Tag Archives: Ecuador

Through Executive Decree No. 451, issued on June 9, 2022, the Regulations to the Public Procurement Law were amended. The amendment covers the provisions applicable to the acquisition of medicines and strategic health goods for outpatient care (“Products“) by the Public Health Network (“PHN“) to private pharmacies qualified by the national health authority (“Pharmacies“). 
 
The main aspects of this amendment are:

1. The prices of the Products, which the PHN shall pay to the Pharmacies, shall be those provided in the electronic catalog. In addition, the PHN shall pay each Pharmacy an additional amount for “operating costs” to be analyzed and fixed by the National Health Authority (“NHA“).
2. If one of the Products is not in the electronic catalog, the price will be the one fixed within the referential budget for the Corporate Reverse Auction of the respective Product (“CRA“). Said price shall be applied until 90 days after the signing of the Framework Agreement resulting from the CRA, after which the provisions mentioned in point 1 shall apply.
3. Until the NHA fixes the “operating costs“, the PHN shall pay each Pharmacy 5% of the total value of the Products it has dispensed under the adhesion contracts entered into or to be entered into with PHN.
4. The “operating costs” fixed by the NHA shall only apply to the adhesion contracts entered into from such fixation. The previous contracts shall be subject to the provisions mentioned in point 3 until their expiration, and if they are renewed, the amount fixed by the NHA shall apply to such renewal.

Executive Decree No. 451 entered into force on June 14, 2022.

Specialist in Corporate and Public Contracting Law
Mario Fernández, associate at CorralRosales
mfernandez@corralrosales.com
+593 2 2544144

As of fiscal year 2022, any taxes paid abroad by individuals or corporations with tax residence in Ecuador over income obtained abroad may be used as a tax credit for the payment of income tax incurred in Ecuador. Previously this income was considered exempt. Through Regulation NAC-DGERCGC22-00000026 the Internal Revenue Service issued the rules and limits for the application of this amendment.

1. Requirements

Taxpayers with tax residence in Ecuador who receive income abroad, which is taxable in Ecuador, may use the tax paid abroad as tax credit for the payment of income tax in Ecuador, in accordance with the following:

1. The tax to be considered as tax credit will be the tax effectively paid or withheld abroad, provided that it may not be used as tax credit or reimbursed abroad.
2. The tax credit may only be used when the tax paid abroad is income tax or any equivalent direct taxes.
3. If the tax paid abroad has been paid in a currency other than US dollars, the value must be converted to US dollars according to the exchange rate reported by the Central Bank of Ecuador.
4. The recognition and quantification of the income obtained abroad will correspond to the gross value, i.e., the value of the income before subtracting the tax paid abroad.
5. If the foreign income is not taxed in Ecuador or is considered exempted, the tax paid abroad cannot be used as tax credit.
6. The necessary evidence must be available to prove the payment of the tax abroad, for example, a certificate issued by the competent tax authority, duly legalized and translated into Spanish.

1. The part of the tax paid abroad that exceeds the limit to be used as tax credit is not subject to refund, compensation or any other form of recovery and cannot be used in another tax period.

1. Limits

The value to be used as tax credit for the payment of income tax shall be limited to the lower between:

1. The tax effectively paid abroad; and,
2. The value obtained by multiplying the effective income tax rate applicable to the taxpayer for that period, by the difference of the income obtained abroad minus the total expenses attributable to such income.

The effective rate is equal to the percentage obtained by dividing the total income tax incurred by the total taxable income.

1. Double tax treaties

If the rules of a double tax treaty apply, the following must be taken into consideration:

1. If the mechanism to avoid double taxation in the treaty is not the ordinary imputation method, the provisions of the regulation do not apply.
2. If the mechanism to avoid double taxation in the treaty is the ordinary imputation method, the provisions of the regulation apply.
3. If the mechanism for avoiding double taxation in the treaty is the ordinary imputation method with specific rules, the specific rules shall be applied first and then the rules of the regulation, insofar as it does not contradict the treaty.

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

By Resolution No. SCVS-INPAI-2022-00004075 dated May 27, 2022, the Superintendent of Companies, Securities, and Insurance resolved to extend the deadline for filing financial statements and reports for fiscal year 2021 of companies subject to its control and established a schedule for filing thereof based on the ninth digit of the company’s taxpayer number (RUC), as follows:

1. Those companies whose ninth digit of the taxpayer number is 1, 2 and 3, must submit the information between June 1 and June 10, 2022
2. Those companies whose ninth digit of the taxpayer number is 4, 5, 6 and 7, must submit the information between June 11 and June 20, 2022
3. Those companies whose ninth digit of the taxpayer number is 8, 9 and 0, must submit the information between June 21 and June 30, 2022

Specialist in Corporate
Milton Carrera, senior associate at CorralRosales
mcarrera@corralrosales.com
+593 2 2544144

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:

1. For VAT paid by Direct Suppliers, two mechanisms apply:
2. Automatic provisional refund; and,
3. Exceptional refund.
4. 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:

1. To be registered in the Taxpayers Registry (RUC) with active status.
2. The right to the VAT reimbursements for the requested period must not be expired,
3. Have completed the “pre-validation” process in the SRI system.
4. Be registered in the VAT refund system for the automatic provisional refund mechanism.
5. To have declared the VAT corresponding to the periods for which the refund will be requested.
6. To have filed the simplified transactional annex, in the applicable cases.
7. 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:

1. 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.
2. Sales receipts of local acquisitions of fixed assets.
3. Sales receipts rejected by the pre-validation system.
4. List of sales receipts of goods transferred to the exporter.
5. In the case of Direct Suppliers, a list detailing the customs export forms.
6. In the case of Indirect Suppliers, a certification issued and signed by the exporter detailing that the export has been executed.
7. 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.
8. 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
amoya@corralrosales.com
+593 2 2544144

By Regulation NAC-DGERCGC22-00000019 issued on May 6, 2022, the Internal Revenue Service extended the deadlines for filing: (i) the equity tax return applicable to individuals, and (ii) the assets and liabilities annex applicable to entities, for the year 2022 according to the following schedule:

For individuals who have a passport and do not have an ID, the deadline for filing will be the one applicable to individuals whose ninth digit of their ID is 0.
 
The taxpayers who are subject to the Temporary Tax Regime for Regularization of Asset Located Abroad, can file the equity tax return or the assets and liabilities annex regarding 2022 and any substitute returns to which they are obliged due to the application of the regime until December 31, 2022.

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