Colombia’s tax collection reached $23.3 trillion COP in June, a 6.5% increase over the same month a year earlier, according to proprietary indicators published by Grupo Cibest (NYSE: CIB; BVC: CIBEST, PFCIBEST), the Medellín-based financial holding company that owns Bancolombia. The estimate comes from the group’s Bancolombia Tax Tracker, one of two tools the bank has built from its transactional data to monitor public revenue and spending between official reports.

Colombia’s tax collection is tracking the 2026 target.

The trackers are produced by Grupo Cibest’s Economic, Industry and Market Research area. The Tax Tracker applies machine-learning models to the group’s transaction and payment-channel data to estimate monthly tax collection disaggregated by type of tax, while the companion Bancolombia Execution Tracker draws on the Bancolombia NowCast reading for the public administration sector to estimate budget execution by the central government.

Grupo Cibest states that the indicators are intended to complement, and under no circumstances replace, the official figures published by the national tax authority, the Dirección de Impuestos y Aduanas Nacionales (National Tax and Customs Directorate, or DIAN), and the Ministerio de Hacienda y Crédito Público (Ministry of Finance and Public Credit).

“Tax collection is in line with the Government’s tax revenue target for 2026.” — Grupo Cibest, Economic, Industry and Market Research

Increases in Tax Collection Across the Board

On the revenue side, the June increase was driven mainly by domestic value-added tax, up 13.5% year over year; the financial transactions tax (Gravamen a los Movimientos Financieros, or GMF), up 10.9%; and tariff revenues, up 7.6%. With the June result, cumulative tax collection in the first half of 2026 reached $162.6 trillion COP, 9.1% above the level recorded in the same period of 2025.

Stamp, excise and customs duties led the 12-month gains.

Measured against the government’s full-year goal, the first-half total is equivalent to 51.2% of the annual target of $317.5 trillion COP. Grupo Cibest estimates that, relative to the objective projected for the first six months of the year, collection reached 100% compliance, placing revenue in line with the government’s 2026 target.

The tracker’s breakdown by tax type, expressed as the year-over-year change in the trailing 12-month cumulative total through June, shows the widest gains in stamp duty, up 166.2%, and excise taxes, up 19.7%, followed by tariff and customs duties at 13.2%, the financial transactions tax at 11.7%, domestic VAT at 9.6%, and income tax at 8.2%, for a total increase of 8.6%. Three categories moved the other way: revenue from the gasoline and diesel tax fell 59.6%, the wealth tax declined 12.8%, and foreign VAT contracted 5.6%.

Government Expenditure Overshoots Target

Budget execution is running ahead of the 2026 path.

On the expenditure side, the Bancolombia Execution Tracker estimates that the government committed $39.2 trillion COP in resources from the Presupuesto General de la Nación (National Budget, or PGN) during June, a 9.0% increase over the same month one year earlier. Committed resources for the year through June reached $299 trillion COP, an execution rate of 53.8% of the 2026 National Budget.

Grupo Cibest characterizes that pace as an overperformance relative to the execution path scheduled through the sixth month of the year. To reach the budget’s full-year total of $556 trillion COP, the government would have needed to commit about $272.3 trillion COP by June; the actual figure implies an overshoot of roughly $26.7 trillion COP against the monthly target.

Halfway through 2026, both sides of the ledger are on or ahead of plan.

The group notes uneven performance beneath the aggregate figures. Revenue from domestic VAT, the financial transactions tax, and income tax has been strong through the year, while collection tied to fuel taxes, the wealth tax, and foreign VAT has shown weaker dynamics.

The Bancolombia Fiscal Tracker is an initiative of Grupo Cibest’s Economic, Industry and Market Research area, which describes it as an effort to monitor two variables central to the evolution of the fiscal deficit: tax collection and national-budget execution. The July edition was prepared by Macroeconomic Research Manager Jose Luis Mojica Agudelo, Quantitative Research Manager Arturo Yesid González Peña, and Macroeconomic Specialist Hector Steben Barrios.

