The Ecuador Internal Revenue Service (SRI) has published Circular No. NAC-DGECCGC22-00000012, which clarifies the application of new rules for the deduction of expenses incurred in relation to royalty and technical, administrative, and consulting services payments to related parties as introduced by Executive Decree No. 586 of 31 October 2022. As previously reported, the new rules provide that the deduction of such expenses is limited to 5% of taxable income per year, with certain exceptions. One of the key points of the Circular is the clarification that the new deduction limit rules do not apply in calculating the tax base corresponding to the fiscal year 2022. However, the SRI is still empowered to verify that such transactions with related parties are in full compliance with the transfer pricing rules and the arm's length principle. It is further clarified that the new deduction limit rules will apply in calculating the tax base corresponding to the fiscal year 2023 and that taxpayers needing to increase their deductibility limit must submit the corresponding request for a prior valuation consultation (i.e., APA) by the last business day of February 2023.