Colombia vs Puerto Arturo S.A.S., April 2025, Supreme Administrative Court, Case No. 25000-23-37-000-2021-00357-01 (28256)

Category: Benchmark, Range and Median, Comparability Analysis, Transfer Pricing Methods | Tag: , , , , , , , , , , ,
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Puerto Arturo S.A.S. had determined that its income from the sale of emeralds to a related party was at arm’s length using the Comparable Uncontrolled Price (CUP) method. It compared the average selling price per carat with the average minimum and total values of the emeralds as determined by independent appraisers.

The tax authorities disagreed with both the method and its application. Instead, they applied the Transactional Net Margin Method (TNMM) using a cost-based profit level indicator (PLI), which led to an assessment where the income from the transactions was adjusted to the median result of a benchmarking study.

On appeal, the Court of First Instance dismissed the taxpayer’s complaint. It found that the appraisers’ valuations did not constitute comparable uncontrolled prices within the meaning of the CUP method.

Puerto Arturo subsequently appealed to the Council of State.

Judgment

The Council of State upheld the approach of the tax authorities and confirmed the assessment of additional income. It held that the CUP method requires a comparison between actual prices charged in transactions between related parties and those charged in comparable transactions between unrelated parties — not values assigned by appraisers. The Court also noted that it had been established that no sufficiently comparable uncontrolled prices existed for emeralds.

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