On 29 November 2017, Ecuador has enacted a new law published in Official Gazette-150 that reforms tax laws, effective as of 1 January 2018.

Corporate income tax

The new law increases the corporate income tax rate from 22% to 25% and withholding tax rate from 22% to 25%. The corporate income tax rate increases from 25% to 28% for local taxpayers with shareholders or beneficiaries that are residents in tax haven countries.

The new law also allows a 10% reduction in the corporate income tax rate for frequent exporters, producers of goods and tourism promotion companies.

Incentives

The new law establishes incentives for micro and small companies (micro company is an entity with 1 to 9 employees and gross income not more than USD $300,000; a small company is an entity with 10 to 49 people and a gross income between USD $300,000.01 and USD $1,000,000) including a 3-year income tax exemption.

Under certain circumstances a 10% reduction may apply in the tax rate for reinvestment of profits of certain companies.

Refund

Under certain conditions, the Ecuadorian IRS may order a refund of the advance payment of the income tax.

Fine for undisclosed assets

The new law imposes a fine on taxpayers that do not disclose all of the information regarding assets abroad. The fine is 1% of the total assets or total income of the last fiscal year (whichever is higher). The fine cannot exceed 5% of the assets or income.