Extension of deadlines for tax matters

deadlines-extension-tax-matters

In accordance with the state of emergency declared by the President, the following tax authorities, in the exercise of their powers, have suspended the following deadlines and terms:

  1. Regulation NAC-DGERCGC20-00000022 issued by the Internal Revenue Service establishes that terms and deadlines in all administrative processes and the statute of limitations for collecting debts are suspended from March 16 to March 31, 2020. The suspension was extended until April 30, 2020 by regulation NAC-DGERCGC20-00000028.
  2. Regulation SENAE-SENAE-2020-0016-RE issued by the Customs Authority establishes that terms and deadlines in all administrative processes and the statute of limitations for collecting debts are suspended from March 17 to March 31, 2020. The suspension was extended until April 30, 2020 by regulation SENAE-SENAE-2020-0022-RE.
  3. Regulation GADDMQ-DMT-2020-001-R issued by Quito Municipal Authority establishes that terms and deadlines in all administrative processes and the statute of limitations for collecting debts are suspended from March 16 to March 20, 2020. The suspension was extended until March 31, 2020 by regulation GADDMQ-DMT-2020-002-R. As soon as the municipality extends the suspension period, we will inform you through this bulletin.

 

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State of emergency – tax measures (April 1st)

state-of-emergency-tax-measures

Regulation NAC-DGERCGC20-000000025 issued by the Internal Revenue Service on April 1, 2020 regulates the application of Executive Decree 1021 by which regulated certain tax issues with regard to the state of emergency.

1. New deadline for filing the income tax return

Taxpayers, except non-profit and government entities, may file the corporate income tax return for the fiscal year 2019, without generating fines or interest, until the dates described in the following chart:

Tax ID 9th digit

Due date

1 and 2 April 15, 2020
3 and 4 April 17, 2020
5 and 6 April 21, 2020
7 April 23, 2020
8 and 9 April 29, 2020
0 April 30, 2020

Non-profit and government entities may file the corporate income tax return for the fiscal year 2019, without generating fines or interest, until the dates described in the following chart:

Tax ID 9th digit

Due date

1 and 2 May 4, 2020
3 and 4 May 5, 2020
5 and 6 May 6, 2020
7 and 8 May 7, 2020
9 and 0 May 8, 2020

2. Taxpayers that are able to defer the payment of taxes:

The following taxpayers are able to defer the payment of corporate income tax of the fiscal year 2019 and, value added tax (VAT) to be declared in April, May and June 2020:

  • Micro-enterprises understood as those that obtained gross revenues of up to US$300,000.00 during fiscal year 2019.
  • Taxpayers that, before March 27, 2020, have registered the province of Galapagos in their Tax ID (RUC).
  • Taxpayers that are regular exporters of goods, or that 50% of their income derives from the export of goods; or,
  • Taxpayers that, before March 27, 2020, have registered one of the following as their main economic activity in their Tax ID:
    • The operation of airlines,
    • The provision of accommodation and/or food services; or,
    • Activities of the agricultural sector.

 

3. Deadlines for paying the corporate income tax:

Taxpayers described in paragraph 2 are able to pay the corporate income tax of the fiscal year 2019 in a single installment, according to the general rules of the Income Tax Regime Law and its regulations, or in six installments, in accordance with the following percentages:

Month for filing
the tax return 
Payment
installments 

Payment
percentage

April, 2020 April, 2020 10%
April, 2020 May, 2020 10%
April, 2020 June, 2020 20%
April, 2020 July, 2020 20%
April, 2020 August, 2020 20%
April, 2020 September, 2020 20%

The first installment shall be paid on the date the return is due in accordance with the schedule set forth in paragraph 1. The remaining 5 installments shall be made through the Multiple Payment Form in accordance with the following schedule:

Tax ID 9th digit:

Due date:

1 10th of each month
2 12th of each month
3 14th of each month
4 16th of each month
5 18th of each month
6 20th of each month
7 22th of each month
8 24th of each month
9 26th of each month
0 28th of each month

If the taxpayer doesn’t pay the tax within the deadlines described before, it would be subject to pay the applicable interests and fines.

 

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Reforms to Ministry of Labor guidelines on the application of reduction, modification or emergency suspension of work activities

work-activities-reduction-modification-suspension-Covid-19-labor

On March 28, the Ministry of Labor amended the Ministerial Agreement MDT-2020-077, regarding guidelines on the application of reduction, modification or emergency suspension of work activities during the sanitary emergency.

