withholding-agents-income-tax-and-VAT-lawyers-ecuador-01

Regulation NAC-DGERCGC20-00000057 issued on September 14, 2020 by the General Director of the Internal Revenue Service and published in the Special Edition of the Official Registry 1024 on September 16, 2020 establishes the rules for the classifying, filing returns and paying taxes for withholding agents and special taxpayers.

1. Designation and Removal:

The amendments to the Internal Tax Regime Law introduced on December 31, 2019 established that only special taxpayers (“contribuyentes especiales”) and those designated as withholding agents by the Internal Revenue Service are required to withhold income tax and VAT.

  • Special Taxpayers: are designated by an administrative act and will be effective from the first day of the month following the date of the notice to the taxpayer.
  • Withholding agents: are designated by: (i) a general resolution that will be effective from the date established in such resolution; and, (ii) an administrative act that will be effective on the first day of the month following the date of the notice to the taxpayer.

In the following link you can verify the taxpayers that have been designated as special taxpayers or withholding agents:
https://www.sri.gob.ec/web/guest/catastros

The tax authority is able to revoke the designation of withholding agents and special taxpayers, this will be effective from the date established in the general resolution or from the first day of the month following the date the taxpayer was noticed with the administrative act.

2. Filing returns and payment of obligations:

Taxpayers designated as withholding agents will continue to file and pay their tax obligations on a regular basis.

Special taxpayers must:

  • File their tax returns and make the payment of income tax, withholding income tax, value added tax (VAT), excise tax (ICE), foreign exchange tax (ISD) and the international currency movement annex (MID), until the 9th day of the month in which each obligation is due.

Special taxpayers with residence in Galapagos will be able to file the return and pay their tax obligations until the 28th day of each month.

When these dates overlap with mandatory rest days or national or local holidays, the return must be filed on the last working day prior to the date the filing is due.

  • Pay their tax obligations through debit from their bank accounts or by using credit notes.

3. Other taxpayers:

Those taxpayers who have not been designated as withholding agents or special taxpayers must withhold income tax and value added tax until September 30, 2020.

Starting October 1st, 2020 such taxpayers must withhold taxes only in the following cases:

  • Income tax:
    1. Distribution of dividends and anticipated payment of dividends.
    2. Transfer of shares.
    3. Payments and refunds made abroad.
    4. Salaries and other payments made to their workers.
    5. Taxpayers whose activity is the related to public events.
    6. Credit or debit card entities.
    7. Organizers of lotteries, raffles, bets and similar.
    8. Those who make monetary donations.
    9. Taxpayers that pay interest or other financial gains.
    10. Taxpayers who commercialize mineral substances.
    11. Taxpayers who transfers hydrocarbon licenses.
    12. Taxpayers who issue liquidations of purchases of goods and provision of services, regarding such transactions.
    13. Taxpayers who make purchases of bananas and other musaceous plants from local producers.
  • Value added tax:
    1. Import of services.
    2. Taxpayers who issue liquidations of purchases of goods and provision of services, regarding such transactions.
    3. Taxpayers who withhold of presumptive VAT in the transfer of fuel.
    4. Entities of the financial system, for payments or credits made under collection or debit agreements.

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DISCLAIMER: The preceding text has been prepared for general information purposes only. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any given situation requires the specific opinion and view of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES