1. A. Transfer pricing documentation requirements
    1. Are taxpayers obliged to maintain transfer pricing documentation? Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?
    2. What is the content of the documentation that must be prepared? 
    3. Which transactions must be documented – all transactions with associated enterprises, or only those which exceed a particular threshold?           
    4. What is the definition of “associated enterprises” for the purposes of this requirement (in particular, are transactions between a permanent establishment (“PE”) and its head office in the scope of the documentation requirement)?   
    5. For EU countries, is the content of the documentation similar to that described in the EU Code of Conduct on TP documentation for associated enterprises (“EU TPD”)? If not, are taxpayers entitled to choose between the local requirements and the EU TPD? 
    6. For all countries (and, in particular, OECD countries), is the content of the documentation similar to that described in the revisions to Chapter V of the OECD TP Guidelines (final report on Action 13 of the BEPS project)? If not, are taxpayers entitled to choose between the local requirements and the OECD approach?
    7. Do taxpayers which are not established in your jurisdiction need to undertake to provide any specific information upon request? Can your tax authorities require a taxpayer in your jurisdiction to provide information which is located in another state? 
    8. If comparable studies are to be provided, do the tax authorities generally accept regional benchmark studies (e.g. pan-European benchmark studies)?     
    9. If comparable studies are to be provided in general, are safe harbours/specific circumstances exempting taxpayers from preparing benchmark studies (such as the EU Joint Transfer Pricing Forum Guidelines on low value-adding services or revisions to Chapter VII of the OECD TP Guidelines about low value-adding intragroup services) in Colombia, or are there situations in which tax authorities do not request benchmark studies? If so, in which circumstances are taxpayers exempted from benchmark studies?
    10. What language(s) is to be used by taxpayers in submitting TP documentation?  
    11. What is the deadline or timescale for providing TP documentation to the tax authorities - is it to be provided, for example, upon filing of the tax returns, at the beginning of a tax audit or on the specific request of the tax authorities?
    12.  In the event that the documentation is not provided within the applicable timescale or is incomplete, do documentation-related penalties apply? If so, please detail the penalties and the circumstances in which they do and do not apply.
    13. Does the absence or incompleteness of documentation reverse the burden of proof as regards the arm’s length character of the transactions?
    14. In the event that the tax authorities (i) impose documentation-related penalties and (ii) make a transfer pricing reassessment, does the imposition of documentation- related penalties prevent the taxpayer from initiating any mutual agreement procedure which may be contained in an applicable tax treaty (or, for EU countries, the procedure contained in the EU Arbitration Convention) with a view to eliminating any double taxation resulting from the transfer pricing reassessment?
    15.  Any other relevant aspect not addressed above?          
  2. B. Country-by-Country reporting ("CbCR")
    1.  Has the obligation to file a CbCR been implemented? If not, is the introduction of the CbCR being considered, and if so, when?        
    2. If the obligation to file a CbCR is in force, what is the tax year from which this obligation applies and what is the deadline for filing the CbCR?      
    3. Which taxpayers are required to file a CbCR under the applicable laws? 
    4. Is the content of the CbCR fully in line with the OECD model (final report on Action 13 of the BEPS project)? If not, what are the differences?   
    5. What is the penalty for failing to file the CbCR on time? Can local subsidiaries of a foreign group suffer the local penalty if the foreign group has not filed the CbCR?        
    6.  Are there tax treaties in force allowing the communication of CbCR with other jurisdictions?
    7.  Any other relevant aspect not addressed above?          
  3. C. As the case may be, other documentation / filing requirement in relation to transfer pricing?
    1. Are there any other documentation/filing requirements in relation to TP?
    2. If so, what is the content of such documentation / filing requirement? What language(s) are to be used by taxpayers?    
    3. What is the deadline for meeting this documentation / filing requirement?
    4. Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?
    5.  What is the penalty for failing to meet this requirement on time?
    6. Any other relevant aspect not addressed above?        

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Colombia
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A. Transfer pricing documentation requirements

1. Are taxpayers obliged to maintain transfer pricing documentation? Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?

TP regulations only apply to taxpayers conducting operations with related companies abroad. However, TP documentation only applies to taxpayers that meet the following conditions:

  • the company gross equity of the last taxable year equals or exceeds 100,000 Taxable Value Units (“UVTs” for its acronym in Spanish), which is approximately USD 1,175,000, or
  • the gross income derived from the operation entered into with related parties abroad that same year is equivalent to or exceeds 61,000 UVTs (approximately USD 716,750).

2. What is the content of the documentation that must be prepared? 

The TP information return must be filed using a specific form indicated by the tax administration that contains:

  • taxpayer’s information
  • information on related parties abroad
  • information on the operations carried out with related parties abroad
  • amount and methodology used in such operations
  • record of the profitability indicator used in the determination of the margin or market price
  • indication of the type of financial information
  • lower and upper limits of the margin of operation
  • information on cost-sharing agreements
  • penalties incurred, if any
  • signatures of the representatives of the reporting company.

