Regulation

In Colombia, two major formal obligations regarding transfer pricing are established:

a) Presentation of Individual Information Statement

When a taxpayer of the income tax and complementary have a gross equity on the last day of the year or taxable period equal to or greater than one hundred thousand (100,000) UVT [1] (Unit of Tax Value measured value established and readjusted annually by the government based on the Consumer Price Index (CPI), or whose gross income for the respective year is equal to or greater than the equivalent of sixty-one thousand (61,000) UVTs, shall inform the tax authority of each and every one of the operations that in the corresponding taxable year they made with linked in a form prescribed for this purpose. Although this statement is informative and does not generate a tax as such, it is susceptible to the penalty regime when it is not filed or is made in an extemporaneous manner, with inconsistencies or omissions. Sanctions related to the formal obligation to file an Individual Information Statement could be up to twenty thousand (20,000) UVT at approximately $ 16,000.

b) Presentation of supporting documentation

All those taxpayers of the income tax and supplementary whose gross assets on the last day of the year or taxable period are equal to or greater than one hundred thousand (100,000) UVT, are required to prepare and submit supporting documentation to the tax authority, whose gross income for the respective year is equal to or greater than the equivalent of sixty-one thousand (61,000) UVT, provided that the sum of all the transactions carried out with affiliates is greater than or equal to sixty-one thousand (61,000) UVT and simultaneously the cumulative annual sum by type of operation is greater than or equal to thirty-two thousand (32,000) UVT.

In accordance with what the OECD indicated in Action 13 of BEPS, which suggests a reexamination of the study of transfer prices since the supporting documentation is the form of entry of the company to the Tax Administration in this area, which allows same to the DIAN with the information contained therein have better control processes. The new regulatory adjustments established in Law 1819 of December 2016 provide that the supporting documentation must contain a master report with the relevant global information of the multinational group and a local report with information regarding each type of operation carried out by the taxpayer in the that demonstrate the correct application of the rules of the transfer pricing regime, within the terms and conditions established by the National Government.

The master file or master report, which will be part of the documentation submitted by the taxpayer within the tax jurisdiction of its competition with group information, provides an overview of the economic group, as well as the nature of global operations, general policies transfer pricing and global allocation of revenues, group organizational structure, group activity description, intra-group service agreements, intangibles, intercompany and location financial activities, among others.

The local file could be said to be very similar, if not identical, to the information that is supplied today through the local supporting documentation. It has the organizational structure of the entity, economic activity, description of competitors, description of transactions with relationships, intra-group transactions between which the functional and economic analysis is involved.

Beginning in the taxable year 2016, income taxpayers and complementary taxpayers, who fall into any of the situations indicated below, must submit a country-by-country report containing information on the total allocation of income and taxes paid by the multinational group together with certain indicators related to its economic activity at a global level.

The country by country report consists of a report on the global distribution of benefits, taxes paid, income, profit indicators of economic activity of the group in general; is a distribution of the group according to each of its entities, is to disaggregate the activity of the group according to certain financial indicators that describe the economic group.

In principle, the person who submits this report would be the parent company or the one designated, the so-called "designated parent".

Assumptions

Controlling entities of multinational groups, being understood as such those that meet the following requirements:

  1. Be resident in Colombia.
  2. Have subsidiaries, subsidiaries, branches or permanent establishments, that reside or are located abroad, as the case may be.
  3. Do not be subsidiaries of another company resident abroad.
  4. Are required to prepare, present and disclose consolidated financial statements
  5. In the immediately preceding year or taxable period, consolidated revenues for accounting purposes equivalent to or greater than eighty-one million (81,000,000) UVT approximately 800,000 dollars.
  6. Are entities resident in the national territory or residing abroad with a permanent establishment in the country that have been designated by the controlling entity of the multinational group resident abroad as responsible for providing the country-by-country report referred to in this article .

In the case of operations with tax havens, no account shall be taken of the equity or gross income limits, since only the taxpayer is liable for income and complementary taxes and carries out transactions with related companies located or domiciled in tax havens for an amount greater than ten thousand (10,000) UVT must present supporting documentation.

Sanctions for failure to comply with this formal obligation could amount to as much as twenty thousand (20,000) UVTs, approximately $ 200,000.

The financial and accounting information used to prepare the supporting documentation must be signed by the legal representative and the public accountant or tax auditor.

The supporting documentation must be kept for a minimum term of five (5) years, counted from January 1 of the year following the taxable year of its preparation, issuance or receipt and be available to the Tax Administration when it so requires.

[1] The value of the UVT for the year 2015 is COP $ 28 279 and for 2016 it is COP $ 29 753.