Harmful Tax Practices – 2017 Peer Review Reports on the Exchange of Information on Tax Rulings

Colombia

Colombia has met all aspects of the terms of reference (ToR) for the calendar year 2017 (year in review) except for completing exchanges of information on past rulings in accordance with the timelines (ToR II.5.6). This recommendation was also included in the prior year peer review report as such, the recommendation remains in place. Colombia is recommended to ensure that all information on past rulings is exchanged as soon as possible. In the prior year peer review report, Colombia also received recommendations regarding the identification of future rulings and the timely exchange of information on rulings in the form required by the transparency framework. Colombia has addressed the issues and these recommendations are removed.

Colombia can legally issue one type of rulings within the scope of the transparency framework.

In practice, Colombia issued one past ruling; and for the year in review, Colombia issued no future rulings within the scope of the transparency framework.

No peer input was received in respect of the exchanges of information on rulings received from Colombia.

Introduction

243.  This peer review covers Colombia’s implementation of the BEPS Action 5 transparency framework for the year 2017. The report has four parts, each relating to a key part of the ToR. Each part is discussed in turn. A summary of recommendations is included at the end of this report.

A. The information gathering process

244.  Colombia can legally issue one type of rulings within the scope of the transparency framework: cross-border unilateral advance pricing agreements (APAs) and any other cross-border unilateral tax rulings (such as an advance tax ruling) covering transfer pricing or the application of transfer pricing principles. In Colombia, The International Tax Auditing team (“ITAT”) is responsible for negotiating APAs and the General Director of the National Tax and Customs Administration (“DIAN”) is authorised to sign and approve APAs requests.

Past rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1, I.4.2.2)

245.  For Colombia, past rulings are any tax rulings within scope that are issued either: (i) on or after 1 January 2014 but before 1 April 2016; or (ii) on or after 1 January 2010 but before 1 January 2014, provided they were still in effect as at 1 January 2016.

246.  In the prior year peer review report, it was determined that the Colombian tax administration’s undertakings to identify past rulings and all potential exchange jurisdictions were sufficient to meet the minimum standard. The Colombian tax administration’s implementation in this regard remains unchanged, and therefore continues to meet the minimum standard.

Future rulings (ToR I.4.1.1, I.4.1.2, I.4.2.1)

247.  For Colombia, future rulings are any tax rulings within scope that are issued on or after 1 April 2016.

248.  In the prior year peer review report, Colombia did not have an information gathering process for the transparency framework and therefore Colombia was recommended to ensure that any future rulings within the scope of the transparency framework and all potential exchange jurisdictions are swiftly identified (ToR I.4.1.2).

249.  For the year in review, the Colombian tax administration has adopted a process similar to that used to identify past rulings according to which ITAT is responsible for gathering all information on future rulings and potential exchange jurisdictions during the APAs’ technical negotiations. This involves the team responsible for negotiating the APA to identify it at the point it is issued. Information on all potential exchange jurisdictions would be collected in the course of negotiating the APA. As such the prior year recommendation has been removed.

Review and supervision mechanism (ToR I.4.3)

250.  In the prior year peer review report, it was determined that the Colombian tax administration’s review and supervision mechanisms were sufficient to meet the minimum standard. In addition, all members of the team responsible for negotiating APAs are aware of the transparency framework obligations.

Conclusion on section A

251.  Colombia has met all of the ToR for the information gathering process and no recommendations are made.

B. The exchange of information

Legal basis for spontaneous exchange of information (ToR II.5.1, II.5.2)

252.  Colombia has the necessary domestic legal basis to exchange information spontaneously. Colombia notes that there are no legal or practical impediments that prevent the spontaneous exchange of information on rulings as contemplated in the Action 5 minimum standard.

