Boletín

Uncontrolled Comparable Price Method for Commodity Transactions

The Colombian Tax Authority (DIAN), following the Council of State, maintained that the Uncontrolled Comparable Price (PC) method is the most appropriate to verify whether the price of a certain commodity operation complies with the arm’s length principle in transfer pricing matters.

It should be added that this method uses two indicators to determine the price. On the one hand, there is the internal indicator, which is the listing price; and on the other hand, there is the external indicator, which is the comparable transactions carried out between independent parties.

Regarding the latter indicator, when there are differences between the conditions of the analyzed commodity transaction and the transactions between independent parties, reasonable comparability adjustments should be made. Why does the transfer pricing law allow adjustments to be made? To ensure that the economically relevant characteristics of the transactions are comparable, and thus be able to apply the PC method.

However, the same article 260-3 of the Tax Statute empowers the taxpayer to waive this method by presenting adequate economic, financial, and technical reasons.