Legal Alert 003- 2020 Colombia: The registration of agreements for Commodities Transactions with related parties is regulated.

Bogota, september 21, 2020.

To perform the Transfer Pricing analysis of these operations applying the Comparable Uncontrolled Price (PCNC) method, it is possible to take as a reference the operations carried out with independent third parties or previously made quotes. One of the most important elements of information to apply the PCNC method in commodity transactions is the date of the operation. Resolution 67 of June 24, 2020 published in Official Gazette 51,355 regulates the procedure for registering commodity contracts in order to prove the date of the contract and establishes deadlines to do so.

To demonstrate the accuracy of the date of the agreement with the related party, the taxpayer must register the contract either within the calendar month following its signature or before the first delivery, whichever occurs first. In case of modifications to the contract, it must be registered again within the calendar month following the modification date, provided that the initial contract has been registered.

In accordance with article of Decree 1625, the information that must be recorded regarding the agreements (contracts, offers and acceptances or other documents that establish the terms, and that may constitute a reliable proof), is the following:

  1. Identification of the parties involved: name or company name, identification and country of domicile and / or tax residence.
  2. Type of document: contract, offer and acceptance or other documents that establish the terms of the agreement.
  3. Subscription date.
  4. Validity: start and end dates.
  5. Commodity price fixation date for each hedged transaction.
  6. Type and description of the commodity: including the characteristics, quality and purpose of the covered transactions.
  7. Agreed volumes: identifying the unit of measure.
  8. Delivery terms and conditions: including information on International Trade terms (Incoterms), type of transport, port of departure, port of delivery, insurance, among others.
  9. Agreed price of the commodity: value of the fixed price or if it is a variable price, indicate the fixation formula, describing in detail each of the variables that make up said formula.
  10. Others that affect the price: all those clauses agreed in the transaction that affect the final price of the commodity and that are not considered within the formula indicated in the previous paragraph.
  11. Type of currency under which the agreement was entered into.

On the other hand, the transitory paragraph of Resolution 27 indicates that the taxpayer must declare at least points 1, 4, 5, 6 and 9 indicated in the previous list.

According to a DIAN press release, it was reported that as of August 3, 2020, the computer system is enabled for a period of three (3) months, in order to verify its functionality; where the taxpayer will be able to record the agreements.

As of November 4, the term of the month referred to in the transitory paragraph of article will begin. of Decree 1625 of 2016, Sole Regulatory in Tax Matters.

To see the complete registration manual for these contracts, click on the following link: Commodities Agreement Registration Presentation Manual.

TP Consulting Colombia

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