|VAT Rate on Digital Services||VAT on Cross-Border Electronically Supplied Services||Digital Reporting Requirements for Foreign Sellers Providing Electronically Supplied Services|
VAT on Cross-Border Digital Services in Ecuador
Ecuador introduced special VAT rules for digital services provided by non-residents in 2019, which came into force on July 2020. Under the digital service rules in Ecuador, VAT is not collected and remitted by the supplier. Instead, VAT is handled by an intermediary agent assigned by the Tax Authorities.
If the payment is made by credit card or financial institution, they should act as withholding agents and remit the VAT amount to the tax authority. Otherwise, the supplier should register as a withholding agent, and withhold and remit the VAT to the tax authority.
Digital Services in Scope
A digital service is taxable in Ecuador if it is delivered over the Internet or an electronic network, the nature of which renders the supply essentially automated and involving minimal human intervention, and is paid by an Ecuadorian tax resident, including individuals, companies and permanent establishments.
Examples of digital services:
- The provision and hosting of computer sites and web pages, as well as any other service consisting in offering or facilitating the presence of companies or individuals on the Internet.
- The supply of digitized products in general, including but not limited to software, modifications and updates, as well as access and/or downloading of digital books, access to and/or downloading of designs, patterns, reports, data, or market analyses.
- The remote automated preventive or corrective maintenance of software and equipment.
- The administration of remote systems and on-line technical support.
- Web services, including, but not limited to, data storage with remote or online access, memory services with online or remote access, and online advertising.
- Software services, including, but not limited to, those provided over the Internet ("Software as a Service" or ScuS) through cloud-based downloads.
- Accessing and/or downloading images, text, information, video, sporting or other events, music, games, and gambling.
- The provision of databases and any service automatically generated from a computer, through automatically from a computer, via the internet or an electronic network, in response to a specific data entry made by the customer. This includes aggregated or "premium" services that are provided for a fee, as an additional option to a free service, including such general or thematic social networking services.
- The services of online clubs or dating websites.
- The service provided by blogs, magazines or online newspapers.
- The provision of internet services.
- Distance learning or teaching of tests or exercises carried out or corrected in an automated manner.
- Online auctions, labor supply/demand, transportation, accommodation, ordering and delivery of tangible movable accommodation, order and delivery of movable goods of a tangible nature, or other services contracted through a website that functions as an online marketplace.
- The manipulation and calculation of data through the internet or other electronic networks.
Determining the Location of the Ecuadorian Consumer
A service is considered to be rendered in Ecuador if it is paid by an Ecuadorian tax resident, including individuals, companies, and permanent establishments.
VAT Registration for Foreign Companies
Under the digital service rules in Ecuador, VAT is not collected and remitted by the supplier. Instead, VAT is handled by an intermediary agent assigned by the Tax Authorities.
If the payment is made by credit card or financial institution, they should act as withholding agents and remit the VAT amount to the tax authority. Otherwise, the supplier should register as a withholding agent, and withhold and remit the VAT to the tax authority. There is no registration threshold.
VAT Returns and payment of taxes
VAT returns for non-residents
VAT Returns for Non-residents
Once registered, businesses will need to withhold and remit taxes to the Ecuadorian Tax Authority. Note that these are returns for non-resident companies - not to be confused with VAT returns of local companies.
|VAT Return Name||IVA Form|
|Filing Deadline||the 15th of the following reporting month. If the deadline falls during the weekend or a public holiday, it moves to the immediate working day.|
|Payment Deadline||Same as the filing deadline|
|Input Tax Recovery||Yes|
|Record Storage||7 years; storage is allowed abroad as long as the documentation is constantly available to the tax authority (without the need to request it).|
Digital Reporting Requirements for Cross-Border Digital Services
Foreign digital service providers registered as VAT withholders are not obliged to issue e-invoices for their transactions.
Foreign Intermediaries Withholding VAT
Credit cards or financial institutions should be required to withhold VAT on the payment of digital services provided by a non-resident to an Ecuadorian resident.
If those entities do not conduct the payment, the supplier should register as a withholding agent and withhold and remit the VAT to the tax authority.
Income Withholding VAT
Income withholding tax is not applicable in Ecuador