Colombia Approves Tax Reform And Increases Taxes On Occasional Winnings In Gaming

Colombia Approves Tax Reform And Increases Taxes On Occasional Winnings In Gaming

After 20 hours of debate in the House of Representatives and 14 hours in the Senate, the most important bill for the government of President Gustavo Petro was approved on Thursday: the Tax Reform.

The controversial initiative was approved amidst criticism from businessmen who warned about the risk of discouraging investment and employment generation, which together with other economic proposals, caused unrest in local markets, leading to an additional depreciation of the currency, the Colombian peso.

Within the framework of this reform, there are provisions that change the final amount that Colombian gamblers will receive when winning a prize, changes that will come into effect next year and that will affect the development of the sector.

According to the articles, one of the most important changes regarding prizes in games of chance in Colombia is based on the fact that the occasional winnings present lower rates than the maximum marginal rate of the general tax rate, “which affects the principle of equity”, said the Ministry of Finance when presenting the tax reform project.

The Government’s proposal was to eliminate the exempted income of prizes for bets and horse or dog shows, together with lotteries and games of chance, corresponding to an exemption currently in force of 410 UVT and 48 UVT, respectively.

But now, when receiving payments for the lottery, betting, and similar prizes, “the individuals or legal entities in charge of making the payment will apply a withholding tax rate of 20% at the time of payment”.

For Evert Montero Cardenas, head of Fecoljuegos, “what is going to be achieved with this reform for the gaming sector, finally, is to lead a great number of users of this activity to bet in illegal platforms that do not make any kind of withholding. I believe that this is an alert that must be taken into account and that, of course, it will affect the activity in some way, and everything that affects this activity directly affects the generation of resources for the health of Colombians, which is the destination of the taxes paid by the sector”.

In addition, it should be noted that a strong economic slowdown is foreseen in Colombia facing 2023, so it is likely that the cutback in family and personal expenses will start with entertainment and gambling. “These are non-primary activities in households, and they are the first to be affected,” said Montero.