Working-day schedule modification

Employer that modifies working schedule due to the sanitary emergency, must allow their workers to rest for 2 consecutive days.

Suspension of work activities 

  • Employer is entitled to recover the period on which activities were suspended, increasing the working schedule up to 12 hours during the week and 8 hours on Saturdays.
  • Employer and workers may agree on a wage payment schedule during the period on which activities are suspended.

Emergency vacation planning

During the health emergency, employer may require its workers to take any vacations days they have available. Employer may also agree with their workers to take early vacations, to do so, the corresponding vacation request must be submitted.

Working conditions modifications 

Employer and workers may agree on work alternatives established in the existing regulations, due to conditions arising from the Covid-19 pandemic, such as the mobilization impossibility, prevention infection risks and employer´s financial status. All these must not imply a waiver to workers’ rights.

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State of emergency – tax measures

state-of-emergency-tax-measures

By Executive Decree 1021 issued on March 27, 2020, the President of Ecuador, adopted the following tax measures within the state of emergency:

1. Income tax withholding:

The following entities will be required to withhold and pay on a monthly basis income tax over their total taxable income obtained in each month:

Entity activity 

Monthly income tax withholding rate (%)

Financial institutions under the supervision of the Superintendency of Banks and entities that provide mobile telephone services. 1,75%
Entities that have entered into contracts with the Goverment for the exploration and exploitation of hydrocarbons under any modality or, contracts for specific works and services under the Hydrocarbons Law or, complementary petroleum services as well as transportation of crude oil. 1,5%

The withholding tax receipt must be issued in the name of the withholding agent and the value withheld will be consider as tax credit for paying the withholding agent’s income tax.

2. Tax payment deadlines:

For this time only, the taxpayers who at this date are considered as:

  • Micro-enterprises;
  • Those domiciled in Galapagos Islands;
  • Those who are regular exporters of goods, or that 50% of their income derived from the export of goods; or,
  • Those whose economic activity is:
    1. The operation of airlines,
    2. The tourism sector, exclusively those that provide accommodation and/or food services; or,
    3. The agricultural sector.

Will be able to pay the corporate income tax for the fiscal year 2019 and the value added tax (VAT) to be paid in April, May and June 2020 as follows:

  1. Payments will be made in 6 installments during the year 2020 in the following percentages: in each of the first two months, the taxpayers are required to pay 10% of the total value; and, in each of the remaining four months, taxpayers are required to pay 20% of the total value.
  2. These payments will be made according to the ninth digit of Tax ID as follows:
Ninth Digit of Tax ID 

Payment Date

1 10th of each month
2 12th of each month
3 14th of each month
4 16th of each month
5 18th of each month
6 20th of each month
7 22nd of each month
8 24th of each month
9 26th of each month
0 28th of each month

Taxpayers domiciled in the province of Galapagos are able to make the payment until the 28th of each month..

If a payment deadline overlaps with a mandatory rest day or holiday, the deadline shall be the next working day unless that day falls on the following month, in which case the payment deadline shall be anticipated to the last working day of the month.

If the taxpayer makes the payment after the deadlines have expired, he must pay the respective interest and fines in addition to the tax

  1. The payment of 2019 corporate income tax for the entities described above, will be made from April to September 2020 in the percentages and terms indicated in numbers 1 and 2 of this document.
  2. The payment of VAT for the months of April, May and June 2020 will be made in the percentages and terms described above, in the following months:
VAT to be paid in the month of

Months of Payment:

April 2020 From April to September, 2020
May 2020 From May to October, 2020
June 2020 From June to November, 2020
  1. Taxpayers subject to the Micro-enterprise Taxation Regime shall file their VAT return on a semi-annual basis. These taxpayers will not be subject to the exception regime detailed above.

 

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National Assembly requires the Executive Branch to establish mandatory licenses and access to testing data and technology to fight COVID-19

licenses-testing-data-intellectual-property

Through Resolution dated March 20, 2019, the Education, Science and Technology Commission of the National Assembly (Legislative Branch) in charge of Intellectual Property matters, requested that the Executive Branch include in the emergency declaration the adoption of administrative and technical mechanisms for the establishment of “compulsory patent licenses, access to testing data and access to other technologies for the availability of vaccines, drugs, diagnoses, devices, supplies, and other useful means for surveillance, prevention, detection, diagnosis and treatment of people infected by Coronavirus (COVID-19).”

