At ALS Transfer Pricing, we conduct thorough and technically sound analyses to support your intercompany operations in Colombia and throughout Latin America. Our team has access to advanced databases and rigorous methodologies that allow us to identify reliable comparables and build robust benchmarks in response to automatic or simplified challenges by tax authorities. Below, we address a recent key Colombian ruling that reaffirms the need for deep and well-founded analyses.
On December 5, 2024, the Colombian Supreme Administrative Court (Ruling No. 25803) issued a landmark decision regarding the inclusion of loss-making companies in transfer pricing analyses. The ruling was officially published on February 4, 2025. This resolution marks a significant step towards aligning Colombian practices with OECD international principles, particularly in the treatment of comparables with negative results.
The case addressed a situation in which the Colombian tax authority (DIAN) had rejected certain comparables submitted by the taxpayer, arguing that these companies had recorded losses during one of the years covered in the comparability analysis. DIAN's position was that the mere presence of a loss warranted the automatic exclusion of that comparable from the final set, without requiring further analysis.
However, the Court dismissed this approach. In its ruling, it stated that the existence of losses does not necessarily imply a lack of comparability, unless it is proven that such losses are recurring, structural, or reflect an economic situation different from that of the taxpayer.
The Court emphasized that comparability analysis must consider multiple factors, including the functions performed, assets used, risks assumed, and market conditions. A loss in one year of the review period does not automatically invalidate a comparable, as long as other elements still reflect reasonable comparability.
It also highlighted that losses might result from extraordinary, cyclical, or temporary events — such as a short-term market downturn, isolated cost increases, or heavy investment in innovation — which do not necessarily remove their status as valid comparables.
This perspective introduces a more flexible, substantively economic approach in line with international standards, reinforcing the obligation of tax authorities to provide technical and functional justification for excluding comparables, rather than relying on purely quantitative or automatic criteria.
This ruling finds direct conceptual support in the OECD Guidelines. Specifically, Chapter III (Comparability Analysis), paragraphs 3.64 to 3.66, addresses the treatment of loss-making companies:
The Colombian ruling strongly supports this view: the goal is not to apply mechanical filters, but to build robust and technically supported analyses that can withstand functional and market scrutiny.
This legal precedent has important implications for multinational groups operating in Colombia:
At ALS TP, we continuously monitor regulatory and case law developments, especially decisions like this that pave the way for more consistent and internationally aligned practices. Our commitment is to provide clients with solid, updated, and strategic technical support in response to the challenges of an increasingly demanding and globalized tax environment.
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