Ecuador: VAT Rate Adjusted for Economic Stability
In response to the declared Internal Armed Conflict in Ecuador, the Legislature has swiftly approved a Tax Reform, subsequently issued by President. These amendments to the existing Tax Law, effective immediately, mark a significant shift in fiscal policy amidst turbulent times.
The Tax Reform entails adjustments to various tax rates, notably impacting the Value Added Tax and the Remittance Tax, alongside the introduction of temporary contributions. These changes come into effect starting this fiscal year, with many provisions slated for implementation as of April 1, 2024.
One of the key alterations includes an increase in VAT rates, now permanently set at 13%. However, President holds the authority to adjust this rate up to 15%, pending approval from the Ministry of Economy and Finance. Effective immediately, the President has exercised this discretion, temporarily setting the VAT rate at 15%, effective April 1, 2024. Notably, the VAT rate for local transfers of construction materials stands at 5%.
Simultaneously, amendments to the Remittance Tax have been implemented, elevating the rate from 3.5% to 5% for cross-border currency transfers. This adjustment also grants flexibility for sector-specific modifications, ensuring compliance with the maximum 5% rate stipulated by law.
