The government of Colombia, under the leadership of outgoing President Gustavo Petro, is making new strides to establish a permanent 19% value-added tax (VAT) on online gambling.
As Colombia prepares for a transition of power with Abelardo de la Espriella set to be inaugurated on August 7, Petro’s administration submitted a new tax reform bill to Congress on Monday, targeting online gambling operators with this permanent VAT.
The government anticipates that the online gambling industry could contribute around COP1.7 trillion ($530.8 million) in tax revenue by 2027, assuming the VAT proposal is approved.
This VAT was initially introduced on an emergency basis in February 2025, with the government emphasizing the need for added funds to address civil unrest in the Catatumbo area. Attempts to make the VAT a permanent fixture failed last December when the Senate’s Fourth Committee rejected the Financing Law.
The mechanism for the tax was altered from being based on deposits to being linked to gross gaming revenue (GGR), though the Constitutional Court suspended the measure shortly after. In response to adverse conditions, including severe flooding in several provinces, the government enacted a March emergency decree that imposed a 16% consumption tax on deposits related to online gambling.
Given the Petro government’s recent struggles to pass legislation, this latest effort to cement the 19% VAT may encounter considerable opposition. Law firm Baker McKenzie suggests that the move to revert the tax basis back to deposits could exacerbate issues within the industry.
The Colombian government maintains that the 19% VAT has met its expected revenue targets without significantly harming the sector's viability. The bill claims there is "no evidence of significant deterioration in the sector that would justify terminating or scaling back the measure."
This position is at odds with the claims made by the Colombian Federation of Gambling Entrepreneurs, which reported a 30% drop in online GGR in the two months following the VAT’s initial implementation in early 2025. In response, several leading operators resorted to offering bonuses to players as a strategy to mitigate the effects of the tax.
The government argues that establishing a permanent VAT on online gambling aligns the taxation of digital services with that of land-based casinos, which already face the 19% VAT. Without this proposal, the law suggests that starting January 1, 2027, online platforms would unfairly benefit from a preferential tax treatment compared to their physical counterparts. The bill articulates that applying a uniform VAT rate to online gambling will help eliminate discrepancies in how goods and services are taxed, adhering to principles such as progressivity, horizontal equity, efficiency, and simplicity as mandated by the constitution.
