Colombia - Local Requirements – Aibidia

Source:

Tax Statute (Estatuto Tributario), Articles 260-1 to 260-11
Decree 1625 of 2016 (Decreto Único Tributario), Chapter 2, as last revised on 8 May 2026

Summary of local requirements

Strict Format: Yes - Form 1729 V-8 (Local Report / Local File) and Form 5231 V-1 (Master Report / Master File)

Language: Spanish

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Local Report ("Local File")

The Local Report must contain the studies, documents, and other supporting materials with which the income tax and complementary taxpayer demonstrate that their income, costs, deductions, assets, and liabilities acquired in the respective taxable year, related to the operations conducted with related parties abroad, or with related parties located in free trade zones, or with persons, companies, entities, or corporations located, resident, or domiciled in non-cooperative jurisdictions with low or no taxation or preferential tax regimes, were determined considering the Arm's Length Principle for these operations, understood as the one in which the operations between related parties meet the conditions that would have been observed in comparable operations with or between independent parties.

Article

1.2.2.2.1.2

Executive Summary

The scope and objective of the study, its content, and the conclusions reached should be described.

Article

1.2.2.2.1.3

Functional Analysis

Activities or operations with economic impact, functions performed, assets used, and risks assumed by the parties involved in such operations must be identified to evaluate the arm's length conditions of the taxpayer's operations relevant for transfer pricing purposes. To do this, the following information should be included:

1. Description of the taxpayer's corporate purpose and the specific activity or activities it carries out. This should include a general description of the business, considering aspects such as: activity or type of business, types of products or services marketed, types of suppliers and customers, list of key competitors, and commercial policies that establish negotiation conditions with different types of customers in relation to prices, volume, and terms, among others, to the extent that they are related to or have affected the types of operations under analysis.

2. Organizational and functional structure of the taxpayer, its departments and/or divisions, with a description of the activities they carry out and their corresponding organizational chart; additionally, if applicable, the people on whom the local management depends hierarchically and the countries where these people have their main offices should be indicated.

3. General information on the taxpayer's commercial and business strategies: Innovation and development of new products, market penetration, expansion or maintenance, volume of operations, credit policies, payment methods, opportunity costs, quality processes, national and international product or service certifications, exclusivity and warranty contracts, business restructurings or transfer of intangibles in the current or immediately preceding year, among others, to the extent that they are related to or have affected the types of operations under analysis.

4. Parties involved, object, term of duration, and value of contracts, agreements, or conventions entered into between the taxpayer and related parties abroad, related parties located in free trade zones, or persons, companies, entities, or corporations located, resident or domiciled in non-cooperative jurisdictions with low or no taxation or preferential tax regimes.

5. Description of the functions carried out by the parties involved in the operation under study, specifying the economic relevance of these functions in terms of their frequency, nature, remuneration, and extent of their use for the respective parties involved in the transaction. Functions may include, among others: design, manufacturing, assembly, research and development, services, procurement, marketing, distribution, sales, advertising, transportation, financing, management and administration expenses, quality control, financial operations. The description required by this section must include all the necessary detail for the determination of the analyzed part.

6. Description of the types of assets used in the operations under study, tangible or intangible, by the parties involved in the operation under study, such as: facilities and equipment, financial assets, valuable intangibles, other intangibles, including their location and rights over them. Additionally, in the case of intangibles, the protection and duration of the rights should be indicated. The description required by this section must include all the necessary detail for the determination of the analyzed part.

7. Description of the inherent risks of the type of operation, assumed by each party involved in the operation under study, or distributed among them, among others, identifying commercial risks, inventory risks, financial risks, and loss risks associated with investment in property, plant, and equipment and their use; risks derived from the success or failure of investments in research and development; risks associated with the instability of exchange rates and interest rates, and credit risks. This analysis must be presented for all risks, whether or not they are susceptible to valuation and/or accounting quantification. The description required by this section must include all the necessary detail for the determination of the analyzed part.

