Colombia: Tax reform bill 2026
The proposed legislation aims to raise public revenue by increasing taxes on high earners, expanding the VAT base, and targeting the digital economy.
The 2026 tax reform bill seeks to strengthen public finances through higher taxation, a broader tax base, and the reduction of existing tax benefits, with a particular focus on environmental and public health objectives. The proposed tax measures include:
- VAT: Expand the VAT base to additional goods and activities, including gambling, fuels, and alcoholic beverages; convert certain renewable energy investments from VAT-excluded to VAT-exempt status; and remove several existing VAT exclusions
- Income, wealth, and capital gains taxes: Increase the tax burden on high-income individuals, financial institutions, and extractive industries by raising rates, lowering the wealth tax threshold, and increasing the taxation of gambling winnings and dividends paid to nonresidents
- Environmental measures: Reintroduce energy transition bonds, reinstate the special tax on hydrocarbon and coal extraction, and strengthen the carbon tax regime.
- Consumption and health taxes: Broaden the scope of taxable goods and services, including vehicles, entertainment, cultural and sporting activities, tobacco products, and vaping devices.
- Significant economic presence (SEP): Raise the SEP tax rate for nonresident digital service providers from 3% to 5%
- Payroll tax relief: Narrow the scope of social security and parafiscal contribution exemptions, potentially increasing labor costs, while earmarking a portion of corporate income tax revenues for healthcare, education, and social programs
- Tax incentives: Eliminate several tax benefits and VAT exclusions, reinforcing a broader policy trend toward increased taxation and revenue collection.
Legislative outlook
Despite the significance of the proposal, preliminary indications suggest limited congressional momentum for its near-term consideration. Given the recent composition of Congress and the political transition ahead of the incoming president’s inauguration on August 7, the bill may face challenges in securing the support required for debate and approval.
Read a July 2026 report (Spanish) prepared by the KPMG member firm in Colombia
For more information, contact a KPMG tax professional in Colombia:
Ricardo Ruiz | ricardoaruiz@kpmg.com
Luis Segura | lsegura@kpmg.com
Karol Bolaños | karolbolanos@kpmg.com