Headline image  by Csaba Nagy via Pixabay.

The bill’s passage is uncertain, particularly with the 2026 presidential elections approaching. However, the breadth of the proposed changes warrants close attention. A summary of the key provisions, based on a document from PwC, is outlined below.

Value Added Tax (VAT)

The proposed reform includes several significant changes to the Value Added Tax (VAT) system:

• Online Gambling: Online gambling would be permanently subject to VAT, a measure that is currently in place temporarily until the end of 2025. This would also require non-resident operators to register for, collect, and file VAT where applicable.
• Filing Frequency: The VAT filing frequency would be standardized to every two months for all registered suppliers, a change from the current system, where some businesses file four times a year.
• Input VAT Creditability: The window for claiming input VAT credits would be reduced from eight to six months.
• Self-Charging VAT: Large taxpayers would be required to self-charge VAT on taxable services imported into Colombia.
• Fuel Oils: Taxation on fuel oils would be increased through adjustments to the taxable base and higher rates.
• Cultural and Sporting Events: Recreational, cultural, and music festivals, as well as sporting events, would be subject to a 19% VAT.
• Low-Value Shipments: The “de minimis” exemption for low-value shipments would be eliminated.
• Digital Services: The VAT exemption for cloud computing, hosting, and software licenses for digital content would be removed. This change is likely to impact non-resident providers selling services to VAT-unregistered customers in Colombia.

Energy Sector

The energy sector would also see significant changes:

• Extraction Tax: A 1% tax would be imposed on the extraction of coal and oil for domestic sale or export. This would apply to taxpayers with a taxable income of $585,000 USD or more in the previous year.
• Coal Producers: The income tax brackets for coal producers would be tightened, aligning them with those for oil producers.
• Renewable Energy: The 50% “super deduction” for qualified renewable energy projects would be replaced with bonds redeemable over 15 years. Supplies for these projects would become zero-rated.

Corporate and Capital Gains Tax

Several changes are proposed for corporate income and capital gains taxes:

• Financial Industry Surcharge: The surcharge for the financial industry would increase from 5% to 15%, in addition to the 35% headline corporate tax rate.
• Deductibility of Expenses: Withholding tax would become a prerequisite for the deductibility of costs and expenses.
• Amortization: Tax amortization of fixed-term assets and shares would be permitted.
• Capital Gains Tax: The capital gains tax for lotteries, raffles, and gambling would increase from 20% to 30%. The 15% rate for the sale of fixed assets would remain, but the required ownership period would increase from two to four years.
• Non-Resident Dividend Tax: The tax on dividends paid to non-residents would increase from 20% to 30%.

Personal Income Tax

The proposed reform would also impact personal income tax:

• Withholding Tax: The current withholding tax system, based on a 12-month average, would be replaced by a system based on monthly income tax brackets. The top marginal rate would increase from 39% to 41%.
• Dividend Tax Credit: The dividend tax credit for individuals would be eliminated.

International Taxation

The bill includes several provisions related to international taxation:

• Sale of Shares: For direct sales of shares, non-resident sellers would be required to provide proof of filing and tax payment to the local recipient’s agent. Both the agent and representative would be jointly liable for any outstanding taxes.
• Indirect Sales: Joint liability would be introduced for any unfiled income tax returns from the seller in indirect sales.
• Corporate Restructuring: Corporate restructurings using “effective place of management” rules would need to be reported to the tax office and in financial statements.
• Information Exchange: Failure to provide data for automatic exchange of information could result in the closure of bank accounts.
• Permanent Establishments: Taxation for permanent establishments would be aligned with the rules for tax residents.
• Related Parties: Limitations on costs and deductions for related parties would continue to be lifted if they are arm’s length compliant, but withholding tax would still be due where applicable.

