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4.1. Foreign PE of a Domestic Entity

There are no specific rules under Colombian legislation with respect to a domestic entity having a PE abroad. In this regard, Colombian legislation only regulates the case in which a foreign entity has a PE in Colombian territory.

Colombian entities are taxed over their worldwide income. As a consequence the foreign income/losses are taken into account when determining the taxable base of the Colombian entity.

Nonetheless, in accordance with article 260-2 of the Tax Code, transactions between income taxpayers and its related parties resident in Colombia, in favor of a foreign PE of any of them, shall comply with the Arm´s Length Principle and the formal obligations related to the Transfer Pricing Regime that the law enshrines.