Regulation NAC-DGERCGC22-00000020 issued on May 11, 2022, by the Internal Revenue Service establishes the procedure for VAT refunds for: (i) direct suppliers of exporters of goods (Direct Suppliers), and (ii) direct suppliers of companies that are owned by exporters and part of the same productive chain up to the export of goods (Indirect Suppliers).
Right to refund: Direct and Indirect Suppliers may request a refund of VAT paid on the importation or local acquisition of goods, raw materials, services, and fixed assets, used in the manufacture and commercialization of goods taxed with 0% VAT rate, that are transferred to the exporter for export.
Periodicity: VAT refund applications shall be filed on a monthly basis. When the production processes are cyclical (greater than one month), the applications shall be submitted when the transfer to the exporter and the export is made.
Mechanisms: The return mechanisms are as follows:
- For VAT paid by Direct Suppliers, two mechanisms apply:
- Automatic provisional refund; and,
- Exceptional refund.
- For VAT paid by Indirect Suppliers, only the exceptional refund mechanism is provided for.
Automatic provisional refund: This mechanism allows Direct Suppliers to obtain an automatic provisional VAT refund before the resolution of the refund request is issued.
The request begins with the filing of the application through the Internal Revenue Service (SRI) system and, if accepted, the taxpayer must submit the requirements detailed below physically as an annex to the process. Once the annex is submitted, the SRI will issue a credit note for the provisional refund percentage.
The provisional refund percentage may vary from 50% to 100% of the amount requested and validated through the IRS system, depending on the tax risk indicators of each taxpayer.
If the amounts provisionally refunded are higher than those recognized in the final resolution, the tax administration will require the reimbursement of the amount refunded in excess. If these amounts are not refunded within the term, the tax administration will initiate a coercive process.
Exceptional return: This mechanism allows the definitive reimbursement of VAT without the issuance of a provisional liquidation.
Requirements: Before filing the VAT refund application, by either of the two mechanisms, the Direct or Indirect Supplier must comply with the following requirements:
- To be registered in the Taxpayers Registry (RUC) with active status.
- The right to the VAT reimbursements for the requested period must not be expired,
- Have completed the “pre-validation” process in the SRI system.
- Be registered in the VAT refund system for the automatic provisional refund mechanism.
- To have declared the VAT corresponding to the periods for which the refund will be requested.
- To have filed the simplified transactional annex, in the applicable cases.
- In the case of the automatic provisional refund, the “Agreement on provisional settlement of automatic refund” must have been signed online.
Once the return process has been initiated, the following requirements must be met:
- List of the sales receipts and/or import customs declarations that support the production costs and marketing expenses that support the tax credit for the VAT paid.
- Sales receipts of local acquisitions of fixed assets.
- Sales receipts rejected by the pre-validation system.
- List of sales receipts of goods transferred to the exporter.
- In the case of Direct Suppliers, a list detailing the customs export forms.
- In the case of Indirect Suppliers, a certification issued and signed by the exporter detailing that the export has been executed.
- If the taxpayer maintains accounting systems that allow the tax credit to be unequivocally differentiated, the accounting ledger of the tax credit account generated by the acquisitions made exclusively for the transfer of goods to the exporter, as well as the accounting ledgers of the accounts in which the sales are registered.
- Certificate issued by the exporter establishing the ownership of the company to which the Indirect Supplier makes its sales.
Specialist in Tax
Andrea Moya, partner at CorralRosales
+593 2 2544144
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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.