The liquidation of a company may also trigger Transfer Pricing obligations, even though many corporate groups treat it merely as a corporate closure procedure. This is made clear by the National Taxation and Customs Department of Colombia (DIAN) in Official Letter 014736 of 2026, dated August 19 and published on September 4, 2026, in which it requires a technical transfer pricing study to determine whether a liability is attributable to a branch. The official letter responds to an inquiry regarding the allocation of assets among a Colombian company in liquidation, its foreign shareholder, and that shareholder’s branch in Colombia.
The response addresses three areas that are typically analyzed separately: the allocation of assets and liabilities to the branch, the minimum presumed return on loans, and the passive income of Foreign Controlled Entities (ECE). In all three cases, the DIAN returns to the arm’s-length principle as its starting point.
What did the taxpayer ask, and how did the DIAN respond?
The inquiry describes a group consisting of three entities. Company A is domiciled in Panama and operates in Colombia through a branch. Company B is Colombian, and its sole shareholder is Company A. Company C is also Colombian and owns 45% of Company A.
In the scenario presented, Company B is liquidated and its assets are assigned to Company A. Among these assets are a piece of real estate, a receivable from Company C, and a receivable from the branch. After the assignment, Company A becomes a creditor of its own branch and of its Colombian shareholder.
The inquirer asked whether the debt owed to the branch is extinguished by confusion, whether deemed interest, passive income, or Transfer Pricing apply, and how the real estate is valued. The DIAN responded in general terms and noted that its doctrine does not constitute advice on specific cases.
Why does the branch require a full-competence attribution analysis?
The DIAN assumes that the branch is a permanent establishment of Company A. Therefore, determining which assets and liabilities belong to it does not depend solely on the accounting records. According to the official letter, “a study must be prepared, in accordance with the Arm’s Length Principle,” to determine the income, assets, and liabilities attributable to the branch.
The official letter also reiterates that transactions between the branch and its foreign office are transactions between related parties. Consequently, they are subject to Articles 260-1 and 260-2 of the Tax Statute. The same applies to transactions with other entities in the group, such as Company B in liquidation.
In practice, this means that the assigned receivable is not analyzed in a vacuum. First, it must be determined whether the debt belongs, under the arm’s-length principle, to the branch or to the parent company.
Is the receivable extinguished by merger?
The DIAN does not provide a yes-or-no answer. It states that “it is not within this agency’s purview to determine whether, in a particular case, an obligation was extinguished.”
It does, however, clarify a relevant point. If the attribution analysis concludes that the liability belongs to the branch, the assignment of the receivable does not, in and of itself, imply that Company A qualifies as both creditor and debtor. In other words, confusion is not presumed merely because the parent company and the branch are the same legal entity.
The consequence is that the debt may remain outstanding for tax purposes. If it remains outstanding, the interest on it is subject to the arm’s-length principle, which leads to the next point in the official letter.
Does the presumed minimum return or the passive income regime apply?
Article 35 of the Tax Code presumes a minimum return on loans between companies and their partners or shareholders. The DIAN notes that, under Article 260-8, this presumption “shall not apply” to taxpayers under the Transfer Pricing regime who “demonstrate that the transaction complies with the arm’s-length principle.”
The exclusion is not automatic. It depends on whether the taxpayer can prove, through documentation, that the interest rate—or the absence of interest—on the loan corresponds to what independent parties would agree upon. Without such proof, Article 35 once again becomes a possible reference.
The ruling adds an additional layer. Before reaching a conclusion regarding interest, it must be verified whether Company A is a Foreign Controlled Entity under Article 882. If it is, its interest and financial income are considered passive income (Article 884) and are deemed to have been realized by the Colombian resident with a significant interest (Article 886). In the scenario under review, that resident would be Company C, which holds a 45% stake in Company A.
What do these guidelines imply for groups liquidating entities in Colombia?
The official ruling shows that a liquidation can transfer intragroup receivables from one entity to another without affecting their Transfer Pricing treatment. When the debtor is a branch, the initial question concerns attribution, and only then does the issue of remuneration for the receivable arise.
It also shows that the Transfer Pricing regime coexists with other rules. The exclusion under Article 35 requires an arm’s-length test, and the rules on Foreign Controlled Entities may attribute interest to a Colombian resident. It is worth noting that, according to DIAN Ruling 006610 of 2026, transfer pricing adjustments affect only income tax and related taxes.
With regard to real estate, the DIAN indicates that the property awarded as a residual asset is recognized at its net liquidation value and not at the equity value specified in Article 277. Any amount exceeding the partner’s contribution is taxed as income or a capital gain, in accordance with Articles 51 and 301.
At TPC Group, in every analysis of the reorganization or liquidation of related entities, we evaluate the allocation of assets and liabilities to branches and permanent establishments, as well as the terms of the intra-group loans being transferred, with the aim of justifying a technically defensible arm’s-length treatment before the DIAN.
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