Digital Taxation

The proposed reform also addresses digital taxation:

• Significant Economic Presence: The tax rate for taxpayers with a “significant economic presence” who elect to file annual income tax returns would increase from 3% to 5%.
• Digital Assets: Digital assets would be outside the scope of income tax, except where they represent underlying assets. They could also be eligible for tax amortization.
• Indirect Disposal of Assets: The indirect disposal of assets in Colombia through the international transfer of digital assets would become subject to income tax.

Tax Amnesty

The bill includes provisions for a tax amnesty program:

• Penalties and Interest: Penalties and interest could be reduced under certain circumstances for unfiled returns, unpaid taxes, or ongoing tax disputes, provided the underlying tax is fully paid.
• Undeclared Assets: Underreported assets or over-reported liabilities as of January 1, 2026, would be subject to a 15% complementary tax rate, without triggering penalties or interest.

Miscellaneous Provisions

Other notable provisions include:

• Excise Tax: Excise tax rates for beers and liquors would be leveled to 30%, with a broadened taxable base based on liquor content.
• Amended Returns: The window to file amended returns to pay more tax or increase a tax receivable would be tied to the statute of limitations (3 or 5 years).

The proposed tax reform is extensive and could have a significant impact on businesses and individuals in Colombia. As the bill makes its way through Congress, taxpayers must stay informed of any developments.

Finance Colombia will continue to monitor the progress of this legislation. Readers are encouraged to follow financecolombia.com for the latest updates.

Gustavo Petro at his 2025 Labor Day rally. Photo credit: Presidencia de la República de Colombia.

Those resources are not coming from commodities. Despite oil production having increased since the days of Duque/Bayon, July exports from Departamento Administrativo Nacional de Estadística – DANE Colombia were again down 4.1% with commodities (-25%) and oil (17%) both lower.

There were some sensationalist headlines (Bloomberg around how much tax the rich will pay under the new reform however, it is far more nuanced than that. Consumption accounts for around 27% (of the $6 billion USD), but there are areas of pure common sense within that. Alcohol & tobacco are two areas proposed, as well as VAT on international tourists. Where the rich may get more nervous is that 24% of the reform is geared towards lowering evasion – Colombians are experts at hiding their funds overseas and/or hiring brilliant accountants. Other areas targeted are mining/energy (3%), gambling (6%), & fuel (10%).

It’s a many-headed snake, but just as Perseus took care of Medusa back in Greece, the Colombian Congress will take a sword to the tax reform, as well as the 2026 budget – much of the media debate will prove redundant. Let’s see what is left in a few weeks.

In terms of the overall fiscal picture, made worse every month by the above exports and booming domestic demand, plenty are saying that the key is to reduce government spending by 3-4%/GDP, which seems sensible. But is that in education, the fight against poverty, or perhaps by simply suspending some massive public infrastructure projects?. Whatever Gustavo Petro does, the ANDI – Asociación Nacional de Empresarios de Colombia and its peanut gallery members will still be moaning.

Was it a sailboat or a speedboat? Was it carrying drugs? Did the US act legally? Was it dispatched by Nicolás Maduro? Will Donald Trump continue to punch downwards until he finds a country that doesn’t bite back? Is Petro correct to speak of caution, given that Colombia shares a 4000 km land border with Venezuela? Simply a rabbit hole I’m going to avoid.

There was news elsewhere in brief.

The current account deficit widened to 2.5%/GDP in Q2.

Vehicle sales in August hit 21,285, up 29% YoY.

The Colombian birthrate fell again in 2024 by 13.7% – no extinction fear yet, but growth is slowing.

A lumpy Friday to say the least!

Regards.

Roops.

Never miss Rupert’s latest commentary.
Follow him now on LinkedIn to see What Jumps Out.

Roulette wheel. Photo credit: stux from Pixabay.

