AmCham Colombia, American Colombo Chamber of Commerce

Should your company enter into a transfer pricing agreement?



Transfer prices were an instrument included within the multiple tax reforms made to the Tax Statute, its main function being to legitimize the purchase and transfer of goods and services between economically linked companies.

Bogota, October 2020-. Today in Business Management López & James knows the fundamental details about this tool present in Colombian legislation and regulated in article 260 of the Tax Statute.

The objective of transfer prices is essentially to monitor the sale or transfer of use of any goods for the domestic and international markets between economically linked undertakings, with the aim of avoiding any irregularities or evasion that may occur. This mechanism gained particular relevance in Colombia, with our country's recent entry into the OECD, an organization requires its member states to have a transfer pricing regime.

By way of example and to give greater clarity to the matter, whether or not a multinational that may have a presence in Colombia sells goods or services to a subsidiary company duly established in the country, it must set transfer prices, that is, before pre-setting the value of such services, so that the tax authority, in our case the DIAN, can verify that prices do not violate the principle of full competition , verifying that these are not lower than the prices normally offered for the same services between companies that do not depend on each other.

Thus, it is common for multinational companies with subsidiaries in Colombia that, for non-known to this rule, risk sanctions from the DIAN, since all companies that are income tax and supplementary taxpayers, that have links abroad or in free zones and have carried out transactions to buy and sell goods or services with entities that qualify as economic affiliates will be part of this regime and the sanctions vary 75 to 80,000 UVT depending on the foul.

One novelty that the legislation brings to this area and that can save several headaches for its beneficiaries, is the elaboration of advance price agreements, these are made with the DIAN and aim to conclude previous agreements that allow to determine the price or profit margin of the different transactions they carry out with their associates, this with the aim of facilitating the filing of income and supplementary taxes for those who welcome , as it will be certain that the prices set are already approved by the DIAN.