Ecuador - New reductions/exemptions from VAT and the tax on foreign currency announced

Ecuador’s president and the tax administration recently announced the following changes to the VAT rules and the tax on foreign currency:

  • The VAT rate on tourist activities is reduced from 12% to 8% on holidays and weekends.
  • The import of fuel from hydrocarbons, biofuel and natural gas destined for domestic consumption by companies or individuals authorised to import such goods is exempt from VAT.
  • Imports and the local acquisition of goods for use in the agricultural, aquaculture and fishing sectors are subject to a 0% VAT rate.
  • Investment contracts concluded with the Ecuadorian state are exempt from the tax on foreign currency (ISD);
  • The ISD rate is gradually being reduced from 4% to 2% as follows:
    • 1 February – 30 June 2023: 3.75%;
    • 1 July – 30 November 2023: 3.5%; and
    • As from 31 December 2023: 2%.

Nelson Morales
BDO in Ecuador