On 17 May 2023, Ecuadorian President Guillermo Lasso signed Decree-Law No. 742 for the Strengthening of the Family Economy. Among other things, the Decree-Law provides revised individual income tax brackets and rates that apply for 2023 as follows:
The Decree-Law also provides new rules for calculating the maximum allowable deduction for personal expenses for individual income tax purposes in 2023. For individuals without dependents, the maximum deduction is equal to 18% of the personal expenses declared or 7 times the value of the basic food basket, whichever is lower. For individuals with dependents, the maximum deduction is equal to 18% of the personal expenses declared or 9 to 20 times the value of the basic food basket, whichever is lower. The multiplier depends on the number of dependents, including a multiplier of 9 for one dependent, 11 for two dependents, 14 for three dependents, 17 for four dependents, and 20 for 5 dependents.
Changes are also made regarding the taxation of "popular businesses" under the simplified RIMPE tax regime, which are defined as natural persons with gross annual income of up to USD 20,000 as of December 31 of the previous year. This includes an exemption for popular businesses with annual sales of up to USD 2,500, and progressive fixed tax rates of USD 5 to USD 50 for popular businesses with annual sales exceeding USD 2,500 up to USD 20,000. Further, a 0% VAT rate is provided for operations carried out by popular businesses. As with the other measures of the Decree-Law, these measures only apply for 2023.
Decree-Law No. 742 will enter into force once approved by the Constitutional Court, which is expected in the coming weeks. Click the following link for a copy of Decree-Law No. 742 as published by a third party.