The comprehensive report analyzes over 40 variables across five categories: corporate taxes, individual taxes, consumption taxes, property taxes, and cross-border tax rules. While Colombia has some bright spots in its tax code, significant weaknesses in corporate and property taxation drag down its overall score, making it the most challenging tax environment for businesses and investment within the OECD.

The Colombian government’s tax authority, the Dirección de Impuestos y Aduanas Nacionales (DIAN), is responsible for administering this complex system. The Tax Foundation’s report suggests that Colombia’s current tax structure may hinder economic growth and foreign investment.

Strengths of the Colombian Tax System

Despite its low overall ranking, the report highlights some positive aspects of Colombia’s tax policies:

• Low Burden on Average Workers: A worker earning the nation’s average wage faces the lowest tax burden in the OECD. This is a significant advantage for the country’s workforce and can help to stimulate consumer spending.
• Competitive Dividend and Capital Gains Taxes: Colombia taxes dividends and capital gains at relatively low rates of 15% and 20%, respectively. These rates are attractive to investors and can encourage capital formation.
• Average VAT Rate: The Value Added Tax (VAT) rate of 19 percent matches the OECD average and is applied without a minimum earnings threshold, creating a broad and relatively efficient consumption tax base.

Weaknesses of the Colombian Tax System

However, the report also identifies several critical weaknesses that contribute to Colombia’s poor ranking:

• High Corporate Income Tax: At 35 percent, Colombia’s corporate income tax rate is the highest in the OECD and significantly above the 23.9 percent average. This high rate can discourage business investment and make it difficult for Colombian companies to compete globally.
• Worldwide Corporate Tax System: Colombia is one of the few OECD countries that operates a worldwide corporate tax system, meaning it taxes the foreign profits of its multinational corporations. This is in contrast to the more common territorial system, which exempts foreign profits from domestic taxation. This can lead to double taxation and reduce the competitiveness of Colombian businesses abroad.
• Additional Taxes: Colombia levies a net wealth tax and a financial transactions tax. These taxes are considered to be some of the most distortive and harmful to economic growth, as they discourage savings and investment. The presence of these taxes further complicates the tax system and adds to the burden on individuals and businesses.

Colombia’s tax environment works to retard growth and investment opportunities in the country, and encourages taxpayers to seek complex tax shelters, often abroad. The country’s worsening fiscal deficit crisis also means that significant tax relief is probably not likely soon. While the country has some competitive features in its tax code, the significant drawbacks, particularly in corporate and property taxation, create a challenging environment for economic growth. Addressing these weaknesses will be crucial for improving Colombia’s competitiveness on the global stage.

DIAN team on the ground. Photo credit: DIAN Dirección de Impuestos y Aduanas Nacionales de Colombia/Facebook.

I am a professional photographer and use Japanese cameras and lenses. Colombia does not make any such equipment, and sellers and resellers here have outrageous prices. I therefore have no other option but to import my camera gear. 

My Experience: A $500 USD Lens Becomes a $750 USD Purchase 

Last month, I bought a camera lens online for $500 USD and paid $53 USD for DHL shipping. Colombia’s law clearly states that any item worth less than $200 USD is exempt from customs duties. This makes sense – it helps small importers and regular people who buy personal items online for their personal use. 

But here’s where the system becomes unfair. Instead of applying duties only to the amount above $200 USD, DIAN charges customs fees on the full $553 CIF value (item plus shipping costs). This is how my customs fees were calculated: 

• Gravamen Arancelario: 10% on $553 USD = $219.000 COP

• IVA (VAT): 19% = $457.000 COP

• Manejo de Envío: $123.359 COP

• IVA Sobre Manejo + Cargo: 19% on $123.359 COP = $23.438 COP

Additional fees and calculations bring the total to exactly what I paid. Total customs charges: $822.797 COP (about $200 USD)

This means I paid an additional 40% of the item’s value in Colombian customs charges and taxes, turning my $500 USD lens into a $750+ USD purchase when you include shipping and customs fees. 

