Does Having Employees Automatically Require Special Income Tax Withholding?

The Colombian Tax Authority (DIAN) has recently clarified an issue that many companies may be overlooking: having employees does not automatically mean being required to apply special income tax withholding.

Through Concept No. 484 issued on April 7, 2026, DIAN recalled that this obligation is directly related to the exemption from contributions to SENA, ICBF, and health insurance established in Article 114-1 of the Colombian Tax Code.

The key point is that special income tax withholding only applies when the company is effectively benefiting from the exemption of payroll-related contributions.

When does this exemption exist? It applies when there are employees who, individually considered, earn less than 10 minimum legal monthly wages (SMMLV). Therefore, the analysis should not be based only on whether the company has employees, but rather on reviewing the specific conditions of each employee.

Therefore, if a company does not have employees, or if all employees earn 10 SMMLV or more, there would be no effective benefit from the exemption of payroll contributions and, consequently, the special income tax withholding established in Decree 2201 of 2016, incorporated into Decree 1625 of 2016, would not apply.

This clarification is important because some companies may be applying special income tax withholding simply out of habit or because they assume that having an active payroll automatically creates this obligation.

However, the mere existence of employees does not automatically trigger special withholding. The determining factor is verifying whether the company actually qualifies for the exemption of payroll contributions according to the tax regulations.

In this sense, a company may have hired personnel and still not be required to apply special income tax withholding.

This criterion is particularly relevant for companies with small organizational structures or with executive, management, and administrative positions where employees may earn amounts equal to or higher than 10 SMMLV.

For this reason, companies should periodically review whether special income tax withholding actually applies, avoiding maintaining tax obligations simply due to operational routine without validating the legal requirements that create them.

Key question for your company:
Are you applying special income tax withholding because it truly applies, or simply because it has always been done this way?

At Kraobi Consultores, we support companies in reviewing their tax obligations so they can make decisions with technical criteria, security, and confidence.

Prepared By: Kraobi Consultores.

THIS DOCUMENT REPRESENTS THE OPINION OF OUR FIRM. TAX AUTHORITIES MAY NOT AGREE WITH OUR POSITION. IF YOU WOULD LIKE TO EXPLORE THIS TOPIC FURTHER OR REQUIRE SPECIALIZED ADVICE, PLEASE CONTACT US. WE ARE READY TO ASSIST YOU.