In Ruling No. 007591 dated June 11, 2025, Colombia’s National Tax and Customs Directorate (DIAN) issued a ruling on a technical aspect of Transfer Pricing that rarely receives explicit official guidance: whether, when analyzing services provided between related parties using a cost-based method, the effort or administrative expenses actually incurred by the service provider should be considered in determining the margin applicable to the transaction.
The inquiry that prompted the ruling
The taxpayer who submitted the inquiry posed two specific questions to the DIAN: first, whether, to determine that the value of a service transaction falls within the arm’s-length range, the parameter of effort or administrative expenses incurred by the service provider should be considered; second, whether, in the specific case of differential commission payments to real estate agents, the same criterion of effort incurred should be applied.
The DIAN’s Response
The Tax Administration indicated that, in the case of intra-group services, it must first be verified that the transaction complies with the general deductibility requirements set forth in the Tax Code, and specified that, when selecting a cost-based analysis method—such as the Cost Plus Method— it may be necessary to consider the administrative efforts or expenses actually incurred by the service provider to determine the margin that should be applied to the transaction. In other words, the DIAN recognizes that the level of actual effort invested in providing the service is a legitimate element of the economic analysis, and not a factor that can be presumed or estimated in a generic manner without supporting evidence.
Why This Technical Clarification Matters Beyond the Specific Case
Although the specific inquiry arose from a case involving commissions to real estate agents, the ruling has broader implications for any multinational group that provides intra-group services valued using cost-based methods—such as administration, technical support, and centralized management, among others. The DIAN’s clarification reinforces a point that is often insufficiently documented in Local Files: it is not enough to apply a generic market margin based on the service provider’s costs; it is necessary to be able to substantiate, with actual evidence—typically time records, resource allocation, or segmented financial statements—the effort actually incurred in providing that specific service.
What This Means for the Documentation of Intragroup Services in Colombia
For a group with shared service centers or support functions provided from Colombia to related parties abroad—or vice versa—this doctrine raises the expected standard of evidence: the DIAN may require that the effort claimed as the basis for the margin be effectively supported by verifiable information, rather than simply assumed based on the reported cost structure. Taxpayers who use cost-based methods to value intra-group services should review whether their current documentation allows them to specifically trace the effort or administrative expenses that support the applied margin.
At TPC Group, we work with our clients that provide intra-group services in Colombia to assess whether their supporting documentation adequately substantiates the effort and administrative expenses incurred in providing those services, in accordance with the criteria that the DIAN itself has specified in its recent guidance.
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