Questions in my mind 

• Should there be an IVA levied on the basic duty? Note: I am not buying my lens from Colombian Customs. 

• What is the handling fee for? Is that not covered in the basic customs charges? 

• Is the DIAN system a penalty for importers? That does not make sense: Colombia does not make the item, and it has to be imported. 

The Core Problem: Ignoring the $200 USD Exemption 

The law says items under $200 USD are exempt from duties. Logic tells us that for items over $200 USD, only the excess amount should be taxed. If someone imports a $199 USD item, they pay zero duties. But if I import a $201 USD item, I suddenly owe duties on the full $201 USD, not just the $1 USD over the limit. 

This creates a massive jump in costs for items just over the threshold. It’s like having an income tax system where earning $1 USD more pushes you into a bracket that taxes your entire income at a higher rate, not just the excess. 

How Other Countries Handle This Fairly 

Most countries with de minimis thresholds apply them correctly. In the United States, items are exempt from duties up to $800 USD, and duties apply only to amounts above that threshold.  

For example, using my case, if someone imported a $553 USD item to a country with a $200 exemption (like ours should work), they would calculate duties on $353 USD, not the full $553 USD. This makes the exemption meaningful and creates fair treatment across different purchase values. 

The Impact on Colombian Consumers 

This current system hurts regular Colombians in several ways: 

• Economic burden: People buying essential items like medical equipment, educational materials, or work tools (including IT equipment which are not made in Colombia), face unexpected costs that can double their purchase prices. 
• Unfair treatment: The current system means the $200 USD exemption is essentially worthless for most imports, as courier shipping typically costs $30-60 USD, pushing most items over the threshold. 

Photographic equipment that cannot be repaired in Colombia, and has to be sent to the USA for repair. The cost of parts, service, and courier will push the total cost above $200 USD. 

Reduced competitiveness: Local businesses that need to import supplies or equipment face higher costs, making them less competitive compared to companies in countries with fairer customs systems. 

Discourages small business: Entrepreneurs who want to import small quantities of products for resale face prohibitive customs costs that make their business models unworkable. 

A Simple Solution 

DIAN should change its calculation method to apply customs duties only to the amount above $200 USD. Using my example again: 

• Item value: $500 USD

• Shipping: $53 USD

• Total CIF: $553 USD

• Taxable amount: $553 USD – $200 USD = $353 USD

• Customs duties would then apply only to the $353 USD

This would reduce my customs fees from $200 USD to about $110 USD, making the exemption meaningful and fair.

Time for Reform 

If the shipments are equal to or less than $200 USD, they are exempt from customs duties – this is what the law says. But DIAN’s interpretation makes this exemption almost meaningless for most imports. 

Other countries manage to implement fair de minimis systems without losing significant revenue. Colombia can do the same. The current system doesn’t just hurt individual consumers – it reduces our economic competitiveness and discourages the kind of small-scale importing that helps diversify our economy. 

I call on DIAN to review their calculation methods and implement a fair system that honors the spirit of the $200 USD exemption. Colombian consumers deserve customs policies that support economic activity, not systems that create artificial barriers to fair trade. 

The law already exists. We just need DIAN to apply it fairly. 

Photo credit: Mano Chandra Dhas.

Many Colombian companies, however, appear to fail to recover the refundable VAT they are entitled to, on their overseas business expenses. This misguided indifference results in millions of euros being left unclaimed annually – funds that could be reinvested in business growth and operational efficiencies.

Let’s study the probable reasons for VAT on business travel not being recovered.

Lack of Awareness: A Major Obstacle

Perhaps one of the main reasons Colombian businesses do not recover VAT is a lack of awareness. Many business leaders or owners do not seem to realize they can reclaim VAT on expenses such as hotels, transportation, conference fees, and business-related purchases. Unlike North American and Asian companies that actively take advantage of VAT recovery, Latin American businesses, especially in Colombia, lag.

