In brief
On 20 July 2026, the Ministry of Finance filed before the House of Representatives the bill "whereby a tax reform is adopted and other provisions are enacted," together with its explanatory memorandum. The initiative is framed within the activation of the escape clause of the Fiscal Rule and the Government’s fiscal consolidation strategy, and seeks additional revenue of COP 21.9 trillion (1.0% of GDP) for 2027, with permanent revenue estimated at an average of 1.5% of GDP as of 2028.
The bill is structured in four titles: (i) reduction of tax expenditures, mainly in VAT; (ii) progressivity measures on income, net worth and occasional gains; (iii) taxes on negative environmental and public health externalities; and (iv) reduction of the exemption from social security and payroll contributions. In general, the measures would apply as of taxable year 2027, except for those with special effective dates.
Key measures
The main measures proposed in the bill are summarized below:
1. VAT – Reduction of tax expenditures
- Games of chance and gambling: would be taxed at the general 19% rate, including online gambling, whose taxable base would be the value of the deposit made by the bettor (including payments in crypto assets). The operator would be liable for the tax, even when operating from abroad.
- Hybrid vehicles: would move from the reduced 5% rate to the general 19% rate.
- Fuels: gasoline and diesel (ACPM) would be taxed on the producer income at a 10% rate in 2027 and at the general rate as of 2028. Biofuels and fuel alcohol for blending would be taxed at the general rate, and the retail margin in the gasoline chain would become taxable.
- Tourism services for non-residents: the VAT exemption for tourism services rendered to non-residents and used within Colombia would be eliminated. The VAT refund mechanism for foreign tourists upon departure would remain in place.
- Low-value imports (de minimis): the VAT exemption for imports below USD $200 (postal traffic and express shipments) would be eliminated.
- Liquors, wines and aperitifs: VAT would increase from 5% to the general 19% rate, with 5 points assigned to the departments for health insurance funding.
- Renewable energy: the VAT exclusion for goods and services used in power generation projects with non-conventional energy sources (NCES) would become a zero-rated exemption, allowing recovery of input VAT along the production chain.
2. Individual income tax
- Marginal rates: would increase for taxable income above 1,700 UVT; the top marginal rate would rise from 39% to 41% for income above 31,000 UVT.
- Dependents deduction: the additional deduction of 72 UVT per dependent (up to 4) created by Law 2277 of 2022 would be eliminated; the deduction of 10% of gross labor income (capped at 32 UVT per month) would remain.
- Dividends: the tax credit under Article 254-1 of the Tax Code would be eliminated, so dividends received by residents would be fully taxed at the progressive rates of the general basket.
- Inflationary component: the non-taxable treatment of the inflationary component of financial yields would be eliminated (Articles 38 to 41, 81-1 and 118 of the Tax Code).
- Lotteries, raffles and betting: the capital gains tax rate would increase from 20% to 30%.
3. Wealth tax
- Entry threshold: would be reduced from 72,000 UVT to 40,000 UVT (approx. COP 2,223 million with the estimated 2026 UVT), expanding the taxpayer base from around 32,000 to more than 105,000 individuals.
- Rates: marginal rates from 0.5% to 3% up to 2,000,000 UVT, and a new 5% marginal rate for net worth above 2,000,000 UVT.
4. Corporate income tax and outbound dividends
- Dividends paid to non-residents: the rate for foreign companies and entities, non-resident individuals and permanent establishments would increase from 20% to 30%.
- Financial sector: the income tax surcharge for financial institutions, insurance and reinsurance companies, stockbrokers and market infrastructure providers would increase from 5 to 15 additional points (total 50% rate) and would become permanent.
- Extractive sector: the conditions of the income tax surcharge for coal and crude oil extraction would be equalized (threshold of 50,000 UVT of taxable income).
- Significant economic presence (SEP): the optional filing rate on gross income from the sale of goods and digital services from abroad would increase from 3% to 5%.
5. Environmental and extractive sector taxes
- Carbon tax: the rate would increase to COP 42,000 per ton of CO2eq (approx. USD 11.2), adjusted annually at CPI plus 2 points. For coal, the full rate would phase in between 2027 (40%) and 2030 (100%). The offset (non-accrual) mechanism would be capped at 30% of the tax due, down from 50%.
- Special extraction tax: a permanent 1% tax would be created on the FOB value of exports or the invoice value of the first sale of crude oil and coal, applicable to taxpayers with taxable income equal to or above 50,000 UVT (including related parties).
- Energy Transition Bond: investors in NCES generation projects certified by the UPME could issue tradable bonds granting a deduction of 50% of the investment over up to 15 years, transferable to third parties.
6. Health and consumption taxes
- National consumption tax: the rate for luxury goods (vehicles with FOB value equal to or above USD 30,000, motorcycles above 200 c.c., yachts and private aircraft) would increase from 16% to 19%.
- Entertainment and events: entertainment, cultural and sports services with tickets above 10 UVT (approx. COP 500,000) would be subject to a 19% consumption tax.
- Tobacco and vaping products: the specific component per 20-unit pack would increase from COP 4,068 to COP 11,200, and a COP 2,000 per milliliter tax would be created for vaping liquids, with a 30% ad valorem component. Rates would be adjusted annually at CPI plus four points.
7. Social security and payroll contributions
- Article 114-1 exemption: the exemption from health (8.5%), SENA and ICBF contributions would only apply to employees earning less than three minimum monthly wages (currently 10). Employers would bear these contributions on salaries equal to or above three minimum monthly wages.
Conclusions
The bill now begins its legislative process before Congress and may undergo substantial changes during the debates. If approved, most measures would apply as of taxable year 2027. The proposed changes are particularly relevant for high-income and high-net-worth individuals, multinational groups distributing dividends abroad, the financial sector, the mining and energy sector, and consumer industries.
We recommend that companies and individuals assess the potential impact of the bill in advance, including dividend distribution policies, investment structures in Colombia, the cash-flow effects of higher labor costs and indirect taxes, and wealth planning scenarios, in order to anticipate the possible approval of the reform.
At Baker McKenzie, we are closely monitoring the legislative process and are available to assist you in evaluating the impact of these measures on your specific circumstances, including compliance obligations and planning considerations.