Colombia’s housing market is experiencing growing difficulties, recently highlighted in a study by Colombian outlet Revista Semana. The hardships stem from a combination of economic and policy-driven factors that are making it harder for both buyers and sellers to close real estate transactions. The situation is causing concerns among Colombians.
The Colombian government recently issued Decree 0572 of 2025, introducing significant changes to the withholding tax system. This measure aims to advance the collection of income tax revenues from 2026 to 2025, addressing a fiscal deficit nearing 7% of GDP and shortfall of at least COP 12 trillion (nearly USD $3 billion).
According to Colombia’s Ministry of Finance, the strategy could generate an estimated COP 7 trillion (nearly USD $1.6 billion)–about 0.4% of GDP–by advancing tax collections.
The decision is expected to have a significant impact on Colombia’s housing market, particularly on buying and selling processes.
The decree’s impact on Colombia’s housing market
An analysis by the Colombian Federation of Real estate Exchanges (Fedelonjas) revealed the potential consequences of the decree. The decree changes the self-withholding tax rates applied to economic activities.
Specifically, the regulation introduces two changes that directly impact property management and real estate sales, as well as brokerage activities, including commissions.
In this context, Fedelonjas has called for the repeal of the regulation and has publicly criticized the decree arguing that the increased tax pressure will hurt an industry that plays a key role in job creation and economic recovery. Their concerns are echoed by a growing support from business leaders, industry groups, and tax experts in the country opposing the measure as it could stifle investment and reduce housing accessibility.
In addition to the increase in the self-withholding tax rate, they point out that lowering the exemption threshold for withholding on home sales is another consequence. These changes represent significant challenges for the real estate sector in Colombia.
It’s important to note that starting June 1, the anticipated tax burden will increase. Specifically, the self-withholding tax rate for CIIU 6820 activities–which cover real estate services–will rise from 1.1% to 3.5%.
How is this affecting Colombians and foreigners?
The increase in tax rates, and lowered exemption thresholds are impacting both Colombian residents and foreign buyers involved in the real estate market. For Colombians, higher self-withholding taxes mean increased upfront costs when buying or selling property, potentially slowing down transactions.
Foreign investors face similar challenges, which could make Colombia’s property market less attractive compared to other countries with more favorable tax conditions. Foreign investors, who have increasingly viewed Colombia as an attractive real estate destination due to favorable prices and high rental yields, may now reconsider their plans. The increased taxation, combined with more administrative hurdles, reduces Colombia’s competitiveness compared to other Latin American markets.
For non-resident buyers, the lack of clarity around how these new self-withholding taxes are enforced and reported adds an extra layer of uncertainty. In some cases, foreign entities may now require local representation or legal assistance to remain compliant-raising costs and logistical barriers to entry.
Overall, these changes may reduce market activity and complicate investment decisions for all parties involved. Buyers and sellers alike may face delays in transactions or even be discouraged from entering the market due to increased complexity and costs.
In addition, smaller developers and independent brokers–already navigating a market affected by inflation and interest rate volatility–are voicing concerns that the new tax regime may lead to slowdown in property turnover and potential drop in housing demand. Colombia is certainly facing new challenges in one of the country’s most dynamic economic sectors.
Fedelonjas issues key recommendations for real estate companies amid new tax measures in Colombia
In response to the recent reforms affecting Colombia’s real estate sector, the Colombian federation of Real Estate Exchange (Fedelonjas) has released a series of strategic recommendations for companies operating in the industry:
Verify and update CIIU Code in Tax Registry (RUT): Companies should confirm whether their business or activity is registered under CIIU code 6820 in the RUT (Single Tax Registry), which classifies real estate services. If so, they must determine whether they are required to apply self-withholding tax under the new rules.
Review contracts and financial projections: It’s essential to revise existing commercial contracts to include provisions for the new self-withholding tax or withholding at source. Companies should also assess how the change will affect pricing structures, negotiations, strategies and overall profitability.
Inform clients and business partners: To avoid confusion during transactions, real estate firms are encouraged to prepare clear, informative materials or formal communications for clients and partners. These should explain the tax changes and how they may impact ongoing or future property deals.
Train accounting and legal teams: Billing, legal advisory, and real estate management teams must fully inform of tax modifications to ensure proper and timely compliance. Targeted training can help prevent costly errors and ensure smooth implementation of the new rules.
Assess the tax impact on income declarations: The accumulation of self-withholding taxes may result in credit balances or overpayments. Fedelonjas advises companies to develop tax compensation strategies in consultation with specialized advisors to optimize their annual tax returns and avoid liquidity issues.