253.  Colombia is a party to international agreements permitting spontaneous exchange of information, including (i) the Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol (OECD/Council of Europe, 2011) (“the Convention”), (ii) double tax agreements in force with 12 jurisdictions and (iii) tax information exchange agreements with one jurisdictions.1

Completion and exchange of templates (ToR II.5.3, II.5.4, II.5.5, II.5.6, II.5.7)

254.  In the prior year peer review report, it was determined that the Colombian tax administration’s completion and exchange of templates were sufficient to meet the minimum standard except for the timely exchange of information on rulings (ToR II.5.5, II.5.6) in the form required by the transparency framework (ToR II.5.3, II.5.4). For the year in review, Colombia notes that the Competent Authority is one of the parties involved in the APAs’ negotiations and all relevant information related to the ruling and potential exchange jurisdictions is immediately available to the Competent Authority at the time the ruling is issued. As such, the prior year recommendation (ToR II.5.5) is removed.

255.  Currently Colombia does not have any APAs in place and does not have a specific process to fill in the information required in the template contained in Annex C of the 2015 Action 5 Report (OECD, 2015). However, Colombia indicates that if future rulings are issued, the Competent Authority would require information on the ruling to be completed in accordance with the Annex C template. This would include providing a detailed summary of the transactions covered by the ruling and the transfer pricing methodology used. As such, the prior year recommendations (ToR II.5.3, II.5.4) are removed.

256.  For the year in review, the timeliness of exchanges is as follows:

 

Past rulings in the scope of the transparency framework	Number of exchanges transmitted by 31 December 2017	Delayed exchanges
		Number of exchanges not transmitted by 31 December 2017	Reasons for the delays	Any other comments
	N/A	1	N/A	Colombia exchanged information on the past ruling with the relevant Competent Authorities of two jurisdictions on 24 July 2018.
Future rulings in the scope of the transparency framework	Number of exchanges transmitted within three months of the information becoming available to the competent authority or immediately after legal impediments have been lifted	Delayed exchanges
		Number of exchanges transmitted later than three months of the information on rulings becoming available to the competent authority	Reasons for the delays	Any other comments
	N/A	N/A	N/A	N/A
Total	N/A	1

 

Follow up requests received for exchange of the ruling	Number	Average time to provide response	Number of requests not answered
	N/A	N/A	N/A

Conclusion on section B

257.  Colombia has the necessary legal basis to undertake spontaneous exchange of information and a process for completing the templates for exchange. Colombia has met all of the ToR for the exchange of information except for completing exchanges of information on past rulings in accordance with the timelines (ToR II.5.6). Colombia is recommended to ensure that all information on past rulings is exchanged as soon as possible.

C. Statistics (ToR IV)

258.  As no information on rulings was exchanged for the year in review, no statistical data can be reported.

D. Matters related to intellectual property regimes (ToR I.4.1.3)

259.  Colombia does not offer an intellectual property regime for which transparency requirements under the Action 5 Report (OECD, 2015) were imposed.

Summary of recommendations on implementation of the transparency framework

 

Aspect of implementation of the transparency framework that should be improved	Recommendation for improvement
Colombia did not complete exchanges of information on past rulings in accordance with the timelines (ToR II.5.6). This is a continuing recommendation from the prior year peer review.	Colombia is recommended to ensure that all information on past rulings is exchanged as soon as possible.

References

OECD (2017), BEPS Action 5 on Harmful Tax Practices – Terms of Reference and Methodology for the Conduct of the Peer Reviews of the Action 5 Transparency Framework, OECD/G20 Base Erosion and Profit Shifting Project, OECD, Paris. www.oecd.org/tax/beps/beps-action-5-harmful-tax-practices-peer-review-transparencyframework.pdf.

OECD (2015), Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report, OECD/G20 Base Erosion and Profit Shifting Project, OECD Publishing, Paris. https://doi.org/10.1787/9789264241190-en.

OECD/Council of Europe (2011), The Multilateral Convention on Mutual Administrative Assistance in Tax Matters: Amended by the 2010 Protocol, OECD Publishing, Paris. http://dx.doi.org/10.1787/9789264115606-en.

Note

← 1.  Parties to the Convention are available here: www.oecd.org/tax/exchange-of-tax-information/convention-on-mutual-administrative-assistance-in-tax-matters.htm. Colombia also has bilateral agreements in force Bolivia, Canada, Chile, Czech Republic, Ecuador, India, Korea, Mexico, Peru, Portugal, Spain and Switzerland and a tax information exchange agreement with the United States.