Additionally, the complexity of VAT regulations across European countries further discourages companies from exploring this opportunity.

Skepticism Toward VAT Recovery Companies

Colombian companies who may even be aware of VAT recovery opportunities often hesitate to engage professional firms specializing in the recovery process. Many financial officers worry about hidden fees, excessive bureaucracy, or lack of transparency. Some also fear that filing VAT refund claims might attract unnecessary scrutiny from European tax authorities, leading to audits or additional paperwork.

Such skepticism may typically prevent businesses from reclaiming substantial amounts of VAT. However, reputable VAT recovery firms operate on a success-based fee model, charging only a percentage of successfully recovered VAT. Frequently referred to as a contingency fee. A company does not have to pay anything until the VAT is refunded. That’s a win-win situation.

Understanding how to identify trustworthy firms (not a difficult process at all), could alleviate concerns and encourage more companies to act.

Internal Inefficiencies: A Costly Barrier

Many Colombian companies lack streamlined systems for tracking VAT-eligible expenses, making the recovery process more challenging. Common inefficiencies include:

• Poor internal documentation processes: Companies often fail to retain proper VAT invoices and receipts, which are essential for VAT recovery claims.
• Lack of Accountability: Without a person who has been made responsible for VAT recovery, claims will regularly go unfilled, leading to lost opportunities.

Millions Left on the Table

The financial impact of failing to reclaim VAT is significant. Colombian companies doing business in Europe collectively forfeit millions of euros annually. This unclaimed money represents a missed opportunity for reinvestment in business expansion, innovation, and operational improvements.

For example, a company that spends €50,000 EUR annually on European business travel could be eligible for VAT refunds of up to 20-25%. That could potentially lead to a recovery of up to €12,500 EUR per year. Over time, these lost refunds add up to considerable amounts of lost capital.

By educating company teams, leveraging technology, and seeking professional guidance, businesses can reclaim substantial funds that are rightfully theirs

Steps to Maximize VAT Recovery

• Engage professionals: Partnering with reputable VAT recovery firms can simplify the process and maximize refunds.
• Educate finance teams and travelers: This is often handled by VAT recovery companies. They create information leaflets. It will be good for nominated people from the company’s finance department to learn more about VAT refunds. Additional knowledge can be acquired as the company moves ahead with the process.
• Establish internal protocols: Businesses should create clear policies for collecting, reviewing, and submitting VAT-eligible receipts and invoices.
• Stay updated on regulations: European VAT regulations vary country by country and change periodically. Staying informed ensures compliance and maximized recovery. Again, a VAT recovery company’s account manager will keep contacts in the finance department updated.
• Leverage technology: It would, of course, be an advantage to implement digital expense management solutions. It would ensure accurate tracking and documentation of VAT-eligible expenses. Technology could assist greatly but is not needed for the process. Small and Medium Businesses (SME), can easily recover VAT as well.

In Conclusion

Colombian companies must shift their perspective on VAT recovery – from viewing it as a complex and troublesome process to recognizing it as a strategic financial opportunity. Barriers such as awareness gaps, distrust, and inefficiencies continue to persist, but they are not insurmountable. By educating company teams, leveraging technology, and seeking professional guidance, businesses can reclaim substantial funds that are rightfully theirs.

With Colombian-European business relations expanding year-on-year, ignoring VAT recovery is no longer an option. Companies that fail to act are leaving money on the table. Recognizing and addressing this issue can lead to significant financial benefits, making VAT recovery an essential strategy for long-term business success.

Headline Image Credit: Mano Chandra Dhas.

It is important to always ask for an electronic invoice, as cash register or handwritten receipts are non-reimbursable.

