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 (%) |
|
50% |
|
75% |
E. Individual Requirements: Workers must meet the following conditions:
- Youth Employment: Workers must be aged between 18 and 28 years. The benefit applies until the worker turns 29.
- Graduates from Public Educational Institutions: This must be verified with corresponding degrees, certificates, or records.
- Alimony Payers: This must be proven by a court decision or settlement agreement.
- 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