By Decree 876 dated September 15, 2023, and published in the Supplement of the Official Gazette 401 of September 21, 2023, the President of the Republic issued the Regulations of the Decree-Law for Strengthening the Family Economy. The following is a summary of the most relevant changes:

1. Income Tax rebate for personal expenses.

The value of the Basic Family Basket corresponding to the month of January of the fiscal year in which the tax is liquidated must be considered for the calculation of the rebate. Before it was established that the value corresponding to the month of December of the previous year had to be considered.

The expenses corresponding to health, food, education, and clothing may include those incurred for the taxpayer’s pets.

The sales receipts supporting the expense may be issued in the name of the taxpayer or his dependents registered for the calculation of the rebate. Only those individuals whose personal expenses are “practically” covered by the taxpayer within the fiscal year may be registered as dependents.

For the registration of parents as family dependents, their express consent will be required. Children who are not disabled may be considered as dependents until the fiscal year in which they reach 21 years.

1. Income tax withholding over income from labor relationships.

For calculating the income tax withholding, the employer must apply the seniority or disability benefits provided by law.

The value of the tax to be withheld must be divided for 11 months, since in January the employer must not withhold income tax.

If the value of the Basic Family Basket corresponding to the month of January of the fiscal year in which the withholding is made has not been published until February, the employer must apply the value corresponding to the month of December of the previous year and subsequently make the applicable adjustments.

When projecting their personal expenses, the employee must include the number of dependents and the differentiated calculation for catastrophic diseases, if applicable.

1. Reduction of the Income Tax rate.

The regulations establish the conditions for the reduction of the Income Tax rate for reinvestment of profits in sports, cultural, responsible scientific research, or technological development projects.

The taxpayer must reinvest its profits in its own or third-party projects to be executed in the following fiscal year to the one in which the profits were obtained. The benefit is applicable in the fiscal year in which the investment is made.

The reinvestment of profits may be used for:

1. In the case of projects executed by the taxpayer, the resources may be used to acquire goods and services necessary for such project.
2. In the case of projects executed by third parties, the resources may be used to acquire shares of the entity executing the project.

 

1. Simplified Regime for Entrepreneurs and Popular Businesses (RIMPE)

The Internal Revenue Service will register the taxpayers in the RIMPE regime when obtaining or updating the Taxpayers Registry (RUC).

The IRS may include, recategorize or exclude taxpayers from the RIMPE regime at any time. These modifications must be notified to the taxpayer and the formal duties derived from the change will be applicable from the month following the notification.

Taxpayers qualified as Popular Businesses may issue sales notes or invoices in the transfer of goods or services.

For calculating the income tax, taxpayers subject to the RIMPE regime will be able to deduct the applicable tax credits, but not the rebate for personal expenses.

1. Single Income Tax for Sports Betting Operators

For the applying the “Single Income Tax for Sports Betting Operators”, sports betting activities shall be understood as those that allow the user to obtain a prize for predicting the result of a sports activity based on his personal estimation and not only by chance.

It is clarified that sports betting operators cannot carry out games of chance such as casinos, bingos, lotteries, or bets in general, prohibited by the 2011 referendum.

The decree does not regulate how the “Single Income Tax for Sports Betting Operators” will be withheld, declared, and paid.

 

 

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

By Resolution NAC-DGERCGC23-00000025 issued on September 13, 2023, and published in the Second Supplement to the Official Gazette No. 396 of September 14, 2023, the General Director of the Internal Revenue Service (“SRI”) amended Resolutions NAC-DGERCGC15-00000455 and NAC-DGERCGC16-00000532 which regulate the filing of the Annex of Related Party Transactions and the Comprehensive Transfer Pricing Report.

1. Amendments to Resolution NAC-DGERCGC15-00000455

Taxpayers obliged to apply the transfer pricing regime and that within the same fiscal year have carried out transactions with related parties for an amount exceeding US$10,000,000 (previously US$15,000,000) must file the Comprehensive Transfer Pricing Report.

Regarding the operations included or not in the amount of operations with related parties, the following amendments were made:

• Income derived from agricultural activities subject to a single income tax is excluded, as well as the assets, liabilities, or expenses of the taxpayer attributable to the activity generating such income.
• In transactions between local related parties, those transactions carried out by the taxpayer that made the prior valuation consultation are excluded from the amount. The taxpayer with which such transactions were carried out may not exclude then automatically; therefore, it would have to analyze whether the transactions are excluded for a different reason or whether they should be included in the amount of related party transactions.
• Liability transactions are excluded from the amount, except for any loans obtained in the fiscal period being reported.
• Transactions with local related parties are included when the taxpayer has applied any income tax exemption or a partial or total reduction of the income tax rate.

