Taxpayers have until next September to file the transfer pricing information return.

Every year, taxpayers of income tax and complementary taxes, whose gross equity is equal or higher than 100,000 UVT or whose income is equal or higher than 61,000 UVT, with related parties abroad, located in free zones and/or with persons, companies, entities or companies located, resident or domiciled in Tax Havens, are obliged to file the informative declaration of transfer prices before the DIAN.

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The above, with the purpose of guaranteeing that the commercial relations contracted between taxpayers and their related parties are being carried out in accordance with the average commercial price and in accordance with the principle of full competition, preventing the outflow of capital with the purpose of evading and/or avoiding tax obligations.

The following are some aspects to be taken into account for the filing of the transfer pricing information return:

1. The concept of related parties

In accordance with the provisions of Article 260 of the Tax Statute, related parties are understood to include, among others, subordinates, parent companies with direct and indirect control, branches, agencies and permanent establishments. This does not imply that the participation of the direct or indirect related parties falls exclusively on the capital stock, since it is also understood as related parties any event that implies subordination, decision-making power, administration, management, direction or unity of business and purpose (Concept 057035-13 of the DIAN).

2. Information to be submitted

It is important to identify the related parties, the information of the operations carried out with them during the taxable year, the amount of such operations, the methodology implemented for the determination of the price or profit margin and additionally the preparation and preservation of the supporting documentation that supports the reported information.

With respect to the operations, it is necessary to clarify that they do NOT refer to purely commercial or mercantile matters, since the contribution in kind and industry made by a national company to a foreign company or entity must also be declared as an operation subject to the transfer pricing regime (Concept 001151-21 of the DIAN).

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Regarding the amount of the transactions, the DIAN has provided that even transactions carried out between related parties free of charge must also be subject to the transfer pricing regime.

3. The methods for determining the price

In this regard, Article 260-3 of the Tax Statute contemplates the comparable uncontrolled price method, the resale price method, the added cost method, the transactional operating profit margins method and the profit split method.

In accordance with the above, the DIAN has indicated that the formal obligation to file the transfer pricing information return shall be deemed duly complied with when the prescribed form is filed completely and in due form.

The total or partial noncompliance with the transfer pricing regime may result in financial penalties for taxpayers for untimeliness, inconsistencies, omission and/or correction, which may range from 417 UVT up to 30,000 UVT, according to the type of noncompliance arising from the formal tax obligation.

It is important to take into account that the doctrine of the DIAN has indicated that the liquidation of penalties will be calculated according to the UVT corresponding to the year in which the punishable event occurs.

Finally, when it is demonstrated that the operation reported by the taxpayer and its economic related parties complies with the arm’s length principle, the tax law allows the taxpayer to be exempted from the limitations established in Article 260-8 of the Tax Statute.

Among these, the non-deductibility of interest and other financial costs and expenses derived from debts between subordinates in the country and their parent companies abroad stands out.

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