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Published: August 17 2015

FREQUENTLY TAX QUESTIONS

TAXES.-

What are taxes?

They are obligations that people living in a country must pay, when they meet certain budgets.

The taxes are used by the countries to finance the costs that society needs like hospitals, schools, police, etc.

INTERNAL RENT SERVICE - SRI.-

What is SRI?

It's the Ecuadorian institution who collect certain taxes (example: income tax).

DUTIES TAXES.-

What are my tax obligations if I engage in an economic activity?

The main tax obligations of a person who carries out an economic activity are..

Have a RUC number;
Issue and deliver bills of sale authorized by the SRI for all transactions; and,
File tax returns according to their economic activity.

 

RUC

What is the RUC?

The RUC (Taxpayer Registration Number) is a record for all persons who consider themselves taxpayers. SRI is in charge to give the RUC.

How do I join the RUC?

Should approach the SRI office in your city, with the following requirements:

Original and color copy of the current ID;
Original of vote certificate; and,
Original and copy of a document indicating the direction of where to carry out the activity, they may or may not be his name. Examples:

- Form of basic services (water, electricity or telephone) of the last three prior to the date of enrollment months;

- Bank statement or pay TV service, or cell phone or credit card, in the last three months;

- Proof of property tax. You should correspond to the year in which enrollment or immediately above is performed;

- Lease (can be valid or not) together with valid proof of sale issued by the corresponding one of the last three prior to the date of enrollment months landlord. The issuer of the voucher must be registered with the RUC property leasing activity; and,

- Deed or sale of property, duly registered in the Land Registry, or certificate of property registrar that it will be valid for three months from the date of issue.

If I stop performing an economic activity, can I suspend the RUC?

Yes. For this purpose, it must file a cancellation request to be submitted to the SRI, which must state the reasons for the suspension of the RUC (termination of activities or the absence of the country). To request copies of your ID the identity card and ballot paper must be accompanied.

 

SALES RECEIPTS

What are sales receipts?

They are previously authorized by the SRI, which support transactions by taxpayers in the transfer of goods or providing services or carrying out other taxable transactions with tax documents.

Invoices are proof of purchase most used. They are issued to prove the transfer of goods or the provision of services.

The non-issuance of bills of sale is sanctioned by the SRI.

How I can get my receipts?

It should bring a printer approved by the SRI (usually they are located near the offices of the Institution) with its charter and RUC. Printing SRI request authorization to print invoices. Depending on the printer, invoices can be ready in a very short time (even on the same day).

What is the validity of the receipts?

The validity of the bills of sale is conditional on effective time depending on the tax behavior of the taxpayer, as explained below:

1 year when the taxpayer is current in their tax obligations.
3 months when the taxpayer has any outstanding tax liability. This permission is granted once, until the taxpayer rectifies the situation.

Issuing bills of sale is not permitted when the SRI has granted authorization for 3 months and the taxpayer still does not meet their outstanding tax obligations. Nor authorization is granted if the taxpayer you are not located in the declared or the RUC is canceled address.

It is important to know that the taxpayer must keep on file the sales receipts for 7 years.

How to fill the invoices?

Proof of Purchase may be filled manually, mechanically or through computerized systems. Invoices original and copy must be completed simultaneously using carbon paper, carbonless carbon or chemical; in any case, the copies must be identical to the original, otherwise not valid

What if I issue an invoice with errors?

A sales receipt issued in error is not valid, and the SRI can penalize the issuer.

What do I do if my bills are lost or stolen?

You should make a complaint to the police and then within maximum 15 days, must terminate to a communication bills to SRI.

Can I issue electronic invoices?

The SRI has implemented a sistema to issue sales receipts by data messages (electronic invoices). To access this mode emission is due to send a request using the available on the website of the IRS application, and subject to the regulations to the effect that institution has dicatdo.

 

STATEMENTS PRESENTATIONS

Why is the obligation to make these declarations?

Tax returns are the means to pay taxes. There are forms created by the SRI for each kind of tax. For example:

101   form societies to declare their income tax.
102A form for natural persons.

