Balta News

The Executive Decree No. 830 establishes the following conditions for the organization, production and presentation of artistic and cultural events to be taxed at 0% VAT rate:

• They must correspond to expenses related to the contracting of companies or individuals who provide such services.
• This includes the sponsor of the event who is an individual or company who obtains taxable income from the performance or execution of the artistic and cultural event.

• In this sense, the value of the ticket of a public event with artistic and cultural content would be taxed with 0% VAT as long as it complies with the following:  

  1. The individual or company sponsoring the event must be registered in the Registry of Artists and Cultural Sponsors (RUAC); and,

  2. The cultural spaces and infrastructure in which the event is held must belong to the Registry of Cultural Spaces and Infrastructure or the Registry of Audiovisual Spaces, as applicable.

• The capacity of the artistic and cultural event must have a maximum permitted capacity of two thousand (2,000) persons.

• In order to be considered an event with artistic and cultural content, the audiovisual spaces must not have more than three (3) screens.

—–  X X X  —–

At Balta Ecuador, our mission is to provide the highest quality legal and tax consulting services to help our clients achieve success in a complex and constantly evolving business environment.

As experts in the field, we understand that legislative changes and regulations can generate doubts and concerns. So we are committed to being your trusted partner and providing clear and accurate answers to all your questions. Our team of highly trained professionals is here to guide you through any legal or tax challenges you may face.

If you have any questions, concerns or would like to take advantage of our services, please do not hesitate to contact us. We are eager to listen to your inquiry and offer solutions tailored to your business needs.

Ruling No. NAC-DGECCGC23-00000006 establishes that provisions for the severance payment and retirement pensions should be considered as non-deductible in the accounting period in which they are recorded and give rise to a temporary difference that allows the recognition of a deferred tax asset that may be used at the time of payment of such labor obligations.

On the other hand, if such provisions are not used and must be reversed, the income generated by such reversal will have to be considered as taxable or not subject to income tax in the same proportion in which they were considered as deductible or non-deductible expenses in the year in which they were provisioned.

—–  X X X  —–

At Balta Ecuador, our mission is to provide the highest quality legal and tax consulting services to help our clients achieve success in a complex and constantly evolving business environment.

As experts in the field, we understand that legislative changes and regulations can generate doubts and concerns. So we are committed to being your trusted partner and providing clear and accurate answers to all your questions. Our team of highly trained professionals is here to guide you through any legal or tax challenges you may face.

If you have any questions, concerns or would like to take advantage of our services, please do not hesitate to contact us. We are eager to listen to your inquiry and offer solutions tailored to your business needs.

Ruling No. NAC-DGECCGC23-00000004 establishes criteria for the application of the regulations related to withholding at source to taxpayers subject to Simplified Tax Regime (RIMPE), which must be applied by national financial system, credit card issuers and taxpayers acting as withholding agents:

Firstly, on payments made to RIMPE called “Popular Business”, neither Income Tax (IT) nor Value Added Tax (VAT) withholdings should be made.

On the other hand, payments made to RIMPE called “Entrepreneurs” will be subject to IT and VAT withholdings according to the percentages established in Resolutions Nos. NAC-DGERCGC14-00787 and NAC-DGERCGC20-00000061 (at the present date the IT withholding is 1% and VAT withholding can be 30% for goods and 70% for services), respectively.  However, if those payments are made through credit or debit cards, collection or debit agreements, or other electronic means of payment (e.g. bank transfers), no IT or VAT withholding will be made.

Ruling No. NAC-DGECCGC23-00000005 establishes as an application criterion that blank weapons are firearms and therefore, such weapons and their ammunition acquired are subject to Excise Tax (ICE) (current ad valorem rate: 30%).

—–  X X X  —–

At Balta Ecuador, our mission is to provide the highest quality legal and tax consulting services to help our clients achieve success in a complex and constantly evolving business environment.

As experts in the field, we understand that legislative changes and regulations can generate doubts and concerns. So we are committed to being your trusted partner and providing clear and accurate answers to all your questions. Our team of highly trained professionals is here to guide you through any legal or tax challenges you may face.

If you have any questions, concerns or would like to take advantage of our services, please do not hesitate to contact us. We are eager to listen to your inquiry and offer solutions tailored to your business needs.

Resolution No. CPT-RES-2023-001

SRI specify the following amendments related to the Income Tax Credit derived from the Overseas Remittance Tax (ISD):

1. Inclusion of subheadings, which correspond to raw materials, supplies and capital goods for whose import payments the respective ISD is incurred and which by this Resolution are included as part of the subheadings that grant the right to income tax credit for the whole year 2023 (January to December).

   The subheadings correspond to plastic derivatives (polyacetals, epoxy resins) and stainless-steel flanges.

2. Exclusion of subheadings, which correspond to raw materials, supplies and capital goods for whose import payments the respective ISD is incurred and that by this Resolution are excluded as part of the subheadings that give right to Income Tax credit as from August 2023.

   The subheadings correspond to rolled products (hot or cold) of iron or steel, alloy steel ingots, tanks, cisterns, vats of iron or steel, hydraulic pumps for the oil sector, sugar cane juice clarifiers, valves, electrical connectors, hydrants, among others.

On pages 72 and 73 of the First Supplement of the Official Gazette you can see the details of said subheadings, which can be reviewed in the «Legal Reference» tab of this Blog.

