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Ecuador Issues Rules for Withholding VAT on Digital Services

Ecuador has published Resolution No. NAC-DGERCGC20-00000053 of 22 August 2020, which establishes rules for the withholding, declaration, and payment of VAT on the import of digital services provided by non-residents to residents or permanent establishments of non-residents in Ecuador. Regulations for implementing the levy of VAT on digital services were introduced by Executive Decree No. 1114 with effect from 16 September 2020 (previous coverage).

The Resolution includes that Ecuador's Internal Revenue Service (SRI) will maintain a registry of digital service providers on their website (www.sri.gob.ec), which will be updated on a quarterly basis by the 15th of January, April, July, and October of each year. This registry differentiates non-resident providers registered with SRI and providers domiciled in Ecuador from other providers for which withholding by credit or debit card issuing companies applies. Any updates made to the registry will apply from the first working day of the month following the date of the update.

An initial registry of digital service providers for the purpose of the new rules has been published, which will be updated to 10 September 2020 with information on providers that have chosen to register with the SRI. According to a transitional provision of the Resolution, the updated registry will apply from 16 September 2020, with the next update to be made on 15 January 2021.

With respect to withholding on the import of digital services, the Resolution provides that where the provider of an imported digital service is not registered with the SRI, the VAT generated on the service shall be withheld by:

  • the intermediaries involved in the payment process, i.e., credit and debit card issuers, based on the registry of digital service providers published by the SRI on its website; and
  • the importer of the service when the payment is made without an intermediary, with the importer of service required to withhold 100% of the VAT generated even if the non-registered digital service provider is not found in the registry published by the SRI.

With respect to the declaration and payment of VAT, the Resolution provides that credit or debit card issuers acting as withholding agents are required to declare and pay the VAT withheld on a monthly basis in the form provided for the declaration and payment of VAT, within the standard time limits. Where the importer performs VAT withholding, the VAT shall be declared and paid with their VAT return.

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