Will withholding tax rates rise with tax reform?

He tax reform project of the National Government brings with it a series of changes in the withholding tax that the National Tax and Customs Directorate (DIAN) It applies to some of the country’s workers, taking away part of their income in advance.

Among the novelties of this initiative is the establishment of the rates of these withholdings, which will increase if the project is approved, according to the tax expert Juan Guillermo Ruiz, partner of the firm Posse Herrera Ruizfor THE TIME.

“The vast majority of people would see an increase in the effective rate applied. The reason is derived from the elimination of the withholding procedure 2, which calculates the fixed percentage applicable to the semester on the average of the income of the last 12 months prior to the calculation.“, said.

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The expert also mentioned that with this procedure, The withholding would no longer be calculated on the average of previous income.but on the value of those actually received each month. “This change will undoubtedly increase the effective percentage of most natural persons subject to withholding for employment income.“, he added.

Faced with the effects that they would have on higher wages, Ruiz assured that this will also apply to these, as well as to the measured salaries.

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“In short, the effective withholding would be increased for all those who are currently subject to withholding under procedure 2. In addition, high-income individuals could have a higher increase with the reform, since it adds a new withholding range.“, he explained to EL TIEMPO.

Withholding tax

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In response to this, he clarified that the new tax rate, which is 41%, would apply to annual income. greater than 31,000 tax value units (1.459 billion pesos). “This percentage would affect both employees and capital investors.“.

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To better explain this measure, the expert gave an example: “If we have a monthly salary of 10 million pesos in 2024, with a 10 percent increase for 2025, by eliminating procedure 2 for 2025, the withholding tax would increase by around 40%.“, said.

And he added: “For this case we assume that the taxpayer maximizes applicable tax benefits, including, for example, a dependent. The percentage increases in withholding at other salary levels are not as high, but in any case they increase.“.

PORTFOLIO
*With information from NOELIA CIGÜENZA RIAÑO – the weather