Article 260-5 of the Colombian Tax Code establishes the requirements for transfer pricing documentation for taxpayers engaged in transactions with related parties. The key points of Article 260-5 are as follows:

• Obligation to Prepare Documentation: Taxpayers subject to income and complementary tax must prepare and submit transfer pricing documentation if they meet certain thresholds regarding their gross equity or gross revenues. Specifically, taxpayers whose gross equity at the end of the fiscal year equals or exceeds 100,000 Taxable Units (UVT) or whose gross revenues for the year equal or exceed 61,000 UVT are required to prepare this documentation when they engage in related-party transactions.
• Content and Purpose: The documentation must demonstrate the correct application of transfer pricing rules, proving that the prices and profit margins used in related-party transactions comply with the arm’s length principle, i.e., are consistent with prices that would have been used in comparable transactions between independent parties.
• Retention and Certification: The documentation must be kept for a minimum of five years starting from January 1 of the year following the fiscal year in which it was prepared, issued, or received. Additionally, the financial and accounting information used to prepare the documentation must be certified by the Revisor Fiscal (statutory auditor).
• Exemptions: Taxpayers who do not meet the gross equity or gross revenue thresholds are exempt from the obligation to prepare transfer pricing documentation.
• Additional Requirements: For certain transactions, such as those with entities in non-cooperating jurisdictions or low/no tax regimes, there are additional thresholds and documentation requirements for Local and Master files, but these are beyond the basic scope of Article 260-5.

Country by Country Reporting

Article 260-5 of the Colombian Tax Code is directly related to the country-by-country reporting (CbCR) requirements as part of Colombia’s transfer pricing regime. The connection can be summarized as follows:

• Transfer Pricing Documentation Framework: Article 260-5 sets the thresholds and obligations for taxpayers to prepare transfer pricing documentation, including the Local File and Master File, when engaging in related-party transactions and meeting certain gross equity or revenue criteria. This article also establishes the obligation for taxpayers who belong to multinational enterprise (MNE) groups to prepare and submit a Country-by-Country Report starting from the fiscal year 2016.
• Country-by-Country Reporting Obligation: According to Article 260-5, MNE groups with consolidated revenues exceeding approximately 81 million Tax Units (around EUR 750 million) must file a CbCR with the Colombian tax authorities if the parent company has not done so in its jurisdiction or if the Colombian entity is designated to file it. This aligns Colombia’s requirements with the OECD BEPS Action 13 standards on CbCR.
• Integration with OECD Guidelines: The Colombian Tax Code incorporates OECD transfer pricing documentation standards, including the Master File, Local File, and CbCR, as part of its domestic law. Article 260-5 thus serves as the legal basis for implementing these international reporting standards in Colombia, ensuring transparency on the global allocation of income, taxes paid, and economic activities of MNE groups.
• Compliance and Filing: The CbCR must be submitted annually and includes information on the global allocation of income and taxes paid by the multinational group, as well as indicators of economic activity. Article 260-5 links the CbCR filing obligation with the broader transfer pricing documentation regime, requiring taxpayers to maintain and submit comprehensive documentation to demonstrate compliance with arm’s length principles.