Ecuador Regulates VAT on Digital Services
Ecuador published Executive Decree No. 1114 in the Official Gazette on 4 August 2020, which includes regulations for VAT on digital services. As part of Law of Simplicity and Tax Progressivity (Law No. SAN-2019-1270), the VAT rules were amended to provide that the import of digital services consumed in Ecuador are within the scope of VAT, including provisions for VAT registration by non-resident service providers, as well as provisions for VAT on supplies made by service providers that are not registered. The regulations provide for the implementation of these rules with effect from 16 September 2020.
The regulations provide that digital services include services provided and/or contracted through the internet or any adaptation or application of protocols, platforms, or technology used over the internet or other network that, by their nature, are automated and require minimal human intervention, regardless of the device used. In particular, digital services include, among others:
- Website and data hosting, including data warehouses;
- Online advertising;
- Online software, including downloads and SaaS;
- Online access to videos, music, games, sporting events, e-books, etc.;
- Online distance learning where entirely automated;
- Online dating and other online club memberships;
- Accommodation, auction, gig, and sharing economy services;
- Online news, blogs, and journals;
- Online technical and administrative support; and
- Data processing based on information inputted or uploaded by the user.
Where a foreign supplier is not registered in Ecuador, VAT at the standard 12% rate is to be withheld and remitted:
- by the importer of the digital service via reverse charge in the case of B2B services; and
- by the intermediary facilitating payment for the service, such as the credit or debit card issuer, in the case of B2C services.
Where a foreign supplier has registered in Ecuador, they are required to collect and remit VAT on their supplies of digital services. VAT collected must be remitted on a monthly basis.