For the local IP office to have a compulsory emergency license, it will first be necessary to issue the corresponding executive decree (Presidency) or ministerial agreement (Ministry of Health) detailing the reasons for the emergency. The validity of the compulsory license will be maintained only while the grounds for the emergency declaration last.

The exploitation of the patent may be carried out directly by the state or a state contractor and it will not be the duty of the IP office to notify the holder of the patent with the compulsory license immediately upon its adoption, since the law establishes that the same will be done “when reasonably possible”.

The owner of the patent on which the compulsory license was ordered will receive financial compensation and may continue to exploit it directly.

The Executive Branch has not ruled on this request so far.

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Income tax withholding rates

Regulation NAC-DGERCGC20-00000020 issued by the Internal Revenue Service and published on March 20, 2020 in the Official Registry Special Edition 459 established new rules to the income tax withholding regime:

  1. The following income tax withholding rate was modified:
Concept 

Previous
rate

New
rate
Acquisition of all types of movable property of a tangible nature 1%  1,75%
Payments that do not have a specific withholding rate 2% 2,75%
  1. It was clarified that the acquisition of goods of agricultural, poultry, livestock, beekeeping, bio aquatic, forest and meat origin, which are maintained in their natural condition, will be subject to 1% withholding regardless of whether an invoice or settlement for the purchase of goods or provision of services is issued.
  2. Additionally, it is clarified that this withholding rate (1%) applies to income from local production and marketing of agricultural activities, even if the taxpayer generating the income is subject to a special income tax regimen.

The new withholding rates are applicable beginning April 1st.

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Ecuador: New measures against Covid-19

covid-19-labor.jpg

Since March 17, new limitations apply to mobility and the development of economic activities.

I. Measures enforced throughout the country

The President of Ecuador, through Executive Decree 1017, declared a state of emergency throughout Ecuador, further declaring the Covid-19 (coronavirus) as a pandemic and issued additional control measures.

  1. Freedom of movement and mobility of people in the country have been limited and in-person work activities on public and private sector were suspended from March 17 to 24.
  2. Exceptionally, the mobility of people will be allowed in the following cases:
    • Workers and employees of entities that provide basic services relating to health, security, fire, airports, terminals (maritime, river), banking, food supply; the export sector and its logistics chain, strategic sector, those related to animal care and breeding, consular services accredited in the country.
    • Members of the National Police and Armed Forces.
    • Medical, health or relief personnel
    • Public and private transportation of entities authorized to operate.
    • People who must commute for emergency reasons.
    • People who need to stock up on food, medicine or fuel.
  3. Curfew has been established prohibiting any circulation of vehicles and people from 9:00p.m. to 5:00 a.m. each day, except for the cases listed in a. to f. of Paragraph 2.
  4. From midnight on Tuesday 17 to April 5, domestic air operations are suspended. Exclusive air cargo operations, domestic and international, are permitted and operational.
  5. Since Wednesday, March 18 vehicle circulation is restricted for people who commute to stock up on food, medicine or fuel. Circulation is limited to:
Day

License plate ending on:

Monday, Wednesday, Friday, and Sunday 1 – 3 – 5 – 7 – 9
Tuesday, Thursday and Saturday 0 – 2 – 4 – 6 – 8

II. Measures enforced in the Metropolitan District of Quito

The Mayor of M.D. of Quito announced additional control measures applicable exclusively in M.D. of Quito from 5:00 am of March 17 until March 31:

  1. Suspension of the use of public spaces including sidewalks, streets, parks, pedestrian bridges, passages, among others. Only the mobility of the persons listed in Section I.2 above is allowed with certain additions.
  2. Suspension of business activity licenses. Licenses for food and medicine sales activities are exempted.
  3. Full restriction for private vehicles´ circulation and buses (motorcycles, bicycles, trolleybus, Ecovía, Metrovía systems). Motorcycles that transport food and medicines with a maximum of one passenger are allowed to circulate.
  4. Taxis can circulate to transport authorized persons, with limitation established by the Mayor.
  5. Closure of land terminals and airports, except for cargo operations.
  6. Circulation of children, senior citizens or people with disabilities is not allowed.