8. Identify and describe, if any, strategies related to risk coverage, as long as they affect the operations under study, either by the parties involved or by any member of the group to which they belong.

9. In the case of compensation payments, information describing the details of the type of operation and the evaluation of benefits, consideration, or costs quantifying the compensation should be provided. Compensation exists when an operation with a related party abroad, or with related parties located in free trade zones, or with persons, companies, entities, or corporations located, resident, or domiciled in non-cooperative jurisdictions with low or no taxation or preferential tax regimes, provides a benefit or consideration to the counterparty, and this is compensated with another benefit or consideration by the counterparty.

10. Any other information related to the functional analysis that the taxpayer considers relevant.

PARAGRAPH: When there are significant changes in functions, assets, and risks regarding the same type of operation in the year under study compared to the previous year that affect the economic analysis as referred to in Article 1.2.2.2.1 of this Decree, the taxpayer must comparatively relate the changes presented.

Article

1.2.2.2.1.4

Market Analysis

Only to the extent that it is relevant to evaluate the arm's length conditions of the taxpayer's operations for transfer pricing purposes, the market analysis section should contain:

1. General description of the industry, sector, or economic activity, behavior and evolution, company's position within it, indicating aspects such as competitive situation, market share, and social conditions, supply and demand behavior, economic, geographical, and political situation influencing the company's activity, specific legal framework, political changes, regulatory changes, or other institutional factors affecting the types of operations.

2. Description of substitute goods or services.

3. In cases of special situations and only to the extent that they have affected the operations under the transfer pricing study, the way these situations impacted the operations should be described, and financial and market studies, budgets, projections, financial reports by product lines or market segments or businesses prepared for the taxable year under study should be kept available for the Tax Administration when requested.

4. Describe, if applicable: the existence of business cycles, whether economic, commercial, or product-related, and how they affect the operations under analysis.

5. Any other information related to the market analysis that the taxpayer considers relevant.

Article

1.2.2.2.1.5

Economic Analysis

The section corresponding to the economic analysis should contain:

1. Description of each type of operation carried out in the taxable period under study, indicating for each related party abroad, or related party located in a free trade zone, or persons, companies, entities, or corporations located, resident, or domiciled in tax havens, the name or corporate name, tax identification number, domicile, and/or tax residence.

2. Method used by the taxpayer to determine the prices or profit margins in the operations detailed in the previous paragraph, indicating the criteria and objective elements considered to conclude that the method used is the most appropriate according to the characteristics of the types of operations analyzed. To determine that the method used is the most appropriate, the following criteria should be used:

The facts and circumstances of the controlled or analyzed transactions, based on a detailed functional analysis;
The availability of reliable information, particularly on operations between independent third parties, necessary for the application of the method;
The degree of comparability of the controlled operations compared to the independent ones;
The reliability of the comparability adjustments that may be necessary to eliminate material differences between the operations between related parties compared to the independent ones.

3. When the Transactional Profit Margin Method has been selected to determine the profit margin in operations with related parties, the profitability indicator selected should be described, which must be in accordance with the type of activity and other facts and circumstances of the case, the nature of the type of operation analyzed, and the availability and quality of the information obtained. For this purpose, profitability indicators such as: gross margin, operating margin, margin on costs and expenses, returns on assets, return on equity, and Berry Ratio understood as "Gross Profit divided by administration expenses plus marketing expenses", among others, should be used. In determining the profitability indicator, only elements that are directly or indirectly related to the operation under analysis and are related to the exploitation of the economic activity being carried out should be taken into account.

