Colombia considers 19% VAT on online gambling deposits

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The Backstory

Deposit tax returns to the center of the market

Colombia’s proposed 19% value-added tax on online gambling deposits is not arriving in a vacuum. It follows a turbulent year in which operators adjusted products, bonuses and marketing around a temporary levy that reshaped the economics of one of Latin America’s most closely watched regulated online betting markets.

The new proposal would revive the core feature that operators and analysts objected to most: taxing deposits rather than gaming revenue. That distinction matters because a deposit tax applies before a wager is placed, before a player wins or loses and before an operator’s true margin is known. A revenue-based tax, by contrast, is assessed on the operator’s retained proceeds after payouts. For companies with large Colombian businesses, the difference can determine whether the market remains investable or becomes a defensive operation focused on retaining customers at lower margins.

The issue has become especially important because Colombia has long been viewed as a regional model for regulated online gambling. It was among the first Latin American countries to license online operators under a national framework, giving international brands a legal route into the market and giving the state visibility over activity that might otherwise move offshore. The proposed fiscal shift tests that model by asking how much tax pressure a legal market can absorb before the licensed channel loses ground.

A temporary levy set the template

The current debate traces back to Decree 175, approved in February 2025, which imposed a 19% VAT on payments made to licensed online betting and gambling operators. The measure applied to deposits made through cash, money transfers and crypto assets, and was set to run through the end of the year.

Operators responded quickly because the tax immediately affected the customer transaction. Stake, which entered Colombia through its acquisition of Betfair Colombia, introduced a player compensation program to offset the levy. Its Cashback IVA promotion for Colombian users credited bonuses intended to match the tax deducted from deposits. The approach showed how companies tried to preserve player balances without openly defying the measure.

That strategy also revealed the cost of the tax. When operators absorb or compensate for a deposit-based VAT, the burden shifts into bonuses, promotions and margins. When they pass it to players, the product becomes less competitive against offshore sites that do not charge VAT, pay Colombian gambling taxes or comply with domestic consumer protections. Either option weakens the regulated market’s position.

The temporary nature of the 2025 levy gave operators hope that the burden would lift. Executives planned around the scheduled expiration, while still warning investors that tax policy could change. That caution proved justified when the government returned with a proposal to embed a similar structure in broader fiscal legislation.

Rush Street’s warning on profitability

Few companies have more clearly illustrated the commercial stakes than Rush Street Interactive, operator of RushBet in Colombia. Early in 2025, management described the Colombian VAT as a significant but manageable surprise. On its fourth-quarter earnings call, Chief Financial Officer Kyle Sauers said the company expected legal challenges to the measure and had already included its impact in guidance. The company was adjusting bonuses and reducing marketing while trying to protect customers from the immediate effect of the tax, according to Rush Street’s discussion of its Colombian exposure.

By late October, the tone had become more guarded. Sauers had said he did not want to “spike the ball” over the expected expiration of the VAT. The next day, the government proposed a renewed 19% levy, prompting analysts to reassess the company’s Latin American outlook. Jefferies analyst David Katz said the proposal could effectively recreate the 2025 structure that Rush Street had been trying to outlast.

The concern was not simply the headline rate. It was the application to deposits. In a note discussed in the analysis of Rush Street’s renewed Colombia tax risk, Katz warned that a deposit-based charge would place a far heavier burden on the business than a tax on gaming revenue. He said player spending could flatten or fall sharply if the company again relied on bonusing to shield customers, while profitability would come under pressure.

That risk highlights a broader industry problem. A legal operator cannot simply ignore tax collection, customer verification or advertising rules. An offshore competitor can avoid all three. The higher the upfront cost of playing legally, the more attractive illegal alternatives become to price-sensitive players.

Codere draws an investment line

Codere Online has taken an even harder public stance. During its third-quarter earnings call, executives said the company would make no further investments in Colombia if the VAT on deposits were renewed. Outgoing Chief Financial Officer Oscar Iglesias called the market difficult under the levy and said the unit economics did not justify additional capital if the measure continued.

That message, detailed in Codere Online’s warning over future Colombia investment, sharpened the policy trade-off facing lawmakers. A tax can raise revenue in the short term while reducing the incentive for licensed operators to invest in technology, marketing, sponsorships, local jobs and customer acquisition. Over time, weaker investment can mean slower growth in the regulated base that the government is trying to tax.

Codere’s comments also showed how operators compare markets. The company was more constructive on Mexico despite a planned increase in gambling revenue taxes, partly because a revenue-based model can be incorporated into commercial arrangements more easily than a deposit tax. Colombia’s proposal is more disruptive because it affects the transaction before the operator has generated revenue from it.

For international groups allocating capital across Latin America, that distinction matters. Companies can accept higher taxes where the base is predictable and tied to actual operator income. They are less likely to expand in markets where taxation erodes deposits, complicates promotions and exposes them to unlicensed competitors that face no comparable burden.

Illegal competition shapes the policy stakes

The Colombian debate mirrors a wider global question: how far governments can tighten rules on licensed operators without benefiting illegal ones. In the Philippines, lawmakers are weighing a total gambling advertising ban, and industry analysts have warned that such restrictions could push customers back toward offshore platforms. A recent examination of five markets found that blanket ad bans often leave licensed operators less visible while illegal sites continue recruiting players through digital channels. The analysis of how advertising bans can shift play to illegal operators is relevant to Colombia because the mechanism is similar: regulation binds the licensed sector first and the illegal sector last.

Colombia’s proposed tax is not an advertising ban, but it can produce a related effect. If legal operators must deduct tax from deposits or fund compensation bonuses, their offers become less competitive. Offshore sites can advertise richer bonuses, offer untaxed deposits and avoid compliance costs. Players may not distinguish between a licensed and unlicensed platform when the illegal option appears cheaper or more generous.

That is why Fecoljuegos has framed its response around proportionality rather than outright resistance to taxation. The industry says it accepts the need to contribute to public finances but wants taxes calibrated to operating costs, employment, investment and existing contributions to the health system. Its planned alternative proposal will likely try to shift the debate toward a structure that preserves the licensed channel while still raising government revenue.

Congress faces a channelization test

The Economic Rescue Bill now gives Congress a chance to decide whether Colombia’s regulated online gambling model should prioritize immediate fiscal extraction or long-term channelization. The proposed VAT would raise money directly from deposits, and a higher tax on prizes would add another fiscal lever. But the design could also depress legal play, reduce reinvestment and make offshore alternatives more attractive.

The legislative process will determine whether the measure remains a deposit-based VAT, is modified into a revenue-based tax or is softened through exemptions, credits or other mechanisms. For operators, the outcome will influence budgets for 2027 and beyond. For investors, it will affect valuations of companies with Colombian exposure. For the state, it will test whether higher nominal tax rates translate into durable collections or push activity beyond the reach of regulators.

Colombia’s online gambling framework has been important because it brought operators into the legal system and gave the government tools to supervise a fast-growing digital market. The new tax debate is about whether that framework can remain competitive. If the burden becomes too heavy, the country risks weakening the same regulated base it is counting on to help stabilize public finances.