Regarding the supporting documents, the content should be as follows:

  • Local File – studies, documents and other supports proving that the taxpayer’s income, costs, deductions, assets and liabilities acquired during the last taxable year complied with the arm’s length principle
  • Master File – an overview of the multinational enterprise (“MNE”) group’s business including the nature of its worldwide economic activities, its general TP policies and its global allocation of revenues, risks and costs
  • if applicable  , the Country-by-Country Report (“CbCR”) may include information regarding the global allocation of income and taxes paid by the MNE group with certain specific data explaining its economic activity at the global level 

2.1 Which transactions must be documented – all transactions with associated enterprises, or only those which exceed a particular threshold?           

All transactions made by taxpayers already determined as subjects of the TP regime and carried out between related parties must be documented. The threshold only applies to determine if the companies are obliged to comply with the TP regime, as explained in Q1. In that sense, taxpayers subject to the TP regime must determine their general and extraordinary income, its costs, deductions, assets and debts in order to prove that their transactions were in accordance with the arm’s length principle . 

2.2 What is the definition of “associated enterprises” for the purposes of this requirement (in particular, are transactions between a permanent establishment (“PE”) and its head office in the scope of the documentation requirement)?   

Associated enterprises are ones:

  • in which more than 50% of their capital belongs to the parent company, directly or through or with the assistance of its subordinates or their subordinates
  • when the parent company and the subordinate companies have jointly or separately the right to cast the votes constituting the minimum majority of votes in the shareholders’ meeting or the assembly, or have the number of votes necessary to elect the majority of the members of the board of directors
  • when the parent company, directly or through or with the assistance of the subordinate companies, because of an act or business with the controlled company or with its partners, exercises a dominant influence on the decisions of the management bodies of the company
  • when control, in accordance with the assumptions provided in this article, is exercised by one or several natural or legal persons or entities, either directly or through or with the assistance of entities, in which they own more than 50% of the capital or constitute the minimum majority for decision-making or exercise dominant influence in the management or decision-making of the entity. Also, enterprises must be considered as associated when they operate with branches, agencies or PEs.

2.3 For EU countries, is the content of the documentation similar to that described in the EU Code of Conduct on TP documentation for associated enterprises (“EU TPD”)? If not, are taxpayers entitled to choose between the local requirements and the EU TPD? 

N/A 

2.4 For all countries (and, in particular, OECD countries), is the content of the documentation similar to that described in the revisions to Chapter V of the OECD TP Guidelines (final report on Action 13 of the BEPS project)? If not, are taxpayers entitled to choose between the local requirements and the OECD approach?

Yes, Colombia must follow the OECD rules for TP documentation. In that sense, all mandatory TP documentation is the same as established in the OECD Guidelines, which are now included in the internal tax regulations. These provisions include filing and submitting a Master File, a Local File and a CbCR before the local tax authorities.

2.5 Do taxpayers which are not established in your jurisdiction need to undertake to provide any specific information upon request? Can your tax authorities require a taxpayer in your jurisdiction to provide information which is located in another state? 

Tax authorities can only request information of the local taxpayer; however, they can ask for specific information from the foreign subsidiary, office or branch related to the taxpayer regarding transactions made between them. According to Article 260-6, when – in compliance with an International Tax Treaty – the tax authorities from another country make a direct adjustment to the prices or amounts of the TP analysis of a taxpayer resident in that country, the related party resident in Colombia may file a correction return without penalty reflecting the corresponding adjustment (but only if the Colombian tax authorities agree with the adjustments). 

2.6 If comparable studies are to be provided, do the tax authorities generally accept regional benchmark studies (e.g. pan-European benchmark studies)?     

No. The Local Report requires a comparative study of enterprises with a common corporate purpose. This study will establish the benchmark by analysing the prices and interquartile applicable. However, this study must be done of companies located in Colombia.

2.7 If comparable studies are to be provided in general, are safe harbours/specific circumstances exempting taxpayers from preparing benchmark studies (such as the EU Joint Transfer Pricing Forum Guidelines on low value-adding services or revisions to Chapter VII of the OECD TP Guidelines about low value-adding intragroup services) in Colombia, or are there situations in which tax authorities do not request benchmark studies? If so, in which circumstances are taxpayers exempted from benchmark studies?

No, filing the Local Report requires a benchmark study in order to determine the applicable interquartile and compliance with the arm’s length principle.

2.8 What language(s) is to be used by taxpayers in submitting TP documentation?  

The information TP return and the Local File must be submitted in Spanish as the Form 120 required for these matters is established in that language. However, some of the supporting documents, such as the Master File and its economic analysis, may be submitted in English, notwithstanding that the tax authorities may request at any time an official translation by the Ministry of Foreign Affairs or by an official interpreter within 20 working days following the request.

3. What is the deadline or timescale for providing TP documentation to the tax authorities - is it to be provided, for example, upon filing of the tax returns, at the beginning of a tax audit or on the specific request of the tax authorities?

Tax authorities fix a specific date each year for filing these TP returns and local reports (usually at the beginning of each year). Depending on the enterprise’s tax identification number, they will have assigned a date each year to submit the information. Also, the tax authorities can ask for the submission of other TP information anytime through an administrative request.

