The Colombian government has officially presented the “Financing Law” bill to Congress as of September 1, 2025. This significant legislative initiative is designed to secure approximately COP 26.3 trillion (USD 7 billion) to finance the national budget. The primary goals are to ensure long-term fiscal sustainability, curb tax evasion, and provide the necessary funding for critical social sectors, including health and education.
This move aligns with global trends of broadening tax bases to enhance equity and efficiency in tax administration. If approved, the measures would largely impact the 2026 tax year, introducing a more progressive tax structure that targets higher income brackets and accumulated wealth.
Details of the proposed “Financing Law”
The bill introduces a comprehensive overhaul of the current tax system, focusing on several key pillars:
1. Increase in Progressive Income Tax
The reform targets resident individuals with an annual taxable base starting from 4,100 UVT (approx. USD 57,731). Marginal rates for these brackets would increase by two percentage points.
Taxable Income FY 2026 (USD) | Current Rate | Post-Reform Rate |
$57,731 – $122,079 | 33% | 35% |
$122,080 – $267,110 | 35% | 37% |
$267,111 – $436,500 | 37% | 39% |
Above $436,501 | 39% | 41% |
2. Expanded Wealth Tax and Capital Gains
- Wealth Tax Threshold: The threshold for triggering wealth tax would drop significantly from 72,000 UVT (USD 1,013,806) to 40,000 UVT (USD 563,226). Progressive rates could reach up to 5% for the wealthiest individuals.
- Occasional Gains: To benefit from the 15% occasional gain rate on the sale of fixed assets, individuals would need to hold the asset for four years, up from the current two-year requirement.
3. Elimination of Deductions
The bill proposes the removal of the 19% tax discount on dividends for residents and the elimination of the additional deduction for economic dependents, which currently provides relief based on the number of dependents.
What this means for skilled workers
Skilled professionals and high-earning residents in Colombia will face a more rigorous tax environment:
- Higher Withholding: Monthly withholding tax rates will be adjusted upward to match the new progressive brackets, leading to lower immediate take-home pay for top earners.
- Increased Tax on Investments: Dividends paid to non-residents will see a jump from 20% to 30%, and interest returns will be fully taxed without deductions for inflation
- Longer Asset Holding: Professionals looking to sell property or fixed assets will need to plan for longer ownership periods to avoid being taxed at the higher ordinary progressive rates.
What it means for employers
For organizations employing talent in Colombia, the “Financing Law” introduces new administrative and compliance responsibilities:
- Updated Payroll Calculations: Finance and HR teams must be ready to implement the new withholding tax tables for the 2026 tax year to avoid penalties and ensure compliance.
- Impact on Global Mobility: The increase in taxes for non-residents (particularly on dividends) may affect how companies structure executive compensation packages for international assignees.
- Communication with Staff: Employers will need to clearly communicate these changes to their workforce, as the elimination of dependent deductions and the rise in income tax will directly impact employee net income.
How Multiplier can help:
Navigating a major tax reform like the “Financing Law” requires expert local knowledge. Multiplier’s Global Payroll platform is built to handle such transitions seamlessly. We automatically update our systems to reflect the latest statutory tax rates and withholding requirements in Colombia, ensuring your team is paid accurately and on time. For companies hiring in Colombia through our Employer of Record (EOR) service, we manage the entire compliance lifecycle — from employment contracts to tax filings — so you don’t have to worry about the complexities of local law changes.
Conclusion
Colombia’s proposed “Financing Law” represents a bold step toward fiscal equity, but it demands a high level of agility from businesses and workers alike. As tax bases broaden and rates increase, maintaining compliance becomes a mission-critical task. Whether you are managing local employees or international contractors via Contractor of Record (COR), Multiplier provides the centralized dashboard and in-house expertise needed to scale safely in Colombia
FAQ
What is the main goal of the Colombian "Financing Law" bill?
The primary objective is to raise approximately COP 26.3 trillion (USD 7 billion) to finance the national budget, focusing on social investments in health and education while ensuring fiscal sustainability.
How will the income tax rates change for residents in Colombia?
The bill proposes a two percentage point increase in marginal rates for resident individuals with taxable bases above 4,100 UVT. The maximum marginal tax rate would rise from 39% to 41%.
What are the proposed changes to the Colombian Wealth Tax?
The threshold for the wealth tax would be lowered to assets exceeding 40,000 UVT (USD 563,226), and progressive rates would be modified to reach as high as 5% for very large asset holdings.
How does the bill affect the taxation of dividends for 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.
How can an Employer of Record (EOR) assist with these Colombian tax changes?
An EOR like Multiplier manages all local compliance, including the calculation and filing of updated withholding taxes and social security contributions, ensuring your business stays compliant with the new laws without needing a local legal entity.