4. Analyzed part. The part subject to analysis must be the one on which the method can be applied to determine the profit margin in operations with related parties with greater reliability, and for which the quality of the comparables is more optimal and their functional analysis is less complex. When the Resale Price Method, the Cost Plus Method, or the Transactional Operating Profit Margin Method, as appropriate, has been selected to determine whether the operations between the income tax and complementary taxpayer with its related parties abroad, related parties located in free trade zones, or persons, companies, entities, or corporations located, resident, or domiciled in tax havens meet the conditions that would have been used in comparable operations with or between independent parties, the part to be analyzed must be the taxpayer in Colombia with respect to whom it will be established whether it complied with the Arm's Length Principle; however, the counterparty with whom the operations under study were carried out may be analyzed, and this will depend on whether, with respect to that part, their functions are less complex, there is more and better information, and a lower level of adjustments is required. In addition, it should be taken into account whether the part to be analyzed owns intangibles or assets of such significance that they make the part under analysis a company not easily comparable, all of which must be properly supported, and in any case, the functional, market, and economic analysis must correspond to the part selected for the corresponding analysis as the analyzed part. Notwithstanding the provisions of the second paragraph of this paragraph, when the Resale Price Method, the Cost Plus Method, or the Transactional Operating Profit Margin Method, as appropriate, has been selected to determine that the operations between the income tax and complementary taxpayer with its related parties abroad, related parties located in free trade zones, or persons, companies, entities, or corporations located, resident, or domiciled in tax havens meet the conditions that would have been used in comparable operations with or between independent parties and the part to be analyzed is the foreign party, the supporting documentation must include all the additional information necessary to verify the correct application of the method to that part. Regardless of which part is analyzed, the supporting documentation should include the documents, analyses, and other evidentiary elements that are sufficient to demonstrate that the operations between the income tax and complementary taxpayer with its related parties abroad, related parties located in free trade zones, or persons, companies, entities, or corporations located, resident, or domiciled in tax havens meet the conditions that would have been used in comparable operations with or between independent parties. This is without prejudice to the verifications and information that the Tax Administration may require or request in relation to the analyzed part used as long as it is conducive to proving compliance with the Arm's Length Principle by this party.

5. Detail of the selected comparables. The documentation and information to be prepared and submitted for each type of operation or comparable company must have the level of detail required to demonstrate the application of the comparability criteria referred to in Article 260-4 of the Tax Statute, for which each of the selected comparables will be identified, the methodology used for their determination, the sources of information from which the comparables were obtained, and the date of consultation to the same, as well as the indication of the selected comparables that were discarded, stating the reasons that were taken into consideration for this. The information corresponding to the taxpayer under analysis must always correspond to the year under analysis. Only in exceptional cases may data from more than one period be used, provided that the reasons for economic, financial, technical, or other reasons that are relevant and conducive to the purposes of the study are included in the supporting documentation and are duly justified.

6. Description of the transfer pricing policies carried out worldwide by the group to which the taxpayer belongs or by the related party with whom the taxpayer has operations, as long as they affect the operation under analysis.

7. Use of internal comparables. In case of internal comparables, these should be considered a priority in the transfer pricing analysis, provided that there are no significant differences between the comparable operations or that, if they exist, they do not affect the analyzed conditions, or that, if necessary, technical, economic, or accounting adjustments can be made to eliminate them and optimize the comparison. For this purpose, the characteristics of the goods or services, the functions or economic activities, taking into account the assets and risks assumed, the contractual terms, the economic circumstances, and the business strategies should be taken into account.

8. Description of the economic or business activity and characteristics of the business developed by the selected comparables.

9. Establishment of the arm's length range and the median.

10. Description of the technical, economic, or accounting adjustments made to the selected comparable types of operations or companies. For these purposes, it should be taken into account that a related operation is comparable to an unrelated operation if none of the differences, if any, between the two operations being compared, or between the two companies carrying out these operations, significantly influence the normal market value, or that, if they exist, sufficiently reasonable and accurate adjustments can be made in such a way as to eliminate the significant effects they cause. Adjustments should be considered only to the extent that the differences actually affect the comparison and to the extent that they improve the reliability of the results and, therefore, comparability. For this, the quality of the data submitted to the adjustment, its purpose, and the reliability of the criteria used to make such adjustments should be taken into account.

11. Income statements of comparable companies, indicating the source and date of obtaining such information.

12. Any other information related to the economic analysis that the taxpayer considers relevant for determining the conditions used in comparable operations with or between independent parties.