Yes, two different penalties could apply in case the documentation is not provided or it does not comply with the requirements:

  • penalty for not submitting supporting documentation: represents a tariff of 4% of the total value of the transactions with related parties that did not comply with the TP regime
  • penalty for untimeliness: when the supporting documentation is not submitted within 5 business days following the expiration of the deadline, a penalty of 0.2% of the total value of transactions subject to be documented for each month or fraction of a month of delay shall be incurred, without the penalty exceeding a total of 20,000 UVTs, equivalent to approximately USD 180,476.

5. Does the absence or incompleteness of documentation reverse the burden of proof as regards the arm’s length character of the transactions?

No, as the taxpayer is always in title of proving its transactions were made in compliance of the arm’s length principle. This means that even if the tax authorities file an investigation, the taxpayer can only prove the specific characteristics of its transactions and the applicable TP methodology.

No, it does not. The taxpayer can submit a request for a MAP procedure any time in order to eliminate any double taxation regardless of any penalties applied before by the local tax authorities. However, any other administrative or judicial requests made by the taxpayers must be withdrawn.  

Once the MAP is finished, the agreement reached by the competent authorities is considered a final decision applicable to both parties. It will not be subject to subsequent administrative or judicial review. The agreement must be complied with – in the same way and applying the same methods – in both jurisdictions  .

7. Any other relevant aspect not addressed above?          

No. 

B. Country-by-Country reporting ("CbCR")

1. Has the obligation to file a CbCR been implemented? If not, is the introduction of the CbCR being considered, and if so, when?        

Yes, the CbCR must be submitted before the tax authorities when taxpayers:

  • are part of an MNE group
  • represent at least 20% or more of the general income of the MNE group
  • when the parent company has not filed the CbCR documentation in its country of residency
  • when the MNE group reports an income equal to or greater than USD 730,930,212 in their last taxable year.

2. If the obligation to file a CbCR is in force, what is the tax year from which this obligation applies and what is the deadline for filing the CbCR?      

In order to prepare the CbCR, the taxpayer must consider its transactions of the last taxable year. The deadline will be established by the tax authorities at the beginning of each year.

3. Which taxpayers are required to file a CbCR under the applicable laws? 

The ones that comply with the requirements specified in Q2.1 above.

4. Is the content of the CbCR fully in line with the OECD model (final report on Action 13 of the BEPS project)? If not, what are the differences?   

Yes. Taxpayers in Colombia must also prepare and submit before the tax authorities a Master File, a Local File and a CbCR as established by the OECD model. However, it must be clarified that taxpayers must follow the provisions included in the Tax Code first, as the OECD rules are considered ‘soft’ law in Colombia.

5. What is the penalty for failing to file the CbCR on time? Can local subsidiaries of a foreign group suffer the local penalty if the foreign group has not filed the CbCR?        

If the TP informative return and supporting documents are not submitted within 5 business days following the expiration of the term established by the Tax Authorities, the taxpayer could be subject to a penalty of 0.2% of the total value of the operations for each month or fraction of a month of delay, without the penalty exceeding a total of 20,000 UVTs (equivalent to approximately USD 180,476). However, this penalty could only be applied to national taxpayers (the local subsidiaries of a foreign group) and is not extensible to foreign parent companies.

6. Are there tax treaties in force allowing the communication of CbCR with other jurisdictions?

Local regulations expressly establish that when the CbCR has already been filed in another jurisdiction, local subsidiaries will not be subject to present it again  . However, the tax treaties in force do not establish a specific rule for this matter.

7. Any other relevant aspect not addressed above?          

N/A 

C. As the case may be, other documentation / filing requirement in relation to transfer pricing?

Not specifically, however the tax authorities can require supporting documents for international transactions held with related parties including accounting records, invoices and contracts, among others.

1. Are there any other documentation/filing requirements in relation to TP?

No, internal tax regulations establish the obligation to file only the TP informative report, Local File, Master File and CbCR. However, the tax authorities can require supporting documents or any other related information any time in order to verify compliance with the arm’s length principle.

2. If so, what is the content of such documentation / filing requirement? What language(s) are to be used by taxpayers?    

In case the tax authorities ask for any extra documentation, it should be regarding transactions between related parties, and any information required to prove compliance with the arm’s length principle.

3. What is the deadline for meeting this documentation / filing requirement?

Usually, a legal request establishes a period between 15 days and 3 months depending on the phase of the investigation.

4. Does this obligation apply to all taxpayers, or only to certain categories (e.g. taxpayers with turnover or assets exceeding a particular threshold)?

Legal requests asking for supporting documents for TP matters can be issued at any time to all taxpayers subject to the TP regime.

5. What is the penalty for failing to meet this requirement on time?

If tax authorities issue a legal request and the taxpayer does not answer on time, the penalty may be a maximum 7,500 UVTs   equivalent to approximately USD 88,125.

6. Any other relevant aspect not addressed above?        

N/A