Do the math! Allowances exceeding $3.6 million per month must pay rent, according to approved pension reform

Do the math! Allowances exceeding $3.6 million per month must pay rent, according to approved pension reform
Do the math! Allowances exceeding $3.6 million per month must pay rent, according to approved pension reform
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“All pensions, including those received by Colombian residents from abroad, will be exempt from income tax. They will be taxed only on the part that exceeds 1,000 UVT”.

With this section, the pension reform of the Petro Government, In its article 84, it stipulated that allowances that exceed 1,000 UVT must pay rent. That is to say, those people who earn $47,065,000 per year through pensionsbecause the Tax Value Unit for 2024 was $47,065) for 2024.

In other words, Those pensioners who receive monthly allowances greater than $3,620,384 must declare income before the Dian.

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Given these changes, Iván Camilo Jiménez, professor at the Labor Observatory of the Javeriana University and master in Labor Law and Social Security, He explained that, basically, the income tax is calculated annually, so that the pension income that would enter this tax would be annual.

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“So, The pension would be exempt from withholding as long as in the 13 monthly payments of the year it is less than 1,000 UVT, which for 2024 is $47 millions, that means that pensions that do not pay taxes or that would not be subject to income tax would be pension income up to $47 million”.

Jiménez added that In monthly accounts it would be more or less $3.6 million, from that amount the pension would annually exceed 1,000 UVT and, therefore, it would begin to be subject to income tax, in other words, it would pay income when it was no longer exempt.

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He then stated that The purpose of this tax is to tax pensions with the objective of raising income for the state apparatus. However, he pointed out that this has direct implications on the real income of pensioners, decreasing their purchasing power. “By starting to pay taxes on income that was exempt, the person’s real income is reduced, and that can cause the person to reduce their purchasing power.”

The academic also highlighted a fundamental distinction between pensions and other types of income taxed by income tax, arguing that pensions are not profits but compensation for years worked or for disability situations. “A pension by nature is not an income that generates a profit, because it does not come from work or an investment, but rather it is an income that compensates for what has been contributed throughout one’s working life or until disability.”

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Regarding the above, Jiménez expressed his skepticism about the capacity of the Colombian state to efficiently manage tax revenues due to a significant history of corruption. That is to say, In theory, if the State makes good use of taxes, “we are all the winners.” However, the doubt in a country like Colombia is that “we have had governments and state structures that have proven to be widely corrupt.”

He insisted in his reflection: “Infinity of cases of corruption that the country has had show that The State does not spend the taxes it collects well and, contrary to changing how the money is being invested, The answer is always to obtain greater income from income.”

Therefore, he proposed that, Although the intention to tax pensions may have a fiscal justification, its implementation in the current Colombian context may be problematic due to distrust in public management and the negative impact on the purchasing power of pensioners. “The big winner is the state apparatus and, if it is invested well, we are all the winners. But with the history of how public money is spent in Colombia, one could cry out loud and say: why reduce the purchasing power of pensioners so that the state maintains its high levels of corruption?

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Jiménez stressed that the project, approved by the Senate, is aimed at people with high pensions, according to the purchasing power standards, already defined by Dian. However, she raised an essential question about whether this level of wealth is appropriate to be taxed. “Those who obtain more than $47 million a year through pensions are people with very high purchasing power according to what the former director of Dian, today Minister of Commerce, calculated. What the Dan figures show could also be considered and, therefore, they must be taxed.”

However, the academic questioned whether this is the best strategy to boost productivity and address the country’s truly great wealth. So he mentioned that These pensions may not be as high in all regions and could significantly affect middle class people in large cities.

“The big question is if that really is the level of wealth that we want to achieve or if we should double it to increase productivity and really ensure that large capital ends up being taxed. In the end, those incomes are not necessarily very high; It varies a lot from the region and they can be middle class people in large cities who can see their purchasing power dynamics quite affected.”.

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Furthermore, Jiménez warned that pensioners usually depend exclusively on their pensions, since they do not usually have other sources of income because they are no longer in work. “Since it is a pension, it is normal that you do not have any sources of income other than the pension, because you are no longer working.”

In short, from now on, youAll pensions that exceed 1,000 annual UVT, equivalent to $3.6 million, will have to pay taxes. This means that these people must declare income, although the amount to pay will depend on the current tax statute.

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“Pensions from $3.6 million will be subject to withholdings at source. This will increase State revenue, but will also add a new group to the list of filers. It is important to remember that pensions should not be affected by any reform, since it is unconstitutional,” concluded Lisandro Junco, former director of the Dian.

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