A new Comprehensive Transfer Pricing Report may not be filed for tax years in respect of which the tax administration exercises or has exercised its assessment capability.

1. Amendments Resolution NAC-DGERCGC16-00000532

The use of financial information corresponding to the fiscal year prior to the one analyzed is allowed when:

• There is no information available for the fiscal year under analysis with respect to one or some of the comparable transactions,
• The accounting closing date of the previous fiscal year is after June 30, and

It is demonstrated that the relevant conditions in both periods did not change.

 

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

By Resolution No. SCVS-INC-DNCDN-2023-019 dated August 29, 2023, published in the Second Supplement of the Official Gazzete No. 394 of September 12, 2023, the Superintendent of Companies, Securities, and Insurance issued the “Guidelines of probity and civil capacity of companies or individuals which act as legal representatives or officers of companies subject to the control and supervision of the Superintendence of Companies, Securities and Insurance” (the “Guidelines”).

The Guidelines determine that companies or individuals acting as legal representatives or officers of companies subject to the control and supervision of the Superintendence of Companies, Securities, and Insurance, must submit the following documents for the recordation of their appointment, either to the Commercial Registry or the Companies’ Registry of the Superintendence (if the company is a Simplified Stock Corporation (S.A.S.)):

1. The certificate of not appearing in the Database of Persons with Convicted Sentences, issued by the Financial and Economic Analysis Unit (UAFE)
2. Proof of not appearing on the following public international lists: (i) Office of Foreign Assets Control (OFAC); and (ii) United Nation’s Security Council.

Copies of these documents will form part of the file of the minutes of the shareholders’ meeting whereby the legal representatives or officers of the company are appointed.

Additionally, the Guidelines state that the legal representative must submit these documents annually to the Superintendence of Companies, Securities, and Insurance, along with the information/documentation required to be submitted under article 20 of the Law on Companies (financial statements, foreign shareholders list, etc.). Non-compliance with this obligation will be communicated to the National Directorate for the Prevention of Money Laundering.

 

Sofía Rosales, associate at CorralRosales
srosales@corralrosales.com
+593 2 2544144

By Resolution SENAE-SENAE-2023-0056-RE, issued on July 31, 2023, and published in the Fourth Supplement of Official Gazette 386 of August 31, 2023, the National Customs Service of Ecuador (SENAE) established new regulations for companies authorized to operate under the international postal traffic and express courier regimes.

The most important changes include:

1.    Courier entities will have the same responsibilities and obligations as those of a customs broker, regarding the transmission of the simplified customs declaration (DAS) and the filing of supporting documents.
2.    Courier companies shall have the obligation to inform the consignees about the status of the cargo throughout the import process, and to advise them on issues related to tariff classification, valuation rules and reasonable doubt.
3.    The Courier entities shall not be liable before SENAE for:
a.    The accuracy of the information declared or for any difference in quantities and nature of the cargo.
b.    The intention of the consignors to comply with the categories that exempt them from the payment of taxes (categories B, E and G).
c.    The lack of house bills affixed to the shipments as long as they have not been subjected to physical inspections.
d.    Verification of split shipments.
4.    Administrative contraventions for not presenting supporting documents shall not be imposed to the courier entity if it is able to demonstrate that the consignee was duly informed of its obligations or that it had the express consent of the consignee not to present them. In such cases, the fine for the contravention shall be imposed on the consignee.
5.    The exemption of prior control documents for textiles and footwear imported under category D is eliminated.
6.    When importing medicines under category E the applicable medical prescription issued by a professional specialized in the diagnosed disease must be filed.
7.    When the value of the international freight is not identified in the transport document, the courier company shall apply a reference value of US$0.003 per unified basic wage per kilo (freight value = USD$0.003 x (Unified Basic Salary) x Kg).

8.    Courier cargo that has been definitively exported under a simplified customs export declaration shall be subject to the rules of the re-importation in the same state regime.

In the following link you can review the complete text of the Resolution:
SENAE-SENAE-2023-0056-RE

 

     

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

Fernanda Inga, senior associate at CorralRosales
finga@corralrosales.com
+593 2 2544144