes, the efficacy is limited in a Colombia’s informal economy. In small and family business, where many employees/workers are relatives or trusted friends, real wages are difficult to track. The above provisions are ensured for public employees and those engaged in formal employment. Registering with the local and/or regional chamber of commerce is both an advantage and hurdle for businesspersons.
More details can be found at the Ministry of Work.
4) Colombia’s Social Stratification Policy - was made law in 1994 for the purposes of effectively administering public services and imposing taxes. All neighborhoods are codified according to
The side effects of such a system are subject to continuous debate among politicians, economist and sociologist.
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