Monthly Archives: December 2024

Through Executive Decree No. 487 issued on December 19, 2024, the President of the Republic of Ecuador amended the Regulations for the Application of the Internal Tax Regime Law and revised the rules governing the Single Income Tax for Sports Betting Operators. Below is a summary of the key points:

 

1. License to Operate

 

Both resident and non-resident operators in Ecuador must obtain a License to Operate Sports Betting (LOPD). This license will be granted by the Ministry of Sports, which must issue the regulations and conditions for obtaining it within three months.

 

The LOPD will be valid for five years. However, operators must pay an annual fee equivalent to 655 unified basic salaries (USD 307,850 for the year 2025).

 

1. Tax Modifications

 

• All entities engaging in sports betting activities will be subject to this tax, even if they are established as non-profit organizations, with the exception of the Guayaquil Charity Board (Junta de Beneficencia de Guayaquil) and the Fe y Alegría Foundation.

 

• The definition of “prize” has been modified for the purposes of calculating the withholding tax applicable to players and the taxable base for the operator’s tax. A player will be considered to have received a prize if, within a monthly period, the amount received from correct predictions exceeds the amount wagered.

 

• Bonuses freely available to the player will also be included in the amount received from correct predictions.

 

• The invoice and monthly withholding certificate for each player must be issued by the fifth business day of the following month.

 

• Operators have three months to adjust their systems and implement the necessary mechanisms to comply with these obligations.

Andrea Moya, Socia en CorralRosales
amoya@corralrosales.com
+593 2 2544144

The President of the Republic, by means of Executive Decrees No. 474 and 482 issued on December 6th and December 13th, 2024, respectively, ordered the mandatory and non-recoverable suspension of the working day of January 2nd and 3rd, 2025, for both the public and private sectors. With this decision, the New Year holiday will be extended from the 1st to the 5th of that month.

In our opinion, if the employer requires employees to work on these days and the employees give their consent, the work may be performed, provided that a 100% overtime surcharge is paid, as these are considered mandatory rest days.

 

Edmundo Ramos, Partner at CorralRosales
eramos@corralrosales.com
+593 2 2544144

 

María Victoria Beltrán, Senior Associate at CorralRosales
mbeltran@corralrosales.com
+593 2 2544144

 

By Resolution NAC-DGERCGC24-00000040, the Internal Revenue Service (SRI) has established the conditions for applying the additional deductions set forth in subparagraphs 9.1, 9.2, and 9.3 of Article 10 of the Internal Tax Regime Law (LRTI).

A. Net Increase in Job Positions: To determine the jobs net increase, subtract from the total number of employees under a labor relationship as of December 31 of the year the deduction applies, the number of employees as of December 31 of the prior year.

For calculating the net increase in young workers, subtract from the number of young workers as of December 31 of the year the deduction applies, the number of young workers as of December 31 of the prior year.

B. Amounts Applicable for the Benefit: The additional deduction is calculated exclusively over salaries and wages subject to social security contributions, as determined by law. It does not include social benefits or other compensation not subject to social security contributions, nor the employer’s social security contributions.

C. Duration of the Benefit: The employer may apply the additional deduction for up to 12 months from the start of the employment relationship. This period does not apply to the benefit for contracting women, which timeframe is determined in the LRTI and its regulations.

If the new worker’s employment ends before December 31 of the fiscal year, the benefit may continue if the position is filled the following month.

D. Additional Deduction Percentages: The additional deduction percentages are as follows:

Worker

Additional Deduction (%)

• Individuals aged 18 to 29 years.
• Individuals required to pay alimony
• Individuals previously detained without a final guilty verdict

50%

• Individuals aged 18 to 29, who are graduates or have completed studies at public universities, technical or technological institutes, pedagogical or arts institutes, conservatories, or public or municipal institutes.
• Individuals of any age, provided the employer’s primary economic activity is in construction or agriculture.
• Individuals who have served a prison sentence exceeding one year, as well as their spouses or partners in a legally recognized union.

75%

E. Individual Requirements: Workers must meet the following conditions:

1. Youth Employment: Workers must be aged between 18 and 28 years. The benefit applies until the worker turns 29.
2. Graduates from Public Educational Institutions: This must be verified with corresponding degrees, certificates, or records.
3. Alimony Payers: This must be proven by a court decision or settlement agreement.
4. Formerly Detained Individuals: The position must be held by someone who served over one year in prison, is in semi-open conditions, or had measures that substituted detention. Verification must come from documents issued by the National Service for Comprehensive Attention to Persons Deprived of Liberty (SNAI).

