- Updated
- May 2025
- Sections
- 15
- Questions
- 36
Key Facts
Core Framework
Colombian Tax Code Article 260-2 Arm’s Length Principle definition.
Ruling C-690 of 12 August 2003 issued by the Constitutional Court (Corte Constitucional, in Spanish)
Colombian domestic legislation does not refer directly to the use of the OECD Transfer Pricing Guidelines. Nevertheless, it is important to note that the Constitutional Court (Corte Constitucional, in Spanish), in its ruling C-690 from 2003, concluded that it is important to consider the guidance of the OECD Transfer Pricing Guidelines in a field as technical as transfer pricing. According to the ruling, for the application of the arm’s length principle “the OECD Transfer Pricing Guidelines constitute a valuable tool in a changing and complex issue as transfer pricing is”. Therefore, the use of the OECD Transfer Pricing Guidelines is permitted as an interpretation tool and does not limit the faculty the tax administration has to use them as a technical supporting tool.
Colombian Tax Code Article 260-4
Article 260-4 of the Colombian Tax Code specifies the comparability criteria in transactions between related and independent parties. The definition of comparability for Colombian purposes is aligned with that of the OECD Transfer Pricing Guidelines. Article 260-4 of the CTC specifies the five comparability factors to consider when comparing transactions between related and unrelated parties. Those five comparability factors are aligned with those of the OECD Guidelines.
Num.4 of Article 1.2.2.2.1.5 of Decree 1625 of 2016
In relation to comparables, Colombian domestic legislation provides that the documentation and information related to each type of comparable operation or company must have the level of detail required to demonstrate the application of comparability criteria. It does not include considerations as to whether local or foreign comparables are preferable.
The Colombian transfer pricing framework does not include this provision.
Colombian Tax Code Article 260-3
According to Article 260-3 of the Colombian Tax Code, an arm’s length range may be obtained whenever taxpayers identify two or more comparable transactions, which are equally comparable to the transaction carried out between related parties. The arm’s length range is a range of prices or profit level indicators, which may be adjustable by means of statistical tools, particularly the interquartile range when considered appropriate.
Documentation
Colombian Tax Code Articles 260-5 and 260-9; Articles 1.2.2.2.1.1 to 1.2.2.2.3.7. of Decree 1625 of 2016
Colombian Tax Code Articles 260-5 and 260-9; Articles 1.2.2.2.1.1 to 1.2.2.2.3.7. of Decree 1625 of 2016
Colombian Tax Code Articles 260-5 and 260-9; Articles 1.2.2.2.1.1 to 1.2.2.2.3.7. of Decree 1625 of 2016
Colombian Tax Code Article 260-11
Colombia has established in article 260-11 of the Colombian Tax Code, a gradual transfer pricing penalty regime in which taxpayers will face different penalty amounts depending on the infraction. Penalties are to be imposed in cases of extemporaneous filings (days or months), errors, omissions and not filing.
TP Methods
- CUP
- Resale Price
- Cost Plus
- TNMM
- Profit Split
Selection: Most appropriate method
Dispute Resolution
Colombian Tax Code Articles 260-10 and 869-3 ET; Resolution 000085 of 2020
Advance Pricing Agreements (APA) including Unilateral, Bilateral, and Multilateral APAs. Mutual Agreement Procedures (MAP) are also available.
Colombian Tax Code Articles 260-10 and 869-3 ET; Resolution 000085 of 2020
Advance Pricing Agreements (APA) including Unilateral, Bilateral, and Multilateral APAs. Mutual Agreement Procedures (MAP) are also available.
Simplifications
Currently, it is under consideration
Special Topics
Num.1 of Article 1.2.2.2.1.5 of Decree 1625 of 2016
Colombian domestic legislation does not contain specific guidance for transactions involving intangibles. For such transactions the general TP rules, contained in articles 260-1 to 260-11 of the CTC, applies. Moreover, as aforementioned the guidance provided in the TPG could be also applicable in a way that best secure consistency with the TPG. Colombian regulation on documentation includes a definition of “intangible” according to BEPS Action 8.
