The Circular clarified income tax rules and filing obligations for share transfers and corporate restructurings.
Ecuador’s Internal Revenue Service (SRI) issued Circular No. NAC-DGECCGC25-00000005 on 30 June 2025, clarifying income tax rules on the direct or indirect transfer of shares, participations, and similar rights in companies or permanent establishments in Ecuador.
The Circular became effective immediately upon publication.
Under existing law, a flat 10% income tax applies to gains from such transfers by resident or non-resident individuals or entities. However, the tax does not apply to corporate restructurings—including mergers and spin-offs—if the effective beneficial ownership remains the same in proportion before and after the transaction. The Circular clarifies that this condition is met when the proportional equity value of the beneficial owners remains unchanged, even if shareholding percentages vary.
The Circular further requires that both the transferring parties and the entities whose shares are transferred must file a tax return with the SRI, regardless of whether the transfer triggers a tax liability. This obligation applies unless the shares are listed on the Ecuadorian Stock Exchange. Buyers are also required to withhold income tax based on the transaction’s fair market value, unless exempt.
Failure to submit the required tax return or submitting incorrect information will result in a fine equal to 5% of the transaction’s fair market value. The Circular also clarifies the definition of “distributed earnings” for tax purposes, referring to shareholder distributions recorded as liabilities and approved in official meeting minutes.
