Bogota is moving forward with a major overhaul of its local tax system that would significantly increase the tax burden on some financial activities, prompting concern across Colombia’s fintech ecosystem over the potential consequences for startups, investment and innovation.
The measure is part of Bogota’s Draft Agreement 724 of 2026, known as the “Smart City Agreement,” a broader initiative promoted by Mayor Carlos Fernando Galan’s administration to simplify local taxation, attract investment, finance infrastructure, provide relief to taxpayers with outstanding debts and restructure the city’s Industry and Commerce Tax, or ICA.
The proposal is broader than the financial sector, but one of its most controversial provisions raises the rate applied to major financial activities, placing fintech companies at the center of the debate.
For Colombia’s fintech sector, the concern goes beyond whether businesses should pay more taxes. The key issue is how the ICA is calculated and what a higher rate could mean for companies that generate revenue long before they become profitable.
Gabriel Santos, president of Colombia Fintech, has become one of the most visible voices questioning the measure and has made many of his warnings directly through his social media accounts. In recent weeks, Santos has repeatedly argued that Bogota risks undermining its ambition to become a regional hub for entrepreneurship and financial technology if it increases recurring costs for companies that are still scaling.
In one recent public statement, he warned that Bogota was at risk of “losing its competitiveness” by increasing the tax burden on traditional financial institutions and fintech companies. His argument is that the debate should also consider whether the reform could influence investment and future expansion.
The controversy entered a decisive phase on Sept. 24, when Bogota’s City Council approved Article 21 of the proposal, which restructures ICA rates for financial activities. Under the approved text, the rate would rise to 20 per thousand through 2027, decline to 19 per thousand in 2028 and settle at 18 per thousand beginning in 2029.
The original proposal had contemplated an increase from 14 per thousand to 21 per thousand, equivalent to a 50% rise in the headline rate, but negotiations during the legislative process softened that formula. Even with the adjustment, the rate remains substantially above the current level.
Why this tax matters for fintech companies
For an international reader, the first important distinction is that this is not a nationwide Colombian tax reform. The ICA is a municipal tax, so the current debate concerns Bogotá rather than Colombia as a whole.
Its significance nevertheless extends beyond the capital because Bogotá concentrates a large share of the country’s banking, technology, venture capital, and startup activity. ICA stands for Impuesto de Industria y Comercio, or Industry and Commerce Tax, and it is imposed locally on industrial, commercial, and service activities.
What makes it especially relevant to the fintech debate is that it does not function like a traditional corporate income tax based simply on a company’s final profit. Instead, it is calculated using a taxable revenue base defined under Colombian law, with special rules for financial institutions.
That distinction matters because a company can generate taxable revenue while still losing money overall. A young fintech may spend heavily on software development, cybersecurity, regulatory compliance, customer acquisition, hiring, and expansion for several years before reaching profitability.
An established financial institution and a three-year-old technology company can therefore both generate significant revenue while operating under very different financial conditions. Santos has repeatedly used that point to explain why Colombia Fintech views the proposed increase as particularly challenging for younger businesses.
In one of his recent public posts, he argued that the ICA is paid on income rather than profits and that a new company can therefore face the tax before seeing its first earnings. The concern is not that fintech companies should be exempt from taxation, but that a tax tied to revenue can represent a heavier relative burden for businesses still investing aggressively.
Under the current rate, every 1,000 units of taxable base generate 14 units of ICA. Under the 20-per-thousand rate approved for the first stage of the reform, the same taxable base would generate 20 units. The city argues that this adjustment reflects the financial sector’s capacity to contribute and notes that the sector is subject to special rules when determining its taxable base.
Bogota’s administration has also emphasized that ICA actually paid may be deductible when calculating national corporate income tax, subject to Colombian tax rules, and has compared its proposed rates with higher rates applied to certain financial activities in other Colombian cities. From the city’s perspective, the measure is intended to rebalance the local tax system rather than penalize innovation.
For fintech representatives, however, that comparison does not fully address the underlying issue. Their argument is that the financial sector is not economically uniform. A decades-old bank with a large customer base, established margins, and predictable profits operates under a different business model from a startup that is burning capital to grow. Treating both within the same broad tax structure can therefore produce very different effects.
That is why Santos has focused much of his public campaign on the idea that Bogota could make it harder for technology companies to scale at precisely the moment when the city wants to position itself as an innovation center. “There is no way Bogota can call itself the capital of entrepreneurship while punishing those who innovate,” he said in a recent appeal to the City Council.
Could it make Bogotá less attractive for investment?
