On May 28, the Ministry of Finance and Public Credit issued Decree 0572 of 2025 (hereinafter, “the Decree”), which reduces the minimum withholding bases and increases the withholding and self-withholding rates for various sectors of the economy. These include the agricultural and livestock sectors, the construction sector, service providers, and industries dedicated to the manufacturing of goods and machinery, among others.
These changes have raised numerous concerns among business owners, as their main effect is the increase in the taxpayers’ anticipated tax burden. This brings several key challenges:
- Impact on projected cash flows for 2025, as the increased withholding and self-withholding will now apply to income that previously was either not subject to such deductions or was subject at lower rates.
- Potential generation of tax refunds in the income tax returns for the 2025 fiscal year. The Decree itself anticipates this possibility in its explanatory statements by acknowledging that the new rates may create situations of a “non-existent gap” — that is, cases in which withholdings and self-withholdings exceed the actual income tax liability of the taxpayer. In such situations, the Decree provides that taxpayers may request a refund or offset of the excess amounts, as provided under Articles 850 and subsequent of the Tax Code.
- Reduction of the income tax advance payment for the 2026 fiscal year, since, in accordance with Article 807 of the Tax Code, a higher withholding value in 2025 reduces the base for calculating the following year’s advance. While this could represent a future financial relief, it does not offset the immediate cash flow impact that this increased withholding represents for the current year (2025).
- Need to review tax planning strategies and billing and collection systems, as the new rates will be applicable starting June 1, 2025. This requires taxpayers to adjust their internal withholding mechanisms, accounting configurations, and even renegotiate contracts in cases where the applicable rate had been previously agreed upon with third parties.
Key Changes in Withholding and Self-Withholding Tax
Before delving into the most relevant changes introduced by the Decree, it is worth noting that withholding tax is a mechanism for the advance collection of income tax, applied by a third party at the time of payment or credit, and is applicable to all taxpayers who receive income subject to withholding under current regulations.
Self-withholding, on the other hand, is a special modality through which the taxpayer, being the party responsible for filing, withholds tax on their own income.
With regard to the key changes introduced by the Decree, these can be grouped into two categories:
- Reduction of minimum bases for withholding tax. The following table shows a comparison between the rates applicable until May 31, 2025, and the rates that took effect as of June 1, 2025, pursuant to Decree 0572.
| Actividades | UVT | Valor en pesos hasta el 31 de mayo de 2025 | UVT | Valor en pesos a partir del 1 de junio de 2025 |
| Prestación de servicios | 4 | $ 199.196 | 2 | $ 99.598 |
| Adquisición de bienes o productos agrícolas o pecuarios sin procesamiento industrial o en las compras de café pergamino tipo federación | 92 | $ 4.581.508 | 70 | $ 3.485.930 |
| Adquisición de bienes inmuebles para vivienda | 20.000 | $ 995.980.000 | 10.000 | $ 497.990.000 |
| Otros ingresos | 27 | $ 1.344.573 | 10 | $ 497.990 |
- Increase in self-withholding rates. The next table presents a comparative view of the rates applicable to certain economic activities:
| Actividades | Tarifa hasta el 31 de mayo de 2025 | Tarifa a partir del 1 de junio de 2025 |
| Extracción de gas natural | 1,80 % | 4,50 % |
| Construcción de edificios residenciales | 1,10 % | 3,50 % |
| Otras industrias manufactureras | 0,55 % | 1,20 % |
As shown in the tables above, Decree 0572 of 2025 not only increases rates and reduces minimum bases, but also expands the number of operations and taxpayers subject to withholding. These modifications pose significant challenges for most sectors of the economy, including:
- The direct impact on projected cash flows for 2025;
- The potential creation of tax refunds in income tax returns —which, in practice, may take months to be reimbursed or offset—;
- And the need to review and update accounting systems, billing schemes, and third-party contracts.
All these elements call for a strategic, technical, and timely response from taxpayers, who must adopt measures to mitigate the immediate financial impact of the Decree, while also addressing its implications for tax compliance and fiscal planning for the 2025 tax year.