Colombia wealth tax threshold cut faces likely withdrawal
Colombia’s outgoing government has proposed cutting the wealth-tax threshold to $620,000, a move that would trip up thousands of foreign residents but is widely expected to be withdrawn before taking effect.
Colombia’s outgoing administration has filed its fifth tax reform, a sweeping bill that slashes the wealth-tax threshold from roughly $1.12 million to $620,000. Measured in local tax units, the floor drops from 72,000 UVT to 40,000 UVT. The finance ministry estimates this change alone would nearly triple the number of liable individuals from 32,000 to over 105,000. Despite the ambitious revenue targets, the legislation lacks a congressional majority and faces almost certain defeat.
For international investors and corporate executives, the most critical detail is the geographical reach of the proposed tax. Colombia taxes its residents on worldwide assets, defining residency as spending more than 183 days annually in the country. Lowering the entry point means long-term foreign residents whose global property, investments, and other holdings exceed $620,000 could suddenly face an annual levy, regardless of whether those assets are located in Colombia.
The proposed levies are structured progressively. Marginal rates begin at 0.5 percent at the 40,000 UVT threshold, stepping up through 1, 2, and 3 percent brackets. At the top end, above 2,000,000 UVT, the marginal rate hits 5 percent. Because the tax applies only to the specific slice of wealth exceeding each bracket, the effective burden sits significantly lower than the top marginal rate, landing near 3.2 percent for the wealthiest taxpayers.
Beyond individual wealth, the bill imposes heavier burdens on specific market sectors. It raises the tax on lottery, raffle, and betting winnings to 30 percent, up from 20 percent. For banks and financial institutions, the reform lifts the sector’s income-tax rate by 15 percentage points to a flat 50 percent. Taken together, the government projects the measures would yield 21.8 trillion pesos in 2027, eventually climbing toward 37 trillion pesos by 2030.
Political realities heavily dictate the bill's future. The proposal essentially reproduces a 2025 financing law that Congress previously rejected. With roughly 15 days remaining in the outgoing president’s term, and the Senate presidency shifting to the opposition-aligned Centro Democrático, the legislation has no viable path forward. A former tax-agency official stated the bill will "surely be withdrawn." The incoming administration takes office on August 7 and is entirely free to modify or abandon the framework.
