5% VAT rate proposed for food service franchises in Colombia

Food service franchises in Colombia could move from the standard 19% VAT rate to a 5% rate if House Bill 454 of 2026 is passed. The initiative, submitted to the House of Representatives and backed by food service industry associations, aims to harmonise the tax treatment of businesses whose obligations currently differ according to their operating model.

A common VAT rate for different restaurant models

According to a report by Portafolio on 24 October, the bill proposes a 5% VAT rate for food services, with entitlement to input tax credits. The change would cover restaurants, franchises and businesses registered under Colombia’s simplified tax regime, known as SIMPLE, in a framework intended to reduce existing differences.

Currently, three tax treatments coexist. Food service franchises are subject to the standard 19% VAT rate, with entitlement to input tax credits. Independent restaurants pay an 8% national consumption tax, without input tax credits. For taxpayers registered under SIMPLE, consumption tax is incorporated into the regime’s overall tax rate.

The proposal is not simply about lowering a rate. It also seeks to give businesses providing the same food services a common tax treatment, despite differences in how they operate. For businesses registered under SIMPLE, the proposed tax would be incorporated into the regime’s rate.

What the proposal means for the franchise sector

For the food service franchise sector, the key element is the combination of a 5% rate and continued entitlement to input tax credits. Both are part of the announced framework and should be considered together when assessing the initiative’s implications.

The comparison with independent restaurants is also relevant: under the proposed framework, they would move from a consumption tax without input tax credits to VAT with entitlement to those credits. The proposed harmonisation would therefore change both the rate and the structure of their tax treatment.

The stated aim is to reduce differences between businesses offering equivalent services. This places the focus of the debate on the rules applying to each operating model, rather than solely on the percentage associated with each tax.

The bill’s explanatory memorandum states that food service activity accounts for 3.9% of Colombia’s gross domestic product. That figure covers the sector as a whole, not the specific contribution of franchises.

Formalisation, investment and local administrative procedures

The bill includes measures beyond the tax change. These include the creation of a Food Service Investment Certificate, as part of a proposal intended to encourage businesses to enter the formal economy, attract investment and improve business competitiveness.

It also proposes that municipalities and districts establish a local one-stop shop for food service businesses. This would centralise the submission, processing and tracking of the permits and official assessments required to operate.

The measure responds to the fragmented regulation and compliance difficulties described in the explanatory memorandum. The proposal thus brings together two strands: harmonising tax obligations and centralising local administrative procedures for business operations.

For food service businesses, the initiative’s scope therefore extends beyond VAT. The proposed one-stop shop would provide a single point for managing operating procedures, while the certificate forms part of the investment measures.

A bill, not a rate currently in force

House Bill 454 of 2026 remains a legislative proposal. Its submission does not change the tax obligations currently applying to restaurants, bars or franchises. The 5% figure should therefore be understood as a proposed rate, not one that businesses can apply now.

The bill provides for a transition period to implement the new framework. However, the information released about the proposal does not publicly specify its duration or the conditions that would apply to each type of business.

Practical takeaway: franchisees and food service brands should continue to meet their existing obligations and monitor the bill’s progress with their tax adviser before changing their invoicing or tax forecasts.