104   form used to return the IVA.

Statements are made by internet. The taxpayer should contact the SRI and request a password. In both cases, payment must be made in an authorized bank.

When can the tax return?

It depends on the tax, as follows:

Income tax.-

The statement is made once every year. Can be made from February 1 until March, and the day will corresponds to the ninth digit of the number of RUC in the case of individuals, and April in the case of companies.

IVA.-

The statement is made each month. The deadline is verified to have according to the ninth digit of the number of RUC.

There are special cases where the declaration is made semiannually, which are: i) professional and tenants of movable property; ii) persons who sell taxable goods or provide entirely with 0% IVA rate services.

What happens if I file my taxes to the maximum specified dates?

Interest and tax penalties are generated.

INCOME TAX.-

How do I calculate the income tax?

The income tax is annual. To calculate this, one must consider all income earned in the fiscal year, ie 1st. January to 31 December.

However, the law allows subtract (deduct) of income two types of expenses:

The expenses needed to generate income and,
Personal expenses of the taxpayer, in the case of individuals.

What are the costs necessary to generate income?

Are those expenses incurred by the taxpayer that relate to their economic activity. For example, if the taxpayer is a lawyer, you can deduct from their income the expenses necessary to maintain its office stationery, staff, etc.

What are personal expenses?

Expenditures are made by a natural person and that are not related to his trade. These expenses can be themselves, that is, the person making the expense of your spouse or minor children or disabled dependents of this person.

I can deduce all personal expenses incurred?

No, it is only possible to deduct the cost of food, health, housing, education and clothing.

What are the costs of housing that can be used as deductible?

Among others, the following:

Lease of a single property used for housing;
Interest on mortgage loans granted by authorized institutions for the expansion, remodeling, renovation, acquisition or construction of a single housing; and,
Property taxes of a property unique in which it lives and their property.

What are the costs of education that can be used as deductible?

Among others, the following:

Tuition and board at all levels of primary, high school and higher general education, initial education system as well as tuition, refresher courses, training seminars duly approved by the Ministry of Education and Labour as appropriate or the National Council of Higher Education as the case made in Ecuadorian territory;
The higher education expenses made by any dependent of the taxpayer, even adult.
Tools and textbooks and instructional materials used in education;
Special education services for the disabled, provided by centers and professionals recognized by the competent organs;
Services provided by child care centers; and,
Uniforms.

My son is an adult and pay their college studies. I can deduct from my earnings the board and tuition paid by the higher education of my child?

Yes, as long as your child is your dependent. This dependence must be justified by a sworn statement made before a notary by which it is justified that no income and financially dependent on you.

What are the health costs that I can use as deductibles?

They are:
Fees of medical and health professionals with professional title endorsed by the National Council of Higher Education;
Health services provided by clinics, hospitals, clinical laboratories and authorized by the Ministry of Public Health pharmacies;
Drugs, medical supplies, eyeglasses and prosthetic devices; and,
Prepaid medical and health insurance premiums in individual and corporate contracts.
The deductible not reimbursed by private insurance settlement

What are the costs of food that can be used as deductible?

Purchases of food for human consumption.
Alimony, duly substantiated in judicial decision or action by the appropriate authority.
Food shopping centers sale of prepared foods (for example, in restaurants).

What are the costs of clothing that can be used as deductible?

Dress the expenses incurred by any type of garment is considered.

How to support personal expenses?

Costs incurred should be based on bills of sale authorized by the IRS, for example, invoices and sales notes.

However, there are certain expenses that are not required to sustain sales receipts, which are:

To support the mortgage interest will be sufficient proof certificates conferred by the institution that issued the credit; or the respective debit reflected in the statements or passbooks;

In the case of the amounts paid by employees for prepaid medical and health insurance premium on corporate contracts, shall be sufficient proof the payroll.

Of course, there are other expenses which by their nature are not based on bills of sale, such as payment of property tax or alimony.

To whom should I ask the sales receipt is issued, to support personal expenses?

