In the context of international tax audits, the DIAN (Dirección de Impuestos y Aduanas Nacionales – National Tax and Customs Directorate) has strengthened the obligations of direct and indirect sales of assets held in Colombia.
These provisions are especially relevant to Transfer Pricing, as they involve cross-border transactions between independent and related parties that must be evaluated under the Arm’s Length Principle.
Scope of Transactions: Direct and Indirect Sales
The regulations establish that the following must comply with these obligations:
- Non-resident individuals
- Foreign legal entities
It applies to both:
- Direct sales: Transfer of assets located in Colombia by foreign investors.
- Indirect sales: Transfer of shares or rights abroad that, in turn, hold underlying assets in Colombia.
This last point is particularly relevant, as even transactions conducted abroad can generate tax obligations in Colombia if they involve assets located therein.
Relationship with Transfer Pricing
A key element is that, when they are related-party operations, the Transfer Pricing regime applies.
It means that:
- Transactions must be valued in accordance with the Arm’s Length Principle.
- Documentation supporting market conditions is required.
- The tax administration can review the transaction’s economic grounds.
Thus, indirect sales become a relevant approach to tax enforcement, particularly in complex multinational structures.
Reporting Requirement: Form 150
The DIAN has established Form 150 as the primary tool for reporting these transactions. This form corresponds to the “Income Tax Return for Changes in Ownership of Foreign Investments and Indirect Disposals.”
Key features include:
- Filing of each transaction carried out
- Filings are for the month following the transaction
Mandatory even if no tax liability arises
This approach reinforces the formal and substantive nature of tax compliance for these types of transactions.
Prerequisites and Operational Considerations
Before filing, taxpayers must consider:
- Registration or update in the RUT (Registro Único Tributario – Single Tax Registry/TIN)
- Appointment of a representative or attorney in Colombia
- Use of an e-signature for filing
Additionally, the system allows for payment from foreign accounts, facilitating compliance for international investors.
Determination of the Tax Obligation
A change in ownership of the investment includes any act involving the transfer of assets, including:
- Shares in Colombian companies
- Equity stakes
- Other assets held in the country
It should be noted that:
- The reporting obligation exists regardless of whether income is generated
- Each transaction must be reported individually
It strengthens the tax administration’s control over foreign investments.
Double Taxation Agreements and Transfer Pricing
Double taxation agreements not only overturn the obligation of complying with formalities.
- The application of these agreements is subject to review.
- It is not exempt from compliance with the Transfer Pricing regime.
It demonstrates that formal and substantial compliance are independent elements within the Colombian tax system.
Responsibility and Risks in Indirect Disposals
In indirect transactions, the regulations introduce additional control elements:
- Possible joint and several liability of the company in Colombia
- Buyer’s liability if aware of potential tax abuse
This broadens the scope of tax audits and reinforces the need to structure international transactions properly.
Practical implications for businesses
From a transfer pricing perspective, these provisions mean that companies must:
- Assess whether their transactions involve taxable indirect sales
- Analyze international structures and ownership levels
- Properly document related-party transactions
- Align reported information with their Transfer Pricing analysis
Non-compliance may result in penalties, tax adjustments, and reputational risks.
Strengthening the obligations related to direct and indirect sales of assets in Colombia reflects a clear strategy by the DIAN to improve control over international transactions.
The integration of these provisions with the Transfer Pricing regime reflects a more sophisticated approach to tax enforcement, emphasizing economic substance and proper transaction valuation as core elements.
In this context, TPC Group stands out as a specialized Transfer Pricing consulting firm, providing comprehensive advice on risk identification, compliance with obligations, and structuring international transactions, ensuring alignment with global standards and proper tax management.
Source: DIAN