III. Public sector operation and the judicial function

  1. The suspension of in-person work activities includes the public sector, which will limit its activity to what can be carried out by teleworking. This means that the majority of processes are suspended.
  2. Several public entities such as the Internal Revenue Service, the National Customs Service of Ecuador, the Superintendence of Companies, the Superintendence of Control of Market Power, Ministry of Labor have expressly suspended the terms within pending administrative proceedings.
  3. The Judicial Branch suspended activities while the state of emergency established by the President of the Republic lasts. Likewise, judicial processes dates and terms are suspended.

 

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New deadlines for filing tax returns

tax-returns-new-deadlines

Regulation NAC-DGERCGC20-00000012 issued by the Internal Revenue Service and published on March 9, 2020 in the Official Registry 157 established new deadlines for filing the following tax returns and annexes:

    1. Value added tax (VAT) taxpayers and VAT and income tax withholding agents, whose ninth digit of the tax ID (RUC) is 4, for this occasion, may file the February monthly tax return, until March 17, 2020.
    2. Individuals and undivided successions that are required to file the income tax return for the fiscal year 2019, for this occasion, may file their tax return until the following dates:
Ninth digit of the tax ID (RUC) 

Maximum date of filing the return

1 Marzo 11 th
2 Marzo 13 th
3 y 4 Marzo 19 th
5 y 6 Marzo 25 th
7 y 8 Marzo 27 th
9 y 0 Marzo 31 st
  1. Taxpayers required to file the Simplified Transactional Annex, may file the annexes from January to September 2020, for this occasion, according to the following dates:
Periodo de 2020 

Meses de presentación

January and February September 2020
March and April October 2020
May, June and July November 2020
August and September December 2020

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Withholding percentage – dividends

withholding-percentage-dividends-tax

Regulation NAC-DGERCGC20-00000011 issued by the Internal Revenue Service establishes the withholding percentages applicable to the dividends distributed by entities with tax residence or permanent establishments located in Ecuador to: (i) individuals with tax residence in Ecuador; or, (ii) foreign entities which beneficial owners are individuals with tax residence in Ecuador.

The withholding percentage will apply over 40% of the amount of the dividend, according to the following:

Taxable income from
(basic tax bracket) 

Taxable income until
(surplus tax bracket)

Withholding over the
basic tax bracket

Withholding percentage over
the surplus tax bracket

20.000,00 0 0%
20.000,01 40.000,00 0 5%
40.000,01 60.000,00 1.000,00 10%
60.000,01 80.000,00 3.000,00 15%
80.000,01 100.000,00 6.000,00 20%
100.000,01 Forward 10.000,00 25%

The withholding receipt must be issued with the name of the individual with tax residence in Ecuador even if the amount to withhold is zero.

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Tax Regime for Microenterprises

tax-regime-microenterprises-lawyers

Regulation NAC-DGERCGC20-00000011 issued by the Internal Revenue Service and published on February 21, 2020 in the Supplement to the Official Registry 148, establishes the rules for applying the Tax Regime for Microenterprises created by the Law of Simplification and Tax Progressivity.

Microenterprises are those individuals or entities whose annual income is equal to or less than US $ 300,000.00 and, that have 1 to 9 workers.

The Internal Revenue Service is able to include or exclude from the especial regime, taxpayers who meet the conditions to qualify as microenterprises. For this purpose, the Tax Authority is able to update the taxpayer tax ID without prior notice and, it must publish a microenterprises registry on its web page (https://www.sri.gob.ec/web/guest/catastros).

Taxpayers who consider that they should not have been included in the microenterprises tax regimen may request their exclusion until April 7, 2020.

Taxpayers included in the Tax Regime for Microenterprises must comply with the following:

  1. Issue invoices in accordance with current regulations.
  2. Request proof of sale to support the acquisition of goods or provision of services.
  3. Keep accounting books or a record of income and expenses as appropriate.
  4. File tax returns when appropriate. In the case of VAT and excise tax (ICE), the tax returns must be filed semiannually in the months of July and January of each year.
  5. Submit the annexes of information when appropriate, and
  6. Fulfill the other formal duties indicated in the Tax Code.

Taxpayers registered in the microenterprise’s registry must apply the regime from February 2020. Therefore, they will not act as withholding agents for income tax or value added tax since said month.

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