Colombia

The Transfer Pricing Regime (hereinafter "TP") in Colombia follows the international standards established by Action 13 of the OECD/G20 BEPS Project, defining the formal obligations as follows:

Compliance with the Transfer Pricing regime is applicable to income taxpayers in Colombia who enter into transactions with related parties abroad. These actors will be obliged to determine compliance with the principle of Full Competence with respect to their ordinary and extraordinary income, costs, deductions, assets and liabilities used to carry out transactions with related parties abroad.

Formal compliance with Transfer Pricing in Colombia, through the submission of declarations and economic studies, depends on the amount of equity and income of the Colombian company, which carries out transactions with related parties abroad or located in Free Trade Zones in Colombia. The above, taking into account that the operation of transactions with related parties within Colombia does not generate the formal or substantial obligation of Transfer Pricing.

Consequently, if domestic companies have gross assets during the taxable year equal to or greater than 100,000 UVTs (COP $4,706,500,000) or whose gross income in the respective year is equal to or greater than 61,000 UVTs (COP $2,867,000,000), they must file the TP informative declaration, which must include all the information on the transactions carried out with foreign related parties.

They must also prepare and submit supporting documentation, which involves carrying out an economic and financial price study, according to the operations carried out by the company subject to the PT regime. The supporting documentation consists of:

1. A local report with the information relating to each type of operation carried out by the taxpayer, demonstrating the correct application of the rules of the TP regime;
2. A master report including the relevant global information of the multinational group and;
3. A country-by-country report , only in those cases where the requirements of Article 1.2.2.2.2.3.3.3. of Decree 1625 of 2016 are met and consolidated income equivalent to 81,000,000 UVT, i.e. COP $3,812,265,000,000 is obtained in the immediately preceding period. It should also be indicated that the financial and accounting information used in the price analysis must be signed by the legal representative and the accountant/tax auditor.

Advance Transfer Pricing Agreement

There is an internal procedure called Advance Pricing Agreement (APA), which creates the possibility for a taxpayer to ask the national tax authorities how to fix profit margins and prices for commercial transactions between related companies.

This procedure is regulated by the DIAN and aims to help taxpayers comply with Transfer Pricing requirements. - Primer on Advance Pricing Transfer Pricing Agreements.

Decree 2229 of 2023 - Ministry of Finance and Public Credit

The aforementioned Decree establishes a deadline according to business days. Companies obliged to file i) Informative Declaration, ii) Local Report and, iii) Master Report, shall file them virtually according to the last digit of the NIT (without verification digit), as follows: 

Informative declaration and supporting documentation

Informative declaration

This declaration shall contain the list of transactions with related parties and/or entities domiciled in tax havens or preferential tax regimes together with the results of the Transfer Pricing analysis reported in the Local Report.

Local Report or Transfer Pricing Study

The report shall contain the studies, documents and other supports with which the taxpayer of the income tax and complementary taxes proves his income, costs, deductions, assets and liabilities realised in the respective taxable year in compliance with the arm's length principle.

Master Report

This report should provide an overview of the business including the nature of its worldwide economic activities, its general Transfer Pricing policies and its overall allocation of revenues, risks and costs. Companies that are required to file a Local Report and belong to a multinational company must also file this report.

Country by Country Report

From the 2016 tax period, taxpayers subject to the Transfer Pricing Regime that comply with the assumptions of numeral 2 of article 260-5 of the Tax Statute, must submit the Country-by-Country Report. It should be clarified that this obligation is normally the responsibility of the parent company or the Multinational Group.

DIANS's Tax ruling

Branches of foreign companies are subject to the Transfer Pricing regime, regardless of whether or not they receive income during the taxable period, as long as they carry out transactions with their related parties and these exceed the ceilings defined by law in terms of income and gross equity - Concept 011767 of 2015.

Regardless of the nature of the asset contributed, its location and amount, transactions related to in-kind contributions to foreign companies must comply with the Transfer Pricing regime - Concept 053957 of 2013.

Non-resident foreign investors in Colombia that carry out operations with related parties, through which changes in the holder of the foreign investment occur, must comply with the Transfer Pricing regime - Concept 053175 of 2009.

In Colombia the Transfer Pricing regime only applies in transactions with related parties abroad, and not in transactions between related parties in the territory as in other Latin American countries - Oficio No. 066668 of 2008 and Oficio No. 094487 of 2009.

Additionally, it is important to note that the Transfer Pricing regime only applies locally if transactions are made with related parties in free trade zones - Concept No. 6363 of 2023.