Sales receipts may be found to the beneficiary, his or her spouse or minor or disabled who receive no taxable income of the taxpayer and dependent children.

When I make a purchase, I ask for an invoice or a bill of sale?

From fiscal year 2010 there is a new system of sales receipts. The answer to the question depends on the person or entity to whom the purchase is made, as follows:

The bill of sale is proof that emit only certain individuals who have been subjected to a special tax regime called the Simplified Tax Regime - RISE. Are individuals having no large income can qualify for the scheme (which requires several additional conditions). If you make a purchase, for example, in your neighborhood store and the grocer is enrolled in RISE, will necessarily deliver a bill of sale. To that serves as a deductible expense, you should ask the recipient on receipt (in accordance with the answer to the previous question) is identified.

The invoice issued other taxpayers. As in the previous case, the bill must identify the beneficiary to be deductible expense. Therefore, no use for such purposes an invoice is issued to the consumer.

I deduct personal expenses without limit?

Not only it is allowed to deduct up to 50% of taxable income received in the year, with a maximum of 1.3 times the basic fraction desgravada for calculating income tax.

What is the basic fraction desgravada of income tax?

It is the amount of income a person can earn in a year and not be subject to payment of income tax. By 2015, persons receiving up to $ 10.800.00 in the year and not have to pay income tax.

The income guidelines for the calculation of the current income tax for 2015 is as follows:

Income Tax for Individual Persons

INCOME TAX FOR 2015

 

So what is the maximum amount you can deduct in 2015 for personal expenses?

You may deduct up to 50% of revenues, with a limit of 1.3 times the basic fraction desgravada (ie: $ 10.800.00 x 1.3 = $ 14,040 maximum for 2015).

 

There is a limit to deduct personal expenses according to each, ie a limit for spending on education, health, clothing, food and housing?

Expenditure on housing, education, food and clothing can be drawn with a maximum of 0,325 times the basic fraction desgravada income tax.

That is, you can deduct $ 3,510 maximum for each of the aforementioned items.

With respect to health costs it is possible to deduce 1.3 times the basic fraction desgravada, ie $ 14.040.00 in its entirety.

 

TAXES ON INHERITANCES, BEQUESTS AND DONATIONS

What is a legacy?

It is the set of goods rights and obligations when leaving a person dies (cause) and transmitted to the people who happen (heirs or successors). The succession may be universal title, if it happens at all assets, rights and obligations, or singular title when it happens in one or more species or certain body, such as home, such a car, etc.

Who are the heirs?

They are the people to whom the law grants the right to receive an inheritance. If the deceased made a will, the beneficiaries of the allocations in stating that called legatees.

It is recalled that, in general, the spouse or do not have the quality of heir. If there is community property, it is 50% of the assets, rights and obligations owner. Only acquires the status of heir if, for example, the heir has not left children or parents.

What is a will?

It is an instrument by which a person (testator), while it is still alive, decides to make unique assignments on their property, in favor of certain persons, whether or not heirs, in order to pass to your property once you have deceased.

There are limits on goods which are subject to a will?

Yes. The law forced the so-called allocations, which are those that the testator or required by law to do. In general, the rules are the following:

Half of the assets of the deceased must necessarily be assigned to the heirs, whether children or parents.

The other half can be allocated at the discretion of the testator, but the following rules must be observed: i) a quarter must necessarily serve to better share one or more offspring and, ii) the other quarter is freely available to the testator , who will be assigned to anyone.

You must pay any taxes to receive an inheritance? Who will pay?

People who get an equity accretion motivated by the transfer of ownership and transfer title free of assets and rights located in Ecuador, whatever the place of death of the deceased or the nationality, domicile or residence of the deceased or donor or his heirs, legatees or donees.

Ecuador also residents in favor of those who transmit or transfer the domain of any assets or rights owned or possessed by the deceased donor abroad.

When the tax is generated in the case of inheritances and legacies?

The operative event for inheritance tax constitutes the accusation, that is, the time the person dies whose estate the heir or legatee is defers.

That is, a person who died immediately, the obligation to pay tax arises?

