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Colombia's Tax Bill - Transfer Pricing Updates

Author:Ms María Espinel

Colombia's newest tax bill, enacted on December 29, 2016 through Law 1819 of 2016, modifies (among others) the following sections of the tax code, related to the transfer pricing regime:

Section Summary of changes 120 Limits royalty payments for the exploitation of intangibles developed in Colombia. 124-2 Establishes that payments to non-cooperating jurisdictions with low or no taxes or to entities that belong to a special regime are non-deductible unless they are in compliance with the transfer pricing regime and the withholding tax is applied when allowed by the tax code. 260-3 Requires the use of the Comparable Uncontrolled Price Method (CUP) when analyzing transactions that involve commodities. 260-5 Requires that financial information used in the preparation of supporting transfer pricing documentation must be signed by a legal representative, auditor and/or public accountant. Requires that taxpayers meeting specific conditions must prepare a "master file" and "country-by-country report." 260-7 Modifies the term "tax haven" for "non-cooperating jurisdictions of low or no taxes" and "special regimes." Establishes that the functions, assets, risks, costs and expenses incurred by entities located in certain jurisdictions through transactions must be documented even if they are considered non-deductible for income tax purposes. 260-8 Eliminates Section 260-5 as a reference, replacing it with Sections 260-1, 260-2 and 260-7. 260-11 Adds a sanction for not filing "supporting documentation" and modifies sanctions...

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