The Colombian government on 1 September 2025 presented to Congress the “Financing Law” bill whose main objective is to raise approximately COP 26.3 trillion (around USD 7 billion) to finance the national budget. This initiative seeks to combat tax evasion and promote medium-term fiscal sustainability, and includes tax measures aimed at various sectors, such as expanding the VAT base and environmental taxes, for purposes of ensuring social investment in areas such as health and education.
The impact this project would have on individuals if it were approved and entered into effect for the 2026 tax year is discussed below.
Increase in Progressive Income Tax Rate
The bill proposes increasing the marginal rates for resident individuals by two percentage points, affecting annual taxable bases starting from 4,100 UVT (USD 57,731). The maximum rate would rise from 39% to 41%. For example, for income between USD 57,731 and USD 122,079, the rate would increase from 33% to 35%.
Withholding Tax
Marginal rates would also be adjusted by the same percentages for the monthly taxable bases for withholding tax.
Dividends Paid to Non-residents
Dividends received by non-resident individuals from Colombian companies would be subject to a tax rate of 30%, an increase from the current 20% rate.
Discounts and Deductions
The 19% tax discount applicable to dividends for residents is eliminated, as well as the additional deduction for economic dependents (currently 72 UVT – USD 1,014 per dependent in the income tax return and 32 UVT – USD 451 in monthly withholding).
Modifications to Wealth Tax
The triggering event would be adjusted so that the tax applies to net liquid assets exceeding 40,000 UVT (USD 563,226), instead of the current 72,000 UVT (USD 1,013,806). Progressive rates would also be modified, reaching up to 5% for assets valued at more than 2,000,000 UVT (USD 28,161,290).
Changes to Capital Gains Rules
For income from the sale of a fixed asset to qualify as an occasional gain subject to a 15% rate, ownership for at least four years (currently two) would be required. If this condition is not met, the ordinary progressive rate would apply.
Elimination of Inflation Component
Interest returns would be fully taxed, without any deduction for inflation.
This project reflects an international trend toward broadening tax bases and strengthening revenue collection to finance social spending, aligning with recommendations from multilateral organisations on fiscal sustainability and equity. The Colombian reform stands out for its focus on progressivity and the elimination of benefits that favoured certain taxpayers, seeking greater tax fairness and efficiency in tax administration.
For more information on the tax reform, please consult your regular BDO contact or the author of this article.
Freddy Andrés Sánchez Díaz
BDO in Colombia
The impact this project would have on individuals if it were approved and entered into effect for the 2026 tax year is discussed below.
Increase in Progressive Income Tax Rate
The bill proposes increasing the marginal rates for resident individuals by two percentage points, affecting annual taxable bases starting from 4,100 UVT (USD 57,731). The maximum rate would rise from 39% to 41%. For example, for income between USD 57,731 and USD 122,079, the rate would increase from 33% to 35%.
| Taxable Income FY 2026 (USD) | Marginal Tax Rate | ||
| From | To | Current | Post-Reform |
| 57,731 | 122,079 | 33% | 35% |
| 122,080 | 267,110 | 35% | 37% |
| 267,111 | 436,500 | 37% | 39% |
| 436.501 | 39% | 41% | |
| Exchange rate: COP 3,720 per USD | |||
| Values calculated based on estimated tax value units for the tax year 2026 | |||
Withholding Tax
Marginal rates would also be adjusted by the same percentages for the monthly taxable bases for withholding tax.
Dividends Paid to Non-residents
Dividends received by non-resident individuals from Colombian companies would be subject to a tax rate of 30%, an increase from the current 20% rate.
Discounts and Deductions
The 19% tax discount applicable to dividends for residents is eliminated, as well as the additional deduction for economic dependents (currently 72 UVT – USD 1,014 per dependent in the income tax return and 32 UVT – USD 451 in monthly withholding).
Modifications to Wealth Tax
The triggering event would be adjusted so that the tax applies to net liquid assets exceeding 40,000 UVT (USD 563,226), instead of the current 72,000 UVT (USD 1,013,806). Progressive rates would also be modified, reaching up to 5% for assets valued at more than 2,000,000 UVT (USD 28,161,290).
Changes to Capital Gains Rules
For income from the sale of a fixed asset to qualify as an occasional gain subject to a 15% rate, ownership for at least four years (currently two) would be required. If this condition is not met, the ordinary progressive rate would apply.
Elimination of Inflation Component
Interest returns would be fully taxed, without any deduction for inflation.
This project reflects an international trend toward broadening tax bases and strengthening revenue collection to finance social spending, aligning with recommendations from multilateral organisations on fiscal sustainability and equity. The Colombian reform stands out for its focus on progressivity and the elimination of benefits that favoured certain taxpayers, seeking greater tax fairness and efficiency in tax administration.
For more information on the tax reform, please consult your regular BDO contact or the author of this article.
Freddy Andrés Sánchez Díaz
BDO in Colombia