The digitalization of nowadays has been impacting the global economy in such a way that it has become relevant for taxation, for which different jurisdictions have been incorporating in their tax laws taxes on the importation of digital services.
In December 2019, the Organic Law on Tax Simplification and Progressivity included the LRTI (Ley de Régimen Tributario Interno – Internal Tax Regime Law) provisions regarding Value Added Tax (VAT) to render digital services from a non-resident in Ecuador to a resident in this country.
This article addresses the main aspects of the importation of digital services in Ecuador.
Is there a registration of digital service providers?
Yes, this registration will be published on the SRI (Servicio de Rentas Internas – Internal Revenue Service) website, which will be updated every quarter.
It will differentiate between non-resident digital service providers, which may be registered in the SRI, and those residents in Ecuador.
Likewise, it will be differentiated from those non-resident suppliers, whose withholding agents are the companies or those issuing debit and credit cards.
When should the import of the digital service be withheld?
When the provider of the digital service is a non-resident and is not registered with the SRI, the VAT must be withheld by:
- Intermediary: Intermediaries in the payment of the digital service, such as credit or debit card issuers.
- The importer of the service: If the payment of the service is performed without an intermediary, the VAT withholding agent will be the importer of the service.
What is the basis for withholding?
The taxable base for VAT withholding will be the total value paid by the importer of the digital service.
Regarding digital services, the VAT to be withheld must take into account the delivery required of a good or the rendering of a service where a commission is collected.
How to file and pay the VAT withheld?
In the case of intermediaries in the payment of services, the amounts withheld must be filed and paid monthly on the VAT return and payment form under the deadlines established in the LORTI regulations.
What are the responsibilities of withholding agents?
Among other duties or responsibilities, withholding agents must comply with the following:
- Reporting of information: Payments to digital service providers and withholdings made.
- Preserve certain documentation: Documentation of withholding payments must be kept for digital services.
