Worldwide transfer pricing reference guide 2014

Colombia (continued)
Frequency of tax audit and transfer pricing scrutiny by the tax authority
Since 2004, the tax authorities have improved their audit processes, focusing on the hydrocarbon and mining industries, especially in
the following aspects:
• Challenge of benefits and actual rendering of technical services and technical assistance as reported by local entities. During audit,
the tax authority requires companies to prove that the aforementioned service’s and usefulness of the assistance’s, non-duplication,
benefits, etc., comply with Article 107 of the Colombian tax code.
• Challenge of benefits and actual rendering of general services (accounting, administrative, marketing, etc.). During audit, the tax
authority requires companies to prove that the usefulness of the aforementioned services’, non-duplication, benefits, etc., comply with
Article 107 of the Colombian tax code.
• The tax authority challenges those taxpayers that “confess” that the intercompany transactions do not comply with the arm’s length
principle. In many cases, taxpayers include in their transfer pricing informative return, a result, below the market range, but they give
theoretical explanations as to why they are in this situation.
• The tax authority challenges extraordinary adjustments that taxpayers include in their transfer pricing analysis, such as exchange rate
gains/losses, government regulations, differences between Colombian GAAP and US GAAP, etc.,
APA opportunity
In 2012, the first APA has been concluded in Colombia and several are in evaluation phase. The Colombian tax authority promotes them
as a viable and advantageous option for taxpayers, as they consolidate the taxpayer’s transfer pricing position across several years
instead of on a year to year basis. The APA agreement will be valid for the year it is subscribed, the year before and up to three taxable
years after the year of the subscription.
Expected reaction to OECD Report on BEPS
There has not been any reaction from the tax authorities up until January 2014.
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