Colombian Tax Code Paragraph 2, Article 260-3; Article 1.2.2.2.4.2. of Decree 1625 of 2016
Article 260-3 of the Colombian Tax Code states that “the taxpayer must demonstrate the actual provision of the service and that the amount received or paid for such service complies with the arm’s length principle”. The goal of this provision is to require taxpayers to provide supporting evidence related to i) those services, ii) their actual provision of the services and iii) their market values, in order to deduct those payments in their income tax return.
Colombian Tax Code Num.1 Article 260-4; Article 1.2.2.1.3 of Decree 1625 of 2016
Colombia achieved greater alignment and compliance with OECD guidelines, including paragraph a) of numeral 1 of article 260-4 of the Colombian Tax Code (CTC) which states that in the case of financing transactions, elements such as the amount of capital, term, credit rating, guarantee, debtor's creditworthiness and interest rate must be considered. Interest payments will not be deductible unless the aforementioned comparability elements are met and satisfied.
Full OECD Questionnaire
Legal ReferenceColombian Tax Code Article 260-2 Arm’s Length Principle definition.
Legal ReferenceRuling C-690 of 12 August 2003 issued by the Constitutional Court (Corte Constitucional, in Spanish)
Colombian domestic legislation does not refer directly to the use of the OECD Transfer Pricing Guidelines. Nevertheless, it is important to note that the Constitutional Court (Corte Constitucional, in Spanish), in its ruling C-690 from 2003, concluded that it is important to consider the guidance of the OECD Transfer Pricing Guidelines in a field as technical as transfer pricing. According to the ruling, for the application of the arm’s length principle “the OECD Transfer Pricing Guidelines constitute a valuable tool in a changing and complex issue as transfer pricing is”. Therefore, the use of the OECD Transfer Pricing Guidelines is permitted as an interpretation tool and does not limit the faculty the tax administration has to use them as a technical supporting tool.
Legal ReferenceColombian Tax Code Article 260-1
Article 260-1 of the Colombian Tax Code (CTC) states that for income tax purposes, a connection will be considered to exist when a taxpayer is in one or more of the following cases: 1. Subordination (control exercised directly or indirectly), 2. Branches, 3. Agencies, 4. Permanent Establishments, 5. Other cases of Economic connection (e.g., transactions between subordinates of a single parent, common management/control/capital >50%, kinship, etc.).
Legal ReferenceColombian Tax Code Article 260-3
Colombia follows the five transfer pricing methods, as contained in the OECD Transfer Pricing Guidelines. Article 260-3 of the CTC prescribes and defines the five transfer pricing methods.
- CUP (provided)
- Resale Price (provided)
- Cost Plus (provided)
- TNMM (provided)
- Profit Split (provided)
- Other (not provided)
Legal ReferenceColombian Tax Code Article 260-3
Colombia does not have a hierarchy among the transfer pricing methods. Article 260-3 of the CTC states the method to be applied shall be the one that is the most appropriate one, considering the following criteria: a. Facts and circumstances of the controlled transactions, based on a detailed functional analysis; b. Availability of reliable information, particularly of transactions between independent parties, required for the application of the transfer pricing method; c. Degree of comparability between controlled and independent transactions; and, d. Reliability of comparability adjustments that may be necessary to eliminate material differences between controlled and independent transactions.
- Hierarchy of methods (not selected)
- Most appropriate method (selected)
Legal ReferenceColombian Tax Code Article 260-3
Colombia implemented the results of BEPS Action 10 in relation to transactions involving commodities by introducing into its primary law a specific rule to establish the Arm’s Length Price in commodity transactions. Article 260-3 of the Colombian Tax Code establishes that that the CUP method will be the most appropriate method to determine the ALP for commodity transactions. Only in exceptionally cases it will be able to use another method.
Legal ReferenceColombian Tax Code Article 260-4
Article 260-4 of the Colombian Tax Code specifies the comparability criteria in transactions between related and independent parties. The definition of comparability for Colombian purposes is aligned with that of the OECD Transfer Pricing Guidelines. Article 260-4 of the CTC specifies the five comparability factors to consider when comparing transactions between related and unrelated parties. Those five comparability factors are aligned with those of the OECD Guidelines.
