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Ecuador Publishes Resolution on Reduced Tax Rate for Micro and Small Enterprise and Exporters

Ecuador has published Administrative Resolution CPT-RES-2019-005 in the 26 November 2019 edition of the Official Gazette which establishes the procedures for qualifying taxpayers to apply the 22% corporate tax rate that was maintained for micro and small enterprise, and exporters that maintain or increase employment as part of the 2018 tax reform. As part of the reform, the corporate tax rate was increased to 25%, while a 3% reduction benefit was provided for qualifying taxpayers.

For micro and small enterprises, the 22% tax rate may be applied if the taxpayer qualifies as such according to the Regulation of Investments of the Organic Code of Production, Trade, and Investments, which includes:

  • Micro enterprise - between 1 to 9 workers and annual gross sales or income equal to or less than USD 300,000; and
  • Small enterprise - between 10 to 49 workers and annual gross sales or income between USD 300,000 and USD 1,000,000.

The 22% rate may be applied directly, with the qualification as a micro or small enterprise validated at the time the tax return is filed.

For exporters, the 22% tax rate may be applied if the exporting taxpayer:

  • Complies with current regulations for categorization as an exporting company; and
  • Is included in the registry of habitual exporters of goods maintained by the tax authority in its institutional web portal.

Further, the exporter must confirm the following in its tax return:

  • Compliance with the requirement for increased employment in accordance with the Regulations for the Application of the Internal Tax Regime Law; and
  • The fulfillment of the requirement that increased employment has been maintained as compared to the previous year.

Click the following link for the text of Administrative Resolution CPT-RES-2019-005 as published by a third party. The Resolution entered into force on 26 November 2019.

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