13. Detailed conclusions on the conformity or non-conformity of the prices or profit margins of the types of operations with the Arm's Length Principle and other regulations governing the transfer pricing regime. This includes a comprehensive assessment of the transfer pricing methods applied, the comparability of the selected transactions or companies, and any adjustments made to ensure compliance with the Arm's Length Principle. The conclusions should provide a clear understanding of the taxpayer's position regarding the transfer pricing analysis and whether the operations under consideration meet the arm's length standard.

Recommendations for Local File:

Regarding content requirements:

Organisational Structure with Hierarchical Reporting Lines:

Colombia requires identification of the persons on whom local management depends hierarchically and the countries where those persons have their main offices, as part of the organisational and functional structure description.

We recommend documenting this in the Management Structure tab under Legal Entities in TPDoc, using the Management Structure table (Employee Job Title, Manager Job Title, Manager Company Name, Manager Country) to capture the full reporting line, and the Management Description field for any further narrative context.
Market Analysis:

Colombia requires a standalone Market Analysis covering industry description, competitive landscape, market share, substitute goods or services, supply and demand behaviour, business cycles, and situational factors — more formally structured than the OECD Local File standard.

We recommend covering the industry and competitive landscape in the Business Description field under the Entity Description tab, and documenting key competitors in the Main Customers & Competitors tab, both under Legal Entities in TPDoc.
Compensation Payments:

Colombia requires description and quantification of any compensation arrangement between the taxpayer and a related party, where one party provides a benefit or consideration that is reciprocated by the counterparty.

We recommend documenting compensation arrangements in the Contractual Terms column of the relevant TP Model under Standard Policies in TPDoc, describing the nature of the reciprocal benefit and its quantification.
Changes in Functions, Assets, and Risks Compared to Prior Year:

Colombia requires a comparative description of any significant year-on-year changes in functions, assets, and risks for the same type of operation whenever such changes affect the economic analysis.

We recommend addressing FAR changes in the Functional Profiles tab of the relevant TP Model under Standard Policies in TPDoc, and cross-referencing in the Method Selection Reason and Application field where changes affect method selection.
Transfer Pricing Adjustments Documentation:

DIAN's February 2026 guidance requires that each TP adjustment be documented with the following detail: accounting account, description, accounting balance, adjustment amount, tax value, and the specific income tax return line references.

We recommend preparing a TP adjustments schedule as a separate annex, saved in the Resources section of TPDoc and attached to the Local File.
Priority Use of Internal Comparables:

Colombia explicitly requires internal comparables to be prioritised, with detailed justification where they are not used.

We recommend documenting the internal comparable search and the rationale for their use or exclusion in the Method Selection Reason and Application field of the relevant TP Model under Standard Policies in TPDoc, and mapping any internal comparables in the Map Benchmarks & Comparables tab under Economic Analysis.

Regarding format/structural requirements:

Colombia prescribes strict standardised formats: the Local Report must be filed using Form 1729 V-8 and the Master Report using Form 5231 V-1, both submitted electronically via DIAN's platform. The Informative Return must be filed on Form 120. Filing deadlines fall between the 9th and 22nd business day of September annually, depending on the taxpayer's last NIT digit.

We recommend preparing the substantive TP analysis using TPDoc's Local File functionality, then using the completed documentation to populate the required DIAN forms via DIAN's electronic services platform. Given the strict format requirements and complexity of Form 1729, it may be advisable to engage a local Colombian tax advisor to manage the electronic filing.