Legal ReferenceNum.4 of Article 1.2.2.2.1.5 of Decree 1625 of 2016
In relation to comparables, Colombian domestic legislation provides that the documentation and information related to each type of comparable operation or company must have the level of detail required to demonstrate the application of comparability criteria. It does not include considerations as to whether local or foreign comparables are preferable.
The Colombian transfer pricing framework does not include this provision.
Legal ReferenceColombian Tax Code Article 260-3
According to Article 260-3 of the Colombian Tax Code, an arm’s length range may be obtained whenever taxpayers identify two or more comparable transactions, which are equally comparable to the transaction carried out between related parties. The arm’s length range is a range of prices or profit level indicators, which may be adjustable by means of statistical tools, particularly the interquartile range when considered appropriate.
Legal ReferenceColombian Tax Code Article 260-4
Article 260-4 of the Colombian Tax Code provides that “two transactions are comparable when there are no significant differences between them that can materially affect the conditions analysed using the appropriate transfer pricing methodology. Those transactions are also comparable in case those differences may be eliminated by means of the application of sufficiently reliable adjustments to eliminate the effects of these differences in the comparison”.
Legal ReferenceNum.1 of Article 1.2.2.2.1.5 of Decree 1625 of 2016
Colombian domestic legislation does not contain specific guidance for transactions involving intangibles. For such transactions the general TP rules, contained in articles 260-1 to 260-11 of the CTC, applies. Moreover, as aforementioned the guidance provided in the TPG could be also applicable in a way that best secure consistency with the TPG. Colombian regulation on documentation includes a definition of “intangible” according to BEPS Action 8.
Legal ReferenceColombian Tax Code Article 120
According to Article 120 of the Colombian Tax Code (rule outside transfer pricing rules), regarding royalty payments for intangibles, establishes: “The deduction will not be accepted for the payment of royalties to related parties abroad or free trade zones, when they correspond to the exploitation of an intangible formed in the national territory. Royalty payments made during the taxable year or period, when said royalties are associated with the acquisition of finished products, will not be deductible.”
Legal ReferenceColombian Tax Code Paragraph 2, Article 260-3; Article 1.2.2.2.4.2. of Decree 1625 of 2016
Article 260-3 of the Colombian Tax Code states that “the taxpayer must demonstrate the actual provision of the service and that the amount received or paid for such service complies with the arm’s length principle”. The goal of this provision is to require taxpayers to provide supporting evidence related to i) those services, ii) their actual provision of the services and iii) their market values, in order to deduct those payments in their income tax return.
Legal ReferenceColombian Tax Code Num.1 Article 260-4; Article 1.2.2.1.3 of Decree 1625 of 2016
Colombia achieved greater alignment and compliance with OECD guidelines, including paragraph a) of numeral 1 of article 260-4 of the Colombian Tax Code (CTC) which states that in the case of financing transactions, elements such as the amount of capital, term, credit rating, guarantee, debtor's creditworthiness and interest rate must be considered. Interest payments will not be deductible unless the aforementioned comparability elements are met and satisfied.
Legal ReferenceColombian Tax Code Article 118-1
Article 118-1 of the Tax Code. Thin Capitalization rules: This rule provides that interest on debts during the respective taxable period are deductible. Nevertheless, when such debts are contracted, directly or indirectly, in favour of national or foreign related parties, the taxpayers may only deduct the interest generated on the debts in which the total average amount thereof, during the corresponding taxable year, does not exceed the result of multiplying by two (2) the taxpayer's net equity determined as of December 31 of the immediately prior taxable year.
Legal ReferenceColombian Tax Code Paragraph 2, Article 260-3; Article 1.2.2.2.4.3 of Decree 1625 of 2016
In Colombia cost contribution arrangements (“CCA”) must comply with the arm’s length principle. Article 260-3 of the CTC specifies that in the case of intragroup services or CCA between related parties, “taxpayers must demonstrate the actual provision of the service and that the amount charged or paid for such service is in compliance with the arm’s length principle”.
