On July 21st the Colombian tax Administration (DIAN) answered the following consultation:
“To a possible transfer pricing adjustment arising from the analysis under IFRS, can the variation between the two accounting standards that leads to a higher taxable base be credited with the transfer pricing adjustments? If so, how should this be reported in the transfer pricing informative return?"
DIAN states that it is not feasible to credit the transfer pricing adjustments with the difference arising from financial and tax records.
In our view, while it is clear that in practice this is not possible, it is important to acknowledge that transfer pricing analysis must take into account the factors that affect the comparability between the analyzed operations and comparable third party transactions. The accounting differences that arise as a result of IFRS implementation may come to constitute, in some cases, a material difference in comparability that is to be adjusted in order to properly assess compliance with the arm's length principle.