The tax reform in Ecuador includes measures regarding the taxation of capital gains related to indirect and direct transfers of shares of Ecuadorian corporations with increased rates of corporate tax imposed on shareholders of Ecuadorian corporations that are residents of tax haven jurisdictions.
On 29 December 2014, the tax reform provisions were announced in the official gazette and have an effective date of 1 January 2015. Generally, the new law establishes that capital gains obtained by residents and non-residents from the direct or indirect sale of shares, participation or any other rights in Ecuadorean companies will be treated as an Ecuadorian source of income and this gain is subject to Ecuadorian income tax at a rate of 22%.
The Ecuadorian corporation whose shares are directly or indirectly transferred is liable for the payment of the capital gains tax and is accountable for reporting the transaction. Failure to comply with the reporting/ filing obligation will result in a penalty equivalent to 5% of the transaction amount.
