Article 260-8 of the Colombian Tax Statute established which taxpayers were obliged to file Transfer pricing documentation. The rule established two requirements for income taxpayers to be obliged to file DIIPT in the year 2010, the first is to have obtained a gross equity on 31 December of the taxable period of 100.100,000 UVT ($2,455,500,000) or gross income of 61,000 UVT ($1,497,855,000), and the second is to have carried out operations with economic associates or related parties domiciled abroad.
In the present case, a Colombian branch of Petroleum Exploration International S.A presented a total gross income of $18,496,716,000 in the income tax return for 2010, and therefore complied with the first requirement. As for the second requirement, it is noted that according to the certificate of existence and legal representation of Colombian branch, it is a branch of the company Petroleum Exploration International S.A. whose principal place of business is Panama. (…) In the accounting inspection report of 2 April 2013, the company’s accountant stated that Ecopetrol paid directly for the oil services provided by the plaintiff to its parent company, which then made the payment to Forum Absolute Return Fund LTD abroad. Consequently, it is evident that there were transactions between the branch and its related company abroad, when the parent company was paid for services provided by the company in Colombia. The aforementioned evidence shows that the company that owned the drill was Petroleum Exploration Internacional S.A. of Panama, which, as recorded in the accounts, was leased by the Colombian branch to provide services in Colombia, but part of the payment went to the company Forum Absolute Return Fund LTD. Hence, there were transactions between the branch and its parent company during the taxable period 2010, so it was obliged to present transfer pricing documentation in the aforementioned period. (…) It is clarified that the acts being challenged do not disregard the principle of the prevalence of substantive law over formal law, as it was not appropriate to declare the drill as an asset of the company, since, as stated by the plaintiff in the appeal, the asset was acquired by its parent company, and therefore the branch could not depreciate an asset that did not belong to it. Moreover, the date of importation of the drill does not affect the fact that transactions had taken place between the branch and its parent company in 2010. (…) According to the above, the branch was obliged to file transfer pricing documentation in 2010 as it exceeded the gross income ceiling, and had carried out operations with its parent company abroad.
FORMAL SOURCE: LAW 1437 OF 2011 (CPACA) – ARTICLE 188 / LAW 1564 OF 2012 (GENERAL CODE OF THE PROCESS) – ARTICLE 365 NUMERAL 8
Colombia vs Petroleum Exploration International November 2021