The Colombian Tax Authority (DIAN) released Ruling 1118 (Int. 81) of 13 February 2024, which provides clarification of the application of the Comparable Uncontrolled Price (CUP) method for commodity transactions between related parties that do not have a quoted market price for reference. This directive affirms the viability of implementing the CUP method in such scenarios. This allows taxpayers to determine an arm’s length price by comparing uncontrolled transactions to controlled transactions.
Additionally, the ruling clarifies the need to make appropriate compatibility adjustments in case of discrepancies between the conditions of the controlled and uncontrolled transactions to ensure comparability.
An alternative to the CUP method may also be deployed in exceptional circumstances, given that the supporting documentation outlines relevant financial, economic, and technical reasons that must be acceptable and justifiable to DIAN.
