- Who is required to comply with the transfer pricing regime?
Starting from September 7th, the deadlines for the Information Declaration and Local Documentation of Transfer Pricing Supporting Documents for the taxable year 2022 begin. It is important to note that individuals and legal entities subject to income tax are obliged to submit the Information Declaration if they meet the following conditions:
- They have conducted buying and/or selling operations of goods or services with entities or individuals classified as economic affiliates, located either abroad or within a Colombian free trade zone.
- Their gross assets on the last day of the taxable year amount to or exceed the equivalent of one hundred thousand (100,000) UVT (COP 3,800,400,000), or their gross income for the respective year equals or exceeds the equivalent of sixty-one thousand (61,000) UVT (COP 2,318,244,000).
The Information Declaration is also mandatory for taxpayers who, even if they do not surpass the aforementioned thresholds, conduct operations with individuals, corporations, entities, or companies located in jurisdictions with low or no taxation or preferential tax regimes.
- What key considerations should declaring taxpayers keep in mind?
Regarding compliance with transfer pricing, it is important to prepare obligations in advance to ensure timely and accurate submission. These obligations require a considerable amount of hours for preparation, so starting early is crucial to reduce sanction risks and income-related exposures.
Additionally, concerning information supply, it is vital for companies to ensure data presentation consistent with their accounting and records. It is advisable to verify data consistency with information reported in other tax obligations, such as electronic filings. Regarding supporting documentation, a detailed evaluation of the macroeconomic, industrial, economic group, company, and transaction environment should be conducted. This is to provide necessary arguments supporting the company's positions on transfer pricing, the selected methods, and ultimately, the conclusions reached in the reports.
- What should the transfer pricing declaration contain?
The Transfer Pricing Information Declaration is the document used to inform the tax authority of all operations carried out during a taxable year with foreign affiliates, affiliates located in free trade zones, or individuals, corporations, entities, or companies located in tax havens or preferential tax regimes. On the other hand, the supporting documentation demonstrates compliance with the arm's length principle for the operation types registered in the Information Declaration, whose amounts exceed 45,000 UVT (COP 1,710,180,000) or 10,000 UVT (COP 380,040,000) when dealing with operations with individuals, corporations, entities, or companies located in non-cooperative jurisdictions with low or no taxation or preferential tax regimes.
- What sanctions could a person receive for not filing the declaration?
The transfer pricing penalty regime is outlined in Article 260-11 of the Tax Statute. This provision specifies the penalties applicable due to late submission, inconsistencies, non-submission, information omission, or correction of the Information Declaration and supporting documentation, as applicable. The severity of the penalties is determined based on the transaction amount. Regarding late submission penalties, these increase per month or fraction of a month.
At BDO in Colombia, we provide comprehensive support and advice for this and other fundamental tax aspects within organizations. Therefore, we invite you to explore our services here: BDO Tax Services.
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