Published and draft legislation - Colombia

Changes to the business classification system

Draft decree

The Colombian Government’s Ministry of Trade, Industry & Tourism has published a decree  changing the classification of micro, small and medium enterprises (MSMEs) in order to define charges, profits or consequences in line with current legislation, using as its sole criterion annual company income from trading activities.

Whereas the current system is based on the number of company employees and total assets, without distinguishing between different economic segments, the modification aims to create a business classification system based on annual company revenues, dividing companies by three major categories: i) manufacturing sector, ii) services sector, and iii) trade sector (see tables below).

As well as entirely changing Colombia’s business classification system, this draft decree stipulates that this new classification will not apply to the source of fiscal or tax profits. Nor will it be applicable in the event of the law providing for a different category in specific cases.

In addition to the above, in view of the fact that the new business classification will be based on corporate revenues from normal activities, the draft sets out that verification of MSME revenues should be effected by submitting the results of the year prior to the one during which the company is being reclassified under the new system. Companies’ annual income must be reported on the Single Business & Social Register [Registro Único Empresarial y Social: RUES*], which may be counterproductive for microfinance activity, given the difficulty of getting formal accounting information from credit recipients. It is also unhelpful in working towards the Government’s aims of encouraging people into the formal banking system, because of the high rate of informality among micro-enterprises in Colombia.

Current system

  • Microenterprise:
    • No. Employees: Under 10
    • Total Assets: <500; < USD 112,237
  • Small enterprise
    • No. Employees: Between 11 and 50
    • Total Assets: 501 -< 5000;  USD 112,237 - <1,122,373
  • Medium enterprise
    • No. Employees: Between 51 and 200
    • Total Assets :5001 - < 30.000; USD 1.122.373 - < USD 6.734.200

 

Proposed changes

Annual income from trading activities (MMW)

  • Manufacturing Sector
  • Microenterprise: < 1.000; < USD 224.400
  • Small enterprise: > 1.000 - < 8.700;  > USD 224.400 -  < USD 1.952.900
  • Medium enterprise: > 8700 - < 73.700; > USD 1.952.900 - < USD 16.543.700
  • Service Sector
  • Microenterprise: < 1.400; < USD 314.264
  • Small enterprise: > 1.400 - < 5.600; > USD 314.264 - < USD 1.257.000
  • Medium enterprise: > 5600 - < 20.500; > USD 1.257.000 - < USD 4.601.700
  • Trade Sector
  • Microenterprise: < 1.900; < USD 426.500
  • Small enterprise: > 1900 - <  18.300; > USD 426.500 - < USD 4.107.800
  • Medium enterprise: > 18.300 - <91.700; > USD 4.107.800 -  < USD 20.584.300

* The Single Business & Social Register– RUES – is a national register that merged the Companies Register and the Single Proposers Register (register of the natural and legal persons that want to tender for contracts with the Republic of Colombia) and also the following registers: i) Register of Non-Profit Institutions; ii) National Public Register of Gambling Vendors; iii) Public Register of Citizens’ Oversight Committees; iv) National Register of Tourism; v) Register of foreign private sector non-profit institutions; and vi) Register of Cooperatives