Foreign tourists may request the refund of sales tax – VAT for the purchase of taxed movable property as long as the value of each sales invoice is equal to or greater than three (3) units of tax value – UVT (equivalent to $38,004 pesos in 2022 and $42,412 in 2023. The maximum refund is 200 tax value units, so in 2023 that would be $8,482,400, or over $1,700 USD as of publication.

Colombian residents are not eligible for VAT refunds. The goods purchased must be leaving the country with the foreign visitor, and the purchase must be supported by electronically traceable invoices. In other words, the retailer would have submitted the purchase to the DIAN electronically. Most major Colombian retailers do this automatically, as they are required to by law, for all retail transactions. Eligible invoices and receipts will have a CUFE code that starts with CUFE: Followed by a long string of letters and numbers. It is important to always ask for an electronic invoice, as cash register or handwritten receipts are non-reimbursable.

There are traveler service points for processing refunds located at major airports, seaports and land border crossings. Look for either DIAN offices, or self-service kiosks before security checkpoints that will be staffed by either DIAN officials, or Global Blue, their outsourcing contractor.

Based in Medellín, Humberto Rodriguez is bilingual, and accredited in Colombia as both a lawyer and accountant.

Allow yourself extra time when traveling to complete the refund application procedure at the airport or border crossing. You will need:

• The refund request form, available on-site
• Passport and/or other appropriate identification
• The actual products that you purchased and are taking with you out of Colombia
• The physical or emailed electronic invoices

The DIAN may take up to one month to process refunds, which in most cases will be returned via the credit card the traveler used to make the purchase. VAT refunds only apply to merchandise, not services.

For questions about VAT refunds, please do not contact Finance Colombia! Instead, contact Rodriguez & Asoc. Bilingual tax specialists in Colombia at info@rodriguezasociados.co or click on the banner below.

This guest article is published as a courtesy to readers. Finance Colombia is a news publication and does not provide financial, legal, or tax advice. This information is provided as general news and the reader must consult is or her own counsel in order to make qualified, informed decisions. Information, rules, procedures, and laws may (and almost certainly will) change, and Finance Colombia assumes no responsibility for accuracy or timeliness of information.

Headline image by Tracia from Pixabay

The new tax bill places export duties on coal by up to 10% and petroleum by up to 15% depending on commodity prices and raise taxes on Colombians earning more than $2,000 per month (10 million pesos, precisely). The law also removes the tax deductibility of petroleum royalties paid to the government by both coal miners and petroleum producers.

With petroleum and coal being Colombia’s most economically important exports, the shock drove the peso, already down 25% the past year, to a historically low $5,070 COP to the USD. Finance Minister José Ocampo complained that the markets were “overreacting,” while defending the package saying: “This is the most progressive reform in history! There are obviously some sectors which will pay more taxes, but all have high earnings.”

Dividends will be taxed at 15% and the wealth tax will be 0.5% on assets exceeding 3 billion pesos, 1% on assets over 5 billion pesos, and 1.5% on assets over 10 billion pesos.

A new 5% tax is imposed on digital streaming services such as Netflix and HBO Max with at least 300,000 subscribers in Colombia. This is not restricted to video, but also applies to audio streaming and web portals.

The Senate bill must go through a reconciliation process with the house bill before the president signs the final version.

The Petro administration sought to impose a 20% tax on churches, but that measure did not pass congress in the heavily Catholic country. Colombia already has a Value Added Tax (VAT, or IVA in Spanish) Taxes were also rejected on bread, sandwiches, crackers, honey, milk and yogurt, but will be placed on the following foods:

• Other dairy products besides milk and yogurt
• Sausages, meat, offal, insect-based food (ants are a famous snack with some Colombians)
• Prepared or preserved meats
• Confectionery items
• Chocolate, basic and prepared
• Baking and pastry mixes
• Cereal
• Pastries and bakery products
• Jams, marmalades, and jellies
• Ice cream

Above photo: Colombia’s taxation chief Luís Carlos Reyes (left) & Finance Minister José Ocampo in congressional chambers (photo: Twitter account of President Gustavo Petro)

The monthly number (0.51%) was below the consensus of 0.54% but core inflation continues to bubble up. There are no consensus estimates but while the June reading of 0.47% was below that of May’s 0.68% – the 12m number rose to 6.84% from 6.50%.