Resolution No. CPT-RES-2023-002

The SRI extends the deadline for the application of the ISD assumption on exports of goods or services from Ecuador to Argentina for an additional three (3) months.

Therefore, such extension of the deadline will allow payments corresponding to such exports to return to Ecuador in an additional period of three (3) months, in addition to the initial six (6) months, counted from the arrival of the goods at the port of arrival or the beginning of the provision of the service.  This deadline extension will apply to exports from November 2022 onwards.

—–  X X X  —–

At Balta Ecuador, our mission is to provide the highest quality legal and tax consulting services to help our clients achieve success in a complex and constantly evolving business environment.

As experts in the field, we understand that legislative changes and regulations can generate doubts and concerns. So we are committed to being your trusted partner and providing clear and accurate answers to all your questions. Our team of highly trained professionals is here to guide you through any legal or tax challenges you may face.

If you have any questions, concerns or would like to take advantage of our services, please do not hesitate to contact us. We are eager to listen to your inquiry and offer solutions tailored to your business needs.

The Resolution No. NAC-DGERCGC23-00000020 replaces the previously effective one (No. NAC-DGER2008-0621), taking into account the family burden concepts established in the current tax reform for the year 2023. The main considerations are as follows:

It is restated that withholding income tax performed by employers must consider the reforms in effect from 2023 regarding the determination of the income tax cut resulting from personal expenses (projection) and family burdens, if any.

For the application of the withholding income tax, it is optional for employees to submit the projected personal expenses to their employers in FEBRUARY (previously it was in JANUARY) in physical or electronic way, two copies of the projected personal expenses considering the » FORMULARIO SRI-GP» which is available at the SRI website (https://www.sri.gob.ec/nl/formularios-e-instructivos); considering the following:

1. Detail the employee’s total projected income on an annual basis (January to December). If the employee has two or more employers, the withholding agent shall be the employer where the employee receives the highest income; therefore, the other employers shall issue a certificate with the projected taxable income and social security contributions to the employer with the highest income so that the latter may perform the corresponding withholdings. A copy of the » FORMULARIO SRI-GP » certified by the employer where the higher income is received must be submitted to the other employers so that they may refrain from making the withholdings.

 

2. Detail the number of family burdens, if any, for which it should be reminded that family burdens may comprise:

    

   • Father
   • Mother
   • Spouse or common-law partner
   • Children up to 21 years
   • Chiildren with disabilities

    

   As long as they do not receive taxable income and are employees’ dependents, i.e., the employee covers almost all personal expenses incurred by such dependents in a fiscal year.

   It is important to note that the family burden must be met or is incurred in the taxable year for which the IT cut is to be applied. In addition, the family burden will be maintained in the tax year even when it has ceased to apply, except in the case of obtaining taxable income, which is completely excluded.

3. In any case, 2 or more employees may not consider the same family burden in a fiscal year.

    

4. Documentation must be submitted to the employer to justify the existence of the family burden (e.g.: copy of spouse’s ID card, disability card, certificate of catastrophic, rare or orphan disease, express consent from parents to be considered as a family burden).

 

5. Projected annual personal expenses. It is important to point out that pets in categories such as food, health, education and clothing may be applied as personal expenses.

In the case of employees residing physically in Galapagos for at least 183 calendar days or that during a 12-month period the condition of 183 days is met; for the calculation of the IT cut from Personal Expenses, the Special Consumer Price Index of Galapagos (IPCEG) will be considered, which is currently 1.803 multiplied by the value of the basic food basket for January of each year.

As a result of the above mentioned, the employer shall apply the monthly income tax withholding considering the following:

1. Withholding shall not be applied on income for the month of JANUARY, but rather withholding shall begin as of FEBRUARY.

 

2. All the employee’s remuneration, excluding the thirteenth and fourth remuneration, must be totalized.

 

3. The personal contribution to the Social Security and the tax benefit applicable to the senior citizens and the disabled or substitutes taxpayers must be considered.

 

4. The resulting amount (taxable base) shall be applied to the progressive Personal Income Tax Table.

 

5. The IT cut from employee’s projected personal expenses will be applied to resulting income tax; and,

 

6. Finally, this amount will be divided by the remaining number of months (11) within the fiscal year, in order to obtain the monthly income tax withholding.

When changes in remunerations are incurred, the employer must recalculate future withholdings, as well as the employee has the right to update his personal expense projection in JUNE or SEPTEMBER of every year.

For the year 2023, employees may submit a new projected personal expense form in the month of JULY. Employees must re-state the Income Tax considering the new projected personal expenses and must perform the withholdings with the adjusted amounts from July to December 2023.

Employers will not be able to offset the amounts already withheld from January to June 2023 to their employees.

If as a result of the projected personal expenses, it is noted that the employer must not perform more withholdings from July to December 2023, he must not withhold more for the year 2023 and the employee may file the respective tax refund request due to excess withholdings in accordance with the guidelines set forth by the current tax regulations.

—–  X X X  —–

At Balta Ecuador, our mission is to provide the highest quality legal and tax consulting services to help our clients achieve success in a complex and constantly evolving business environment.

As experts in the field, we understand that legislative changes and regulations can generate doubts and concerns. So we are committed to being your trusted partner and providing clear and accurate answers to all your questions. Our team of highly trained professionals is here to guide you through any legal or tax challenges you may face.

If you have any questions, concerns or would like to take advantage of our services, please do not hesitate to contact us. We are eager to listen to your inquiry and offer solutions tailored to your business needs.