Colombia tax reform keeps cross-border planning in focus

Diaz Reus | Colombia’s tax policy remains in a period of uncertainty following the rejection of the proposed Ley de Financiamiento by Congress in December 2025 and the subsequent adoption of limited emergency measures by decree. For Colombian families and entrepreneurs with U.S. investments, the key takeaway is that several of the most significant tax proposals were never enacted, although the current policy environment continues to warrant careful planning.

Among the proposals that did not become law were a 41% top individual income tax rate, an increase in the withholding tax on dividends paid to nonresidents from 20% to 30%, and an extension of the holding period required to qualify for the preferential capital gains regime from two to four years.

The emergency tax decree issued in December 2025, which temporarily introduced measures relating to wealth taxation, financial-sector taxation, indirect taxes and penalty relief, was declared unconstitutional by the Constitutional Court in April 2026. While the treatment of taxes collected, refunds and previously granted benefits requires case-by-case analysis, the decree should no longer serve as the basis for new tax planning.

Fiscal pressure nevertheless remains, and the government has indicated that further tax reform could be introduced either through Congress or through narrower emergency measures. Separate emergency measures adopted in 2026 also established a temporary net-worth tax for certain Colombian legal entities exceeding a specified net-equity threshold, a measure that may affect families holding U.S. investments through Colombian companies or family holding structures.

For Colombian tax residents, U.S. investments require separate analysis because worldwide income generally remains subject to Colombian taxation. U.S. dividends, interest, rental income and capital gains may therefore be reportable in Colombia, while high-net-worth individuals must also consider whether U.S. assets are relevant for Colombian wealth tax reporting.

On the U.S. side, Colombian residents who are not U.S. citizens, green-card holders or U.S. income tax residents are generally treated as nonresident aliens. U.S.-source dividends are typically subject to 30% withholding tax unless an exemption or treaty applies. Because the United States and Colombia do not have a comprehensive income tax treaty, treaty benefits available to residents of other jurisdictions generally are unavailable, making proper documentation, W-8 forms, broker reporting and foreign tax credit planning particularly important.

The article also highlights U.S. estate tax as a significant consideration for non-U.S. persons holding U.S.-situs assets directly, including U.S. stocks and real estate. Given the comparatively low filing threshold applicable to nonresident noncitizens, even relatively modest portfolios may create estate tax exposure.

Ownership structures therefore require coordinated analysis. While foreign companies or other holding vehicles may reduce U.S. estate tax exposure, they may also generate income tax, reporting, controlled foreign corporation (CFC), accounting, financing, banking and Colombian wealth tax implications. Trust structures likewise require careful consideration of trust classification, grantor status, beneficiary residence and reporting obligations. U.S. real estate investments also involve additional considerations, including FIRPTA withholding, federal and state taxation, liability protection, financing requirements and probate planning.

The article recommends that families confirm the tax residency status of each family member, prepare a complete inventory of U.S.-situs assets, coordinate withholding taxes and foreign tax credits, review ownership structures before liquidity events or succession, and reassess their planning annually in light of potential future reforms.

The conclusion notes that, although the rejected reform package should not prompt alarm, it should encourage Colombian families with U.S. assets to review ownership structures, tax reporting and estate planning before future legislative changes, court decisions or family transitions require action.


By Jason Jones, Senior Tax Attorney at Barbosa Legal (member of the DRT Alliance, headed by Diaz Reus International Law Firm)

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