Legal ReferenceColombian Tax Code Articles 260-5 and 260-9; Articles 1.2.2.2.1.1 to 1.2.2.2.3.7. of Decree 1625 of 2016
- Master file consistent with Annex I to Chapter V of the TPG (selected)
- Local file consistent with Annex II to Chapter V of the TPG (selected)
- Country-by-country report consistent with Annex III to Chapter V of the TPG (selected)
- Specific transfer pricing returns (separate or annexed to the tax return) (selected)
Legal ReferenceColombian Tax Code Articles 260-5 and 260-9; Articles 1.2.2.2.1.1 to 1.2.2.2.3.7. of Decree 1625 of 2016
The Local File must be filed in Spanish. The timing for submission is established annually by the government. The Master File may be provided in English. The CbC report must be filed within 12 months of the last day of the fiscal year of the MNE Group. Thresholds for filing apply based on gross equity or gross revenues.
Legal ReferenceColombian Tax Code Article 260-11
Colombia has established in article 260-11 of the Colombian Tax Code, a gradual transfer pricing penalty regime in which taxpayers will face different penalty amounts depending on the infraction. Penalties are to be imposed in cases of extemporaneous filings (days or months), errors, omissions and not filing.
Legal ReferenceColombian Tax Code Articles 260-5 and 260-9; Articles 1.2.2.1.2 and 1.2.2.2.3.2. of Decree 1625 of 2016
According to Article 260-5 of the Colombian Tax Code, taxpayers do not need to comply with the transfer pricing documentation requirements unless either: (a) gross equity on the last day of the fiscal year or period equals at least 100 000 Taxable Units; or (b) gross revenues of respective year equal at least 61 000 TU; and (c) transactions are carried out with related parties. Other thresholds apply for transactions with related parties (45,000 UVT) or entities in non-cooperating jurisdictions (10,000 UVT).
Legal ReferenceColombian Tax Code Articles 260-10 and 869-3 ET; Resolution 000085 of 2020
Advance Pricing Agreements (APA) including Unilateral, Bilateral, and Multilateral APAs. Mutual Agreement Procedures (MAP) are also available.
- Rulings (not selected)
- Enhanced engagement or cooperative compliance programmes (not selected)
- Advance Pricing Agreements (APA) (selected)
- Mutual Agreement Procedures (selected)
Currently, it is under consideration
Taxpayers may make year-end fiscal adjustments to comply with the ALP. They must inform in the TP Return the amount of the adjustment made in their Income Tax Return.
Legal ReferenceColombian Tax Treaties
Colombia has eleven (11) tax treaties that broadly follow Article 7 of the OECD Model Tax Convention before the 2010 version, and seven (7) tax treaties containing an Article 7 broadly in line with the OECD Model Tax Convention of 2010. Additionally, Decision 578 of 2004 of the Andean Community applies to member states.
- Article 7 as it read before 2010. (selected)
- Article 7 as it reads after 2010. (selected)
- Other (selected)
The attribution of profits to a PE (for tax treaties containing Article 7 as it reads before 2010) is calculated considering the profits which the PE might be expected to make if it were a distinct and separate entity. In addition, the functions performed, the assets used, the personnel involved, and the risks undertaken by the permanent establishment, as well as by other parts of the enterprise of which the permanent establishment is part of, must be taken into account for the functional analysis and profit attribution.
Legal ReferenceColombian Tax Code Article 20-2 Attribution of profits to Permanent Establishment; Articles 1.2.1.14.1 to 1.2.1.14.10 Decree 1625 of 2016
In accordance with the provisions of article 20-2 of the Tax Code, the profits and capital gains attributable to a permanent establishment in Colombia are those that the permanent establishment could have obtained, in accordance with the Arm's Length Principle. For these purposes, the functions performed, the assets used, the personnel involved, and the risks assumed by the company through the permanent establishment must be considered.
- Yes, they follow the AOA as described in the 2010 Report on the Attribution of Profits to Permanent Establishments (selected)
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