2026 tax reform: key points of the Financing Bill

In September 2025, the Colombian Government submitted its third tax reform proposal of the presidential term to Congress, also known as the 2026 Financing Bill. The text seeks to raise COP 26.3 trillion (approximately USD 6.3 billion) to support the public budget and secure fiscal stability in the coming years.

1. Background

• Colombia has a high fiscal deficit and is currently outside the fiscal rule, which has been suspended since June 2025. According to its analysis, the Government projects a deficit of up to 7.1% of GDP for 2025 and around 6.2% for 2026 if the reform is not approved.

• The public debt burden has increased, and rating agencies have issued warnings about the fragility of public finances.

  • On 26 June 2025, the main international credit rating agencies announced the following rating decisions:

    • Standard & Poor’s (S&P) downgraded Colombia’s sovereign rating to BB, placing the country two notches below investment grade, with a negative outlook.

    • Moody’s reduced its rating to Baa3, the lowest investment-grade level, while maintaining a stable outlook.

  • Both agencies based their decisions on the growing fiscal deficit, the suspension of the fiscal rule, sustained spending increases and the absence of a credible framework for structural adjustment. S&P also warned that it could apply a further downgrade within the next 12 to 18 months if clear corrective measures were not adopted.

2. Significant tax changes

• Fuels (petrol and diesel): A progressive VAT rate would begin at 10% and reach 19%, alongside a carbon tax. This could increase transport and basic goods costs.

• Broader VAT coverage: A 19% VAT rate would apply to activities such as gambling, alcoholic drinks, performances above a specified amount, digital services (Netflix, Amazon Prime, etc.), memberships and condominium management fees.

• Financial sector: Institutions such as banks and insurers would face an income tax surcharge taking their rate from 40% to 50%.

• Dividends and occasional gains:

  • The holding period required for the sale of fixed assets to qualify as an occasional gain would increase from 2 to 4 years.

  • Withholding on lotteries, raffles, betting and similar activities would rise from 20% to 30%.

• Rates for resident individuals would increase and could reach 41%, depending on the progressive tax brackets.

• Other relevant points:

  • The deduction for dependants and the inflation component of financial returns would be eliminated.

  • New restrictions would apply to deductions for expenses paid in cash or without withholding tax.

  • Tax amnesties would reduce penalties and interest by between 50% and 85% for those who bring their tax affairs into compliance before 31 March 2026. If approved, this point would be relevant to people with outstanding obligations and even criminal investigations for conduct such as a withholding agent’s failure to remit taxes.

The first draft of the tax reform bill (Financing Bill) proposed by Gustavo Petro’s Government can be downloaded here:

3. Economic and social impact

• An analysis by Itaú bank estimates that, excluding tax efficiencies, the reform would aim to raise approximately COP 19.9 trillion, with significant contributions from consumption and VAT, potentially taxing up to 12% of the CPI basket.

• A direct impact is expected on transport, housing (management fees subject to VAT), food and entertainment costs.

4. Legislative process

• The reform faces a difficult political environment: with a fragmented Congress and an election year, several members of Congress have opposed it from the outset. Various prospective presidential candidates have downplayed it, saying that it will not pass.

• Nevertheless, the Government maintains that without approval it will have to seek external financing, increasing indebtedness.

5. Main points

Feature	Description
Expected revenue	COP 26.3 trillion, above the original COP 19 trillion plan.
Sector coverage	Affects consumption, finance, religion, transport, tourism, digital activities, energy, mining and the non-financial sector.
Broader tax base	Progressive VAT increases and broader taxation.

This reform seeks to address medium-term fiscal pressures, but introduces a wide range of new taxes that could affect savings, consumption and specific sectors. At Marín Ortega, we will continue to monitor its progress and are ready to help our clients understand and adapt to the changes it brings.