The next question is whether a higher ICA could affect investment or the cost of financial services. Colombia Fintech and other industry voices argue that increasing recurring operating costs can influence where companies decide to expand, hire, or deploy capital, particularly in sectors where much of the business can be organized digitally.
For a startup, taxation is only one factor among many, but it becomes relevant when founders and investors compare jurisdictions, especially when the company is still far from profitability. Santos has repeatedly argued through his social media channels that Bogotá risks sending a contradictory message: It wants to attract technology investment while raising taxes on a sector closely associated with digital transformation and financial inclusion.
Those concerns should be separated from proven outcomes. A higher ICA does not automatically mean fintech companies will leave Bogotá, stop investing, or raise prices. Responses would depend on each company’s margins, access to capital, and ability to absorb higher costs. Consumer effects are also not direct: Lending rates depend on monetary policy, funding costs, borrower risk, competition, and operating expenses, among other factors.
The competitiveness debate is similarly complex. Local taxation may influence where entrepreneurs establish teams and future operations, but moving an office does not necessarily eliminate an ICA obligation in Bogotá because Colombian rules determine where economic activity is taxed. The more relevant question is whether tax conditions affect where new investment and future growth are placed.
Why Bre-B became part of the debate
The ICA increase is not the first part of the proposal to generate friction between Colombia Fintech and Bogotá’s administration. An earlier controversy involved Bre-B, Colombia’s instant-payment infrastructure created by the central bank. Santos publicly raised concerns about provisions that the industry feared could introduce additional ICA withholding friction around digital transactions, arguing that Colombia has spent years trying to move individuals and small businesses away from cash and toward digital payments and that adding tax-related complexity could work against that goal. He again used his social media platforms to bring the issue into the public debate.
The latest version of the proposal contains provisions intended to address some of those concerns. Bogotá says qualifying small businesses with annual income below approximately US$30,000 (COP 101.2 million) would not be subject to ICA withholding on certain debit and credit card income under the conditions established in the reform. The city has also maintained that the project does not create a new tax simply for using Bre-B or digital wallets.
Is the reform fair?
The Galán administration presents the reform differently. City officials argue that the proposal is designed to make Bogotá’s tax structure simpler, more balanced and more favorable to a broad range of economic activities. Under the plan, hundreds of activities would see their ICA rates decline while others would face increases.
The administration says the objective is to reduce complexity, encourage investment, provide relief to some businesses and taxpayers, and ask sectors with greater contributive capacity to make a larger contribution. For the city, increasing the financial-sector rate is therefore part of a broader redistribution of the local tax burden rather than a standalone measure targeting fintech companies.
Bogotá has also promoted provisions to support formalization and new business creation. Qualifying microbusinesses entering the formal economy could begin at 0% of the applicable ICA rate in their first year and move progressively toward the full rate over 10 years. The administration also projects that the wider package could attract approximately US$23.5 billion (COP 78.3 trillion) in private investment and generate around 215,000 jobs over a decade. Those are government projections, not guaranteed outcomes, but they show how differently the two sides interpret the reform.
The disagreement ultimately comes down to a policy question that extends beyond Bogotá: should rapidly growing fintech companies be treated in the same way as mature financial institutions when local taxes are designed? The city argues that the broader financial sector can contribute more while Bogota continues to offer advantages such as market size, access to talent, and a dense financial ecosystem. Colombia Fintech counters that grouping young technology businesses into a higher-tax environment fails to account for the fact that many may still be years away from profitability.
A debate that matters beyond Bogota
Although the tax is local, the debate has broader implications for Colombia. Bogotá remains one of the country’s main centers for banking, venture capital, entrepreneurship and technology, so changes in the capital’s tax environment can influence national conversations about investment and digital growth.
The issue is particularly relevant as Colombia seeks to strengthen financial inclusion, expand digital payments and consolidate its position as one of Latin America’s most active fintech markets. The policy challenge is therefore not simply whether the city should collect more revenue from the financial sector, but how it can do so without making it harder for newer companies to compete, innovate and attract capital.
That is the point Santos has sought to emphasize in many of his public interventions. His argument is not that fintech companies will necessarily leave Bogota immediately if the tax rises, but that taxation becomes one of several factors investors and entrepreneurs consider when deciding where future financial technology businesses should grow.
Bogota’s administration disputes the premise that the reform will weaken competitiveness and argues that the capital’s economic scale, talent and concentration of financial activity remain significant advantages. Both positions reflect a broader tension: how to increase public revenue while preserving an environment capable of attracting technology, investment and entrepreneurship. The outcome tests Bogotá’s balance between taxation and innovation.
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