Master Report ("Master File")

The Master Report shall provide an overview of the business of the Multinational Group including the nature of its worldwide economic activities, its general transfer pricing policies and its global distribution of revenues, risks and costs. The Master Report shall be comprised of relevant information of the Multinational Group, including the following:

Article 1.2.2.2.2.2	Organizational structure Corresponds to the organization chart of the multinational group where the legal structure and the percentage of shareholding or capital participation is identified, as well as the geographical location of its entities.
Article 1.2.2.2.2.3	Description of the business or businesses of the Multinational Group This corresponds to the general description of the business of the Multinational Group, including: 1. Main factors generating the group's business profit. 2. Description of the supply chain for the five (5) main products and/or services of the group in terms of sales, as well as any other product and/or service representing more than five percent (5%) of the group's sales. The required description may be presented in the form of a graph or diagram. 3. List and brief description of the most representative service agreements between members of the Multinational Group, other than those corresponding to research and development (R&D) services, including a description of the capabilities of the main service-provider centers and the transfer pricing policies used to allocate service costs and determine the prices to be paid for intra-group services. 4. Description of the main geographical markets for the group's products and services mentioned in point 2 of this article. 5. Brief functional analysis in which the main contributions to value creation for each of the entities of the Multinational Group are presented, i.e., the key functions performed, substantial risks assumed, and significant assets used. 6. Description of the main business restructuring operations, acquisitions, and divestments that have taken place during the fiscal year.
Article 1.2.2.2.2.4	Intangibles of the Multinational Group The Master File must contain the following information on the intangibles of the Multinational Group: 1. General description of the global strategy of the Multinational Group with respect to the development, ownership, and exploitation of intangibles, including the location of the main R&D centers and the location of the R&D management function. 2. List of intangibles or sets of intangibles of the Multinational Group that are significant for transfer pricing purposes and the entities involved. 3. List of significant agreements on intangibles entered into between companies belonging to the Multinational Group, including cost-sharing agreements, research service agreements, and licensing agreements. 4. General description of the group's transfer pricing policies concerning R&D and intangibles. 5. General description of any relevant transfer of intangible rights made between companies belonging to the Multinational Group during the fiscal year in question, specifying the corresponding entities, countries, and remunerations.
Article 1.2.2.2.2.5	Intercompany financial activities of the Multinational Group The Master File must contain the following information on the financial activities of the Multinational Group: 1. General description of the group's financing structure, including significant financing agreements with entities not belonging to the Multinational Group. 2. Identification of the members of the Multinational Group that perform a centralized financing function, indicating the country of incorporation and the effective headquarters of administration for these entities. 3. General description of the Multinational Group's transfer pricing policies concerning financing agreements between companies belonging to the same group.
Article 1.2.2.2.2.6	Financial and tax positions of the Multinational Group The Master File must contain the following information on the financial position of the Multinational Group: 1. Annual consolidated financial statements of the Multinational Group for the fiscal year in question, if they have been prepared for other reasons, such as financial reporting, regulatory, internal management, tax, or other purposes. 2. List and brief description of the unilateral Advance Pricing Agreements (APA) of the Multinational Group and other agreements between the Administration and the taxpayer related to the allocation of profits between countries.

Recommendations for Master File:

We have no additional recommendations for Colombia regarding the Master File.

Recommendations for Master File:

Regarding content requirements:

List of Important Intangible Agreements:

Colombia explicitly requires a list of important intangibles-related agreements between MNE Group members — including cost-sharing arrangements, research service agreements, and licensing agreements — which is more granular than the OECD Master File standard.

We recommend documenting material intangibles-related agreements in the Intangible Assets section of the Master File Workflow in TPDoc, with a list of the relevant agreements and their key terms.
Description of Reorganisations:

Colombia requires a separate description of reorganisations during the fiscal year — changes of legal form, debt restructuring, equity acquisitions, asset acquisitions, mergers, and divestitures — distinct from the general business restructuring description.

We recommend documenting any such reorganisations in the Business Restructuring section of the Master File Workflow in TPDoc, clearly distinguishing between operational business restructurings and legal or financial reorganisations.

Regarding format/structural requirements:

The Master Report must be filed using Form 5231 V-1 via DIAN's electronic platform, simultaneously with the Local Report and Informative Return.

We recommend preparing the Master File content using TPDoc's Master File Workflow and then populating Form 5231 for DIAN's electronic filing.