For FY 2015 Needish Colombia S.A.S. (formerly Groupon Colombia S.A.S.) had deducted cross border related party service payments, including COP $1,726,463,000 for administrative services allegedly provided by Needish Ltda. (Chile) and COP $81,860,000 for management services allegedly provided by Groupon Inc. (United States).
The tax authority disallowed the deductions. For the Needish Chile services, it concluded that the effective provision of the services was not sufficiently proven for 2015. For the Groupon Inc. payment, it concluded that withholding tax was required for deductibility and that withholding had not been applied, and it treated transfer pricing compliance as not removing that withholding requirement.
Needish Colombia S.A.S. sought annulment of the tax assessment. It argued, among other points, that it had provided sufficient evidence of the services, that some documentation was rejected because of language, that withholding should not apply to the Groupon Inc. payment, that the disputed amount should be COP $1,493,653,453 rather than COP $1,726,463,000, and that the inaccuracy penalty should not apply due to a difference in legal criteria.
Judgment
The Supreme Administrative Court confirmed the tax authority’s denial of Needish’s deductions. It maintained the disallowance of costs of services from Needish Chile because the file did not contain sufficient evidence of effective service provision during 2015, noting that the agreement contemplated documenting services in reports, emails, documents, or another medium, but the material provided did not allow identification of verifiable deliverables for the period. It also maintained the disallowance of costs of services from the Groupon Inc. because withholding was not applied despite being required for deductibility, and held that the transfer pricing regime did not exempt the taxpayer from that withholding obligation.
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