Monthly Archives: January 2022

• The taxpayers have maintained assets abroad such as money, real estate, shares, etc. derived from income that should have been subject to income tax in 2020 or before, but such tax has not been paid, provided that:
• The Tax Authority has not initiated an assessment procedure and the assessment is not final,
• The assets are not subject to judicial litigation,
• The assets are not located in countries classified as high risk or non-cooperative by the Financial Action Task Force (FATF), and
• The money is in a financial institution.
• The taxpayer has carried out transactions subject to Outflow Tax (ISD) and have not paid such tax, provided that conditions (i) and (ii) above are met.

• Individuals who, as of November 29, 2021, have an enforceable conviction for crimes against the development regime, crimes against the efficiency of the public administration, customs, or economic crimes, and
• Individuals who have been public officials at any time since 2015, their spouses, domestic partners or family members up to the second degree of consanguinity and second degree of affinity, and entities in which these officials have or have had a participation of more than 10%.

• Taxpayers must submit a reserved sworn statement in which they state the following:
• That as of December 31, 2020, they did not maintain any other assets and did not carry out other operations that should have been subject to tax, which comply with the conditions to benefit from the Regime.
• The taxable income that was not taxed in Ecuador, detailed for each fiscal year to which the Regime will be applied.
• For each asset, the date and value of acquisition, the commercial value as of December 31, 2020, the place where they are located and, in case of money, the financial entity where it is deposited.
• The amount of the operations that should have been subject to the pay outflow tax (ISD), the date of the taxable event and its description.

• b.    Declare and pay the Temporary Tax for the Regularization of Assets Abroad. The taxpayer may request payment facilities.
• c.    Submit the patrimonial statement including the regularized assets until December 31, 2022.

• a.    The values of the assets included in the sworn declaration; and,
• b.    The value of the operations that were not subject to the payment of outflow tax (ISD) included in the sworn statement.

The applicable tax rate will be established according to the following:
    


5.    What are the effects derived from applying the Regime?

• Taxpayers will not be subject to assessment process regarding income tax for the fiscal years 2020 and prior years, and outflow tax (ISD) for operations occurring up to December 31, 2020.
• The taxpayers will not be subject to legal or administrative sanctions derived from the noncompliance of the formal duties related to the above taxes.
• Criminal proceedings will not be initiated regarding crimes of unjustified private enrichment, tax fraud or customs fraud.

Specialist in Tax
Andrea Moya, partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

The Law for Economic Development and Fiscal Sustainability After the Pandemic COVID-19, enacted in the Official Gazette 587, Third Supplement, on November 29, 2021, amended the Tax Code and, among others, the Internal Tax Regime Law.
 
On December 29, the President of the Republic issued the corresponding regulations. CorralRosales will summarize the most important changes introduced by the indicated regulations in several bulletins. The following analyzes the main elements to be considered for calculating the income tax withholding to workers.
 
Employers must withhold income tax from their employees on a monthly basis. For this purpose, they must follow the following procedure:

1. The taxable income of the employee for the fiscal year must be projected.
2. From such value, the amount of the contribution to the Social Security Authority must be deducted.
3. The amount obtained will be the income taxable base, over which the tax rate must be applied according to the following table:

1. The amount of the tax obtaining from applying the tax rate must be reduced by the discount for personal expenses.
2. The result must be divided by 12 to establish the monthly rate to be withheld to the employee.

In order to calculate the maximum amount of the personal expense deduction, employers must apply the following procedure:

1. The value of the employee’s personal expenses projected for the year must be informed to the employer. The maximum amount of personal expenses is equal to the value of the Basic Family Basket (BFC) of December of the previous fiscal year multiplied by 7. For the calculation of the monthly withholding of the fiscal year 2022 the maximum value for the personal expenses is US$5,037.55 which is equal to the value of the BFC of December 2021 (US$719.65) multiplied by 7.
2. The employee’s gross annual income must be determined. This is equal to the total value of the employee’s income, including exempted income.
   1. If the employee’s gross annual income does not exceed US$24,090.30, the tax credit to be discounted from the income tax will be 20% of the value of the projected personal expenses (maximum US$5,037.55).
   2. If the employee’s gross annual income exceeds US$24,090.30, the tax credit to be discounted from the income tax will be 10% of the value of the projected personal expenses (maximum US$5,037.55).

The personal expenses to be considered for the calculation of the tax credit are those incurred for housing, health, food, clothing, tourism, and education, including art and culture.

* On the Circular NAC-DGERCGC21-00000007 issued by the Internal Revenue Service on December 30, the value of the FBC as of November 2021 was used as an example, since the value of December 2021 was not known at that date.

Specialist in Tax
Andrea Moya, partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

The Law for Economic Development and Fiscal Sustainability After the COVID-19 Pandemic, enacted in the Official Gazette 587, Third Supplement, of November 29, 2021, introduced several amendments to the Code of Production, Commerce, and Investments (COPCI).
 
Regarding customs matters, the law provided for the exclusion of freight from the taxable base for the calculation of customs duties. Through Bulletin 96 issued on December 23, 2021, the Customs Authority (SENAE) stated the following:

• For calculating the taxable base for customs duties (Advalorem tariff), the freight must be excluded from the customs value of the merchandise.
• For calculating the taxable base of the remaining taxes on foreign trade (FODINFA, Value added tax and excise tax), freight should not be excluded from the customs value.

The Customs Authority established that, with respect to import customs forms filed from November 29, 2021 until December 23, 2021 that are in the process of nationalization, the form must be amended and the taxable base must be calculated based on the criteria indicated above.
 
With regard to imports made from November 29, 2021 to December 23, 2021 and which merchandise has already been nationalized, we recommend verifying that the taxable base was calculated correctly. If the importer paid less than the amount due, a substitute declaration may be filed; and, if the importer has paid more than the amount due, a reimbursement claim may be filed.

Specialist in Tax
Andrea Moya, partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

Specialist in Tax
Andrea Moya, partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144