F. Document Retention: Employers must retain supporting documents for seven years.

G. Construction and Agriculture Sectors: For the construction sector, the employer must register a principal activity under Section F “Construction” of the International Standard Industrial Classification (ISIC).

For agriculture, the employer must register any of the following principal activities under ISIC:

– A011: Growing non-perennial crops

– A012: Growing perennial crops

– A013: Propagation of plants

– A015: Mixed farming of crops and livestock

If additional activities are performed, the employer must differentiate payrolls by activity and calculate the net increase in employment only for workers engaged in construction or agriculture. If differentiation is not possible, the benefit will apply proportionally to income.

H. Benefit Restrictions: The benefit is not applicable if new employees were previously employed by the same employer, their relatives up to the fourth degree of consanguinity or second degree of affinity, shareholders, legal representatives, or related parties, within the 3 fiscal years preceding their hiring.

I. Compliance Obligations: To access the benefit, employers must be up to date with obligations to the Internal Revenue Service, Ecuadorian Social Security Institute (IESS), and the Ministry of Labor as of the date of submission of the income tax return.

 

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

Organic Law for Financial Relief and Economic Strengthening of Generations in Ecuador was published in Official Gazette No. 699, Fifth Supplement, on December 9, 2024.

Below is a summary of the most relevant provisions:

1. Tax credit for employers:

Employers who did not terminate their workers during October, November, and December 2024 and who maintain them under the same or better working conditions may claim a percentage of the employer’s contribution to social security paid during this quarter as a tax credit for 2024 income tax. The percentage will be calculated according to the following chart:

Type of institution Benefit Large companies with gross income in 2023 higher than in 2022.

Medium-sized banks with gross income higher from October 2023 to October 2024. 5% Large companies with gross income in 2023 similar to 2022.

Medium-sized banks with lower gross income from October 2023 to October 2024. 10% Large companies with gross income in 2023 lower than in 2022.

Small banks with higher gross income from October 2023 to October 2024 15% Medium-sized companies with gross income in 2023 higher than in 2022.

Small banks with lower gross income from October 2023 to October 2024 20% Medium-sized companies with gross income in 2023 similar to 2022

All other financial institutions. 25% Medium-sized companies with gross income in 2023 lower than in 2022 30% Small and microenterprises with gross income in 2023 higher than in 2022 35% Small and microenterprises with gross income in 2023 similar to 2022 40% Small and microenterprises with gross income in 2023 lower than in 2022 45%

Large banks are not eligible for this benefit. The credit amount cannot exceed the tax liability for the 2024 fiscal year.

1. Exceptional payment plan:

The Internal Revenue Service (SRI) may accept payment plans of up to 12 installments for withheld or collected taxes outstanding as of October 31, 2024. Applications must be submitted by February 7, 2025.

1. Extinction of Tax Obligations:

The SRI Director General and, optionally, sectional tax administrations will declare extinguished any tax obligations with a total value (including tax, interest, and penalties) that does not exceed $460 per taxpayer. This applies if the obligation has been outstanding for at least one year and the tax administration has initiated collection proceedings.

1. Income Tax Waiver:

Income tax payments for the 2022 and 2023 fiscal years are waived for taxpayers under the RIMPE-Popular Business Regime.

1. Income from occasional property sale:

Income from the occasional sale of real estate by individuals or entities will be considered exempt from income tax, provided it does not exceed two property sales per year.

1. Social security:

• The Ecuadorian Institute of Social Security (IESS) will not initiate collection proceedings until February 28, 2025. Ongoing processes will also be suspended until that date.
• Social security contributions corresponding to November and December 2024 will not generate employer liability if paid within 90 days of becoming overdue and upon the employer’s request.

1. Public procurement:

Public sector contracting entities may grant exceptional extensions to contractual deadlines for the delivery of goods or services, provided the contracts were signed during the period of the electricity crisis.

 

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

Through Executive Decree 468 issued on December 1, 2024, the President of the Republic has reduced the ISD tax rate for importation of goods classified under certain tariff subheadings:

Sectors ISD tax rate from January to March 2025 ISD tax rate from April 2025 Tariff subheadings of the pharmaceutical sector 0% 0% Tariff subheadings of other productive sectors 0% 2,5%

The lists of tariff subheadings subject to these rates will be issued by the Ministry of Economy and Finance.

This measure aims to mitigate the impact of the elimination of the ISD tax credit for income tax purposes.

 

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