The country is going through a complex fiscal scenario. According to International Monetary Fund (IMF), both the fiscal deficit and the level of indebtedness have exceeded initial projections, as a result of a lower tax collection and a growing primary expenditure. Thus, in order to alleviate cash pressures and maintain the payment of public debt commitments, the Ministry of Finance presented a draft decree that seeks to update both rates and minimum bases for income tax withholding at source. This initiative raises adjustments to Decree 1625 of 2016, based on the provisions of Article 365 of the Tax Statute, which grants the national government the power to regulate this collection mechanism by decree, without the need for legislative proceedings in Congress.
Among the main modifications of the project is the reduction of the minimum threshold to apply withholding on payments for services, which goes from 4 to 2 UVT, thus broadening the taxable base. In addition, with respect to agricultural and livestock purchases without processing, the possibility for the withholding agent to decide whether or not to apply the withholding is eliminated: when the payment exceeds 70 UVT, a rate of 1.5% must be mandatorily applied. On the other hand, more specific criteria are established for the acquisition of real estate: purchases of housing intended for housing with a value of less than 10,000 UVT will be subject to a withholding of 1%, while those that exceed that amount or have a different use will be taxed at a rate of 2.5%.
Additionally, new bill introduces adjustments in the minimum base for applying withholding as well as in the self-withholding rates, which will range from 0.55% to 4.5%, depending on the economic activity. For example, agriculture and livestock would have a rate of 1.2% while activities related to mining and hydrocarbons would be between 2.2% and 4.5%.
Thus, according to estimates of DIAN, this measure is expected to generate an advance in the collection of around $7 billion, which according to analysts’ calculations could exceed $13 billion. Although in the midst of the crisis this measure seems to provide relief, the truth is that it is not a desirable solution.
The measure, without being accompanied by a structural tax reform, implies a change in the logic of tax collection. In reform contexts, this type of measure usually contributes to a gradual adaptation to the new tax scheme. However, in the current situation, anticipating the payment of taxes could translate into additional financial pressure for companies, deteriorating their liquidity and impacting their operating capacity. In addition, as if that were not enough, there is an adverse effect on future tax collection. By increasing the advance payments, more balances are deducted from the actual tax returns, which reduces tax revenues for the following year, as happened in 2023-2024. Undoubtedly, this project, which improves the current cash flow but compromises revenues in 2026, turns out to be an inconvenient measure.
Source:
- Comentario Económico de ANIF, Abril 22 de 2025
