The National Assembly of Ecuador announced a project that contains a tax incentive in the Organic Law for the Restructuring of Debts of Public Banks and National Financial Sector, on 20 March 2017. In accordance with the project, entities resulting from the merger of savings and credit cooperatives will have an income tax exemption of 5 years as from the date of the merger, provided certain requirements are met.
The Internal Revenue Service (SRI) of Ecuador published Resolution NAC-DGERCGC17-00000121 in the Official Gazette, on 20 February 2017. The Resolution establishes the process to request a tax refund of the income tax paid in excess. The key provisions of the Resolution are following:
Taxpayers may apply for a tax refund of their excess income tax paid, provided that their economic activity had been seriously affected during the tax year and the amount of income tax paid exceeds their respective average effective tax rate (TIE). The TIE established for the tax year 2016 is 1.7% for companies and 1.2% for individuals and inheritances, subject to maintaining accounting books.
The tax refund process requires a previous comparison between the TIE calculated for 2016 and the general TIE and the tax refund must be requested using the forms authorized by the SRI.
These provisions are not applicable to financial institutions, credit card companies and other financial entities subject to the control of the Supervisor of Banks. The Resolution is applicable as from its publication.
The Internal Revenue Service of Ecuador has issued a Resolution that was published in the official gazette on 30 December 2016. The Resolution launches transfer pricing (TP) regulations applicable to exports of bananas, oil, petrol, gold, silver, copper or other minerals. In accordance with this Resolution, the transfer prices on exports of such goods have to be analyzed using the comparable uncontrolled price (CUP) method.
On 29 December 2016, a resolution published in Official Gazette No. 912, established the individual income tax rates applicable to income derived in 2017. The new income tax rates are as follows:
|Taxable income (USD)||Tax due on lower limit (USD)||Marginal rate on the excess (%)|
|up to – 11290||0||0|
|11290 – 14390||0||5|
|14390 – 17990||155||10|
|17990 – 21600||515||12|
|21600 – 43190||948||15|
|43190 – 64770||4,187||20|
|64770 – 86370||8,503||25|
|86370 – 115140||13,903||30|
On 13 December 2016, Ecuador and Italy signed an amending protocol to update the existing DTA of 1984 for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income.
On 17 September 2016, the tax information exchange agreement (TIEA) between Costa Rica and Ecuador entered into force, which requires the parties to exchange information that is relevant for the determination, assessment, collection and execution of tax claims or for the investigation or prosecution of tax lawsuits.
For Ecuador, the exchange of information applies to information regarding income taxes, inheritance and donation tax, and other taxes collected by Ecuador’s Internal Revenue Service as same as for Costa Rica, the exchange of information applies to information regarding the income tax and other taxes collected by Costa Rica’s tax authorities.
This agreement generally applies from 17 September 2016 for criminal tax issues and from 1 January 2017 for other tax issues.
Administrative Resolution No. NAC-DGERCGC16-0156 issued by the Tax Administration was published in the Official Gazette and it establishes that 1% withholding tax rate will apply even if the Central Bank acts as an intermediary under any contractual figure, in the following cases:
- to interest and fees incurred in credit transactions between banks and other financial entities subject to the supervision of the Superintendence of Banks and the Superintendence of Popular and Solidarity Economy; and
- to any financial returns on investments made by the above financial institutions.