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4x1000 Tax levied on financial movements is questioned

4×1000 Tax levied on financial movements is questioned

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On August 17, 2021, the “El Tiempo” website commented that the elimination of the 4×1000 Tax in Colombia is being proposed.

1. On the 4×1000 tax

It should be recalled that the 4×100 tax started as the 2×100, being now highly questioned, only arising as a temporary idea but has become permanent. Thus, a bill has just arrived at Congress seeking the elimination of this tax. 

The 4×1000 tax is also called GMF (Gravamen a los Movimientos Financieros – Tax on Financial Movements), being a tax created in 1998 by then-President Andres Pastrana, who intended to solve the economic crisis of that time. 

2. What does the 4×1000 tax consist of?

The 4×1000 tax consists of discounting 4 pesos for every 1000 pesos of the transaction, whether it is a withdrawal, a transfer, a payment, and depending on whether it is from a current or savings bank account.

3. Proposed elimination

According to the aforementioned website, in order to seek the elimination of this tax, Alianza Verde representative Katherine Miranda filed an initiative reducing this tax progressively until 2025, after which it will be dismantled. It is proposed that the tax rate will be reduced as follows:

  • At three per thousand (3 x 1,000) in the year 2023.
  • At two per thousand (2 x 1,000) in the year 2024.
  • At one per thousand (1 x 1,000) in the year 2025.

4. Compensation proposal

Likewise, in view of the proposal, a tax on high income will be created for those earning monthly revenues of 10 million pesos or more to compensate for the effects of the aforementioned proposal.

Payment of this proposed new tax would be as follows:

INCOMERATE
Revenues between 10 and 12.5 million pesos2% rate
Revenues between 12.5 and 15 million pesos5% rate
Revenues between 15 and 18 million pesos8% rate
Revenues exceeding 18 million pesos10% rate
Source: El Tiempo 19/08/21

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