No. Although the tax liability arises on the death of the deceased, the obligation is due six months after that event, at which point you must present the corresponding statement. For example, if a person died on January 1, 2014, it was due to report and pay the inheritance tax on July 1, 2014.

When the tax is generated in the case of donations?

The operative event for the tax is the act or contract by which the domain is transferred. The tax will be paid prior to registration of the relevant contract or form.

What is the tax rate?

The SRI issued each year a table for calculating inheritance tax, legacies and donations. The following table applicable for 2015 expose yourself:

 

 

Under what criteria I can assess the property subject to an inheritance, bequest or gift?

It depends on what question as well:

 

THE GOOD	CRITERION
General goods	Commercial value declared by the beneficiary
Properties	Minimum: i) the commercial value assigned by experts in the trial of inventories and ii) the commercial appraisal of the municipal land
Trust securities and documents that are quoted on the Stock Exchange	The value attributed to them in the stock at the date of the tax return
Shares and stocks	Book value as of December preceding the date of filing the year 31
Vehicles	Assessment contained in the database of SRI in force in the year in which the operative event occurred tax
Rights of use and habitation	60% of the value of property
Bare ownership	40% of the value of property

 

Can I deduct any item of value of property and inheritance rights, bequests or donations?

The following deductions are only allowed:

- The expenses of the last sickness, funeral, opening the succession, publication of the will (which are not covered by insurance);

- The inherited debts, including any taxes found to owe the cause; and,

- The executor with tenancy rights of property.

There is some exemption or rebate?

In the case that the beneficiaries of inheritances and legacies are within the first degree of consanguinity with the deceased and are of age, the rates in the table are halved.

For the children of the deceased are minors or disabled for at least 30% are exempt from tax.

You can explain with an example how should I calculate the tax?

Of course. Suppose a married person dies without making a will. Its heritage, it is within marriage, amounts to $ 1,600,000.00. The date of death was 1 January 2014. It had 4 children.

For the amount of inheritance tax corresponding to each heir must perform the following operations:

Half the estate of the deceased belongs to the surviving spouse, which does not have the quality of heir. As such, the amount of the inheritance amounted to $ 800,000.00.

Inheritance is distributed to each heir. There being 4 corresponds to each child $ 200,000.00.

The July 1, 2014 every child must make the respective declaration. The tax payment must have happened in the following way:

With a tax base of $ 200,000.00 each heir is located in the following table instead of the current 2014:

Therefore, you should pay $ 3,319 for tax basic fraction more than 10% of the surplus.

Consequently, the calculation is as follows: $ 3,319 for tax basic fraction + 10% of excess [200,000 (taxable) - 132 760 (basic fraction) = 67,240 x 0.10 = $ 6,724] = $ 10,043.

However, finding the beneficiary within the first degree of consanguinity with the deceased, the rates in the table are halved. Therefore, the tax payable by each heir would be $ 5,021.5.

In what form I make the tax return?

The tax return to be made in the form called 108. this form is annexed.

What if I did not pay the tax to 6 months after death?

Penalties and interest generated in the following sense:

Fines: The 3% of the tax paid in the statement for each month or part month of delay in submission of the declaration. The fine shall not exceed 100% of the tax.

Interests: Lack of declaration and payment of tax generates default interest equivalent to annual interest equivalent to 1.5 times the benchmark lending rate ninety days established by the Central Bank of Ecuador, from the date of its enforcement until their extinction. This interest is calculated according to the interest rates applicable to each quarterly duration of the arrears for each month of delay without a daily settlements; incomplete month will be settled as a full month.

What if I have not paid for several years the inheritance tax, legacies and donations?

The tax obligation is extinguished if after a specified period of time (prescription) that is:

Five years from the date they were payable; and,
Seven years from that in which it must present the corresponding declaration, if it proves incomplete or if it has not been filed.

If that statement is not submitted, the limitation period of seven years applies?

To this end, once that period has expired, you must submit a written request that the SRI tax declaration requirement, so that the obligation, interest and fines is extinguished.