Published on Tuesday, September 14, 2021

Colombia | What should you know about the fiscal reform?

The tax reform includes social measures, mainly transitory, to mitigate the effects of the pandemic on the most vulnerable and raises revenues in COP15.2 trillion on a permanent basis. Of this, 70% from corporate taxes and the rest from anti-evasion and austerity. The fiscal rule is also reformed.

Key points

  • Key points:
  • In the social area, it extends, on a transitory basis, the payroll support program -PAEF- (from May to December 2021), focused on companies with 50 workers or less, and the Solidarity Income program (until December 2022). In addition, support is provided for employment and higher education.
  • The reform makes it possible to increase, on a transitory basis, the liquidity and spending of local authorities and to support, in 2021, the financing of transportation systems in large and intermediate cities, among others.
  • In the tax area, the main measures are the increase of the corporate income tax rate from 30% to 35% as from 2022, the continuation for three additional years, from 2023 to 2025, of the 3 points income surcharge for financial entities and the continuation at 50% of the Industry and Commerce tax discount -ICA-, which increased to 100% as from 2022. The reform also broadens the Simple Taxation Regime, a regime specially created to benefit smaller businesses.
  • Most of the revenues expected from the reform are of a permanent nature and the main social expenditures introduced are transitory. With this, the reform will contribute to improve the Government's balance in the medium term, starting in 2023.
  • Despite the fact that the additional revenue from the recently approved reform was included in the Government's accounts presented in the Medium-Term Fiscal Framework in June 2021, the Central National Government's debt as a percentage of GDP remains at very high levels, close to 70% in 2023-24.

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