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6.4. Deduction of Cross-Border Payments and Non-Deductible Expenses

The following expense types are not deductible or have limited deductibility for Ecuadorian tax purposes:

  • Interest paid on foreign loans, which exceeds the limit established by the Central Bank Board are not deductible;
  • Interest on foreign loans not registered at the Ecuadorian Central Bank are not deductible;
  • Losses on asset sales between related parties are not deductible.
  • Expenses for royalties and technical, administrative and consulting services paid to related parties are not deductible;
  • Leasing payments with respect to leasebacks or trade with related parties are not deductible;
  • Interest, fines, and penalties imposed on late payments of tax obligations are not deductible;
  • Effective 1 January 2015, Ecuador introduced certain tax measures targeting companies owned by shareholders resident in tax haven or low-tax jurisdictions, including limiting the deductibility of specified expenses (see Sec. 8.1.1.);
  • Payments for charitable contributions are not deductible;
  • Depreciation of the re-evaluated part of assets is not deductible; and
  • The deduction of expenses incurred towards the promotion and advertisement of highly processed foods by taxpayers that produce or commercialize such foods but do not serve them, is limited to 4% of taxable income.