The leader of the left-wing coalition ‘Pacto Histórico,’ Gustavo Petro, took office as the 61st Colombian president on August 7.
Within a day of inauguration, the executive branch presented a new tax reform bill (the tax reform bill), which has the intended goals of making the Colombian tax system more egalitarian, progressive, and efficient. The government hopes to meet these goals through provisions focused on taxing high-net-worth taxpayers, preventing tax evasion and avoidance, and promoting the improvement of the public health system and the environment.
The government’s expectation is for the bill to be passed before year-end. If this happens, then most of the bill’s provisions would become effective January 1, 2023.
Observation: Colombia is proposing significant changes to its tax legislation as part of President Petro’s agenda. Although the opposition party does not currently represent more than 20% of the Colombian Congress, the president’s party on its own does not have a majority in Congress. Given the current political environment, the bill is expected to be subject to debate, from both technical and political standpoints. Accordingly, certain provisions of the proposed bill may change during the discussion in Congress.
Action item: Taxpayers should monitor the progress of the bill through the legislative process.
The Tax Reform Bill includes key corporate tax measures, some of which are outlined below:
Director and International Tax Services, PwC US