The Law for Promoting Employment Opportunities for People Over 45 Years Old (Law No.10079) represented a significant step, not only in combating employment discrimination but also in improving the country's competitiveness by reducing the fiscal and social burden on companies that hire individuals over 45 years old.
Social Security Contributions Benefits
Published in La Gaceta No. 15 on January 25, 2022, this law amended Article 15 of the Social Development and Family Allocations Law (Law No. 5662) to modify how Fodesaf is funded.
The reform established that employers whose payroll consisted of at least 10% of workers over 45 years old would pay 4% of their total salaries instead of the current 5%. Likewise, those reaching 20% of employees in this category would contribute only 3%.
However, due to an unusual legislative technique, this benefit was made subject to a technical study by the General Directorate of Social Development and Family Allocations (Desaf) to determine whether applying this law would jeopardize the fund’s financial sustainability.
After waiting more than a year, on October 31, 2023, the Minister of Labor and Social Security submitted a report to the Legislative Assembly regarding the impact of implementing Law No. 10079, concluding:
Taking into account the previous conclusions and estimates, which do not foresee a significant percentage impact on Fodesaf, and in light of the economic situation of households and individuals due to Covid-19, this ministry approves the implementation of Law No. 10079 “Law for promoting employment opportunities for people over 45 years old”
Due to the delay, on May 23, 2022, the Law on Strengthening Territorial Competitiveness to Promote Investment Outside the Greater Metropolitan Area was approved. This law once again amended Article 15 of Law No. 5662 and tacitly repealed the provisions concerning social security contribution benefits outlined in Law No. 10079. As a result, the Desaf report became completely irrelevant, and this part of the law was rendered inapplicable.
Tax Benefits
While the social security contribution benefits were legally nullified, Law No. 10079 remains valid in fiscal matters, as Article 2 establishes tax incentives for companies hiring individuals over 45 years old.
Specifically, the law grants a 5% deduction on income tax declarations for companies whose payroll includes at least 10% of workers over 45 years old, increasing to 7% if this age group represents 20% of the workforce. However, it is important to note that this deduction applies only to hires made after the law took effect, provided that the employees have worked continuously for at least one year in the company.
Currently, these tax benefits remain in effect and can be applied until January 25, 2026, the date when the law expires, according to Article 4. There is a possibility of extending it for another four years, but this will depend primarily on the Legislative Assembly. Although the law mentions a report from the Ministry of Labor and Social Security (MTSS), given what happened with the social security contribution benefits, this ministry will not be able to assess the impact on Fodesaf.
To apply for this incentive, there is no specific procedure. Since income tax is self-assessed and self-liquidated, companies can include the deduction in their tax declaration, following the general procedure of the Income Tax Law. However, it is crucial to emphasize the taxpayer’s obligation to maintain accounting records that support the self-assessment of taxes, which must be available to the Tax Administration in case of a tax audit.
That said, Law No. 10079 was a novel initiative with a relevant social focus, but its deficient legislative drafting and the subsequent approval of new regulations limited its impact. Despite this, companies can still take advantage of the tax incentives provided by the law, as long as they meet the requirements and ensure the accuracy of the reported information to avoid tax contingencies.
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