The Ministry of Health and Social Protection issued Decree 1273 of 2018, which regulates the payment in monthly arrears of the contributions to the Social Security Integral System (“SSIS”) of independent contractors, as well as the retention of the contributions when a personal service agreement has been executed. 

According to the referred Decree, the payment of the contributions to the SSIS of independent contractors must be performed monthly in arrears, in monthly periods through the Integrated Sheet of Contribution’s Liquidation (“PILA”, for its acronym in Spanish), taking into account the income received during the contribution period, this is, during the last month. This payment scheme will be in full force and effect as of October 1, 2018, which corresponds to the contribution period of September of the current year. 

In addition, the Decree added a new section to the Decree 780 of 2018 (Decree that regulates the Health and Social Protection sectors) regulating the retention and transfer of the contributions to the SSIS of independent contractors with personal service agreements related to the core business of the contracting company, with the following rules: 

• The base income upon which the contributions are calculated (“IBC”, for its acronym in Spanish) continues to be 40% of the monthly amount of each agreement, without including the total amount of the VAT. 
• In no case, the IBC can be inferior to the minimum monthly legal wage (“MMLW”) or higher than 25 MMLW. 
• When, due to the beginning or termination of the service agreement, the term is less than one month, the payment of the contributions to the SSIS will be made taking into account the number of days worked. In this case, the IBC cannot be inferior to the proportion of the MMLW. 
• In the cases of undetermined duration and/or value, the contributions will be calculated considering the accrued amounts during each period of contributions. 
• The sum to be retained comes from applying the percentages established in the current regulations for health, pensions and labor risks, or the ones that modify or substitute them, to the IBC. 
• In the event in which the contractor makes the contributions for different services, the retention and payment of the contributions will be performed over the amount resulting from each one of the agreements, irrespective whether the results of the application of the 40% to the monthly amount of the agreement or agreements subject to retention are inferior to one MMLW. 
• The contracting party that performs the retention and transfer of the contributions must report through the PILA the beginning, suspension and termination notices of the service agreement. 
• The contracting party will be responsible for making the payment to the administration entities of the SSIS of the amounts that were not retained or that were retained for an inferior value, and for the default interests arising from the lack of compliance to the terms established for the payment of the retained contributions, without prejudice to the criminal, fiscal and disciplinary sanctions that may take place.  
• When there is no place to pay the hired services, in accordance with the provisions of the service agreement, the contractor will be responsible to make the payments of the contributions to the SSIS as well as the default interests (if applicable); in these extraordinary circumstances, the contractor shall demonstrate the payment of the corresponding period to the contracting party.  
• When the payments performed by the contractor do not correspond to the total mandatory contributions to the SSIS, the contracting party shall inform this situation to the Special Administrative Unit of Pension Management and Payroll Contributions of the Social Security System – UGPP. 
• On one hand, the contractor must pay in monthly arrears the amount of the contributions to the General System of Labor Risks, when the affiliation corresponds to risks I, II or III. On the other hand, the contracting party must pay the contributions in monthly arrears when the affiliation of the contractor corresponds to risks IV or V. 
• The retention and payment of the contributions to the SSIS will be performed as of June 2019. 

To perform the retention of these contributions, the Decree established the information that the contractors must supply to the contracting parties at the beginning of the agreement and whenever there is a modification that affects its amount.