In terms of the headline number, it was food (+0.65%) & housing (+0.65%) which caused the most damage, meat (0.07%) was again a major contributor.

All this was on the day the central bank minutes were published and whilst there wasn’t a great deal of new information versus last week’s press conference there is much to cause alarm.

The Central Bank is still behind the curve, where is seems to have been since the end of 2021. Emerging market central banks may have acted faster than those of the developed world, but it doesn’t mean they have done enough. The decision to increase rates from 6% to 7.5% was unanimous but the magnitude of that increase surely demonstrates the depth of concern.

In the minutes there are comments that allure to inflation being further driven by consumer spending and weak peso and it is hard to see what can be done about that – the dollar is slapping every currency in the world around and Colombia is no exception, now with oil wobbling things could get worse.

Yesterday incoming Finance Minister Ocampo said there will be no more VAT free days; that is a move I personally champion. It was one thing at the depth of COVID as a panic measure but when your economy is booming it only encourages reckless spending whilst denying valuable revenues to the central government. The local retailer federation Fenalco was up in arms – showing little consideration for the much bigger picture.

Fedesarrollo in their latest survey saw analysts calling for an 8.5% terminal rate by September – is that now feasible if spending continues, oil stumbles or the rain continues? Perhaps the Central Bank needs to make another extreme rate increase before inflation really gets away from them whilst this might at the same time add a little protection to the Peso?

________________________________________

That is about it for today – remember these are just themes that jump out at me – please refer to your local analyst, economist, salesperson or soothsayer for more details.

My regards to all,

Roops

Under the new regimen, the government has to make good on refunds within 10 days from filing when using a third-party VAT refund service, or one month when a traveler applies for a refund directly.

Previously, only certain purchases were eligible for VAT refunds. Now, all product purchases qualify.

To apply for a VAT refund request, travelers must initiate the procedure at the time of departure from the country and before checking luggage. In the event that the applicant’s flight itinerary has a domestic stopover, the return request should be made at the port or airport where the baggage is checked with the airline.

The documents to be submitted are:

• Request for refund in the format and through the mechanism indicated (DIAN tax authority form)
• Electronic invoices for purchases made. The date of the invoice must be between the date of entry into the country and the date of departure.
• Documentation of the visitor’s status as a tourist (as opposed to visiting Colombia on a work or residency visa).
• Upon request, the traveler must demonstrate to the DIAN that the purchased goods for which the traveler is applying for a refund are actually leaving Colombia with the traveler.
• The foreign traveler is still responsible for any customs or duties in his or her destination country.

The VAT refund may be credited to the international credit card issued outside the country and indicated on the return request, or alternatively in cash.

“We seek to encourage tourism by expanding the coverage of the VAT refund benefit to foreign tourists through an agile mechanism. This will boost the purchases of national products by those who visit us from abroad. In this way, we continue to work for the reactivation of the country’s economy,” said the Ministry of Commerce, Industry & Tourism’s director of Tax Management, Julio Lamprea Fernández.

“As tourism was one of the activities most affected by the pandemic, we are working for its recovery on several fronts. We are committed to restoring its importance in the national economy. We have the destinations and the infrastructure, which is complemented by stimuli such as this tax refund. This is one more incentive for world travelers to visit us and contribute to safe economic reactivation,” said Minister of Commerce, Industry and Tourism, María Ximena Lombana Villalba (above photo).

For questions about VAT refunds, please do not contact Finance Colombia! Instead, contact Rodriguez & Asoc. Bilingual tax specialists in Colombia at info@rodriguezasociados.co or click on the banner below.