ECUADOR - Income tax refunds for non-residents by application of a double taxation treaty

September 2019

Double Taxation Treaties

Double Taxation Treaties (DTTs) prevent a tax resident of any of the signatory countries from paying income tax in two jurisdictions, to minimise the tax burden on international operations.

Ecuador established maximum amounts for benefiting from these agreements with effect from July 2016. When these are reached, the Ecuadorian company must apply withholding tax, at the rate of 25%, by the year 2019. However, non-Ecuadorian resident foreign companies have the option to request a refund of this payment.

The maximum amounts established by the tax administration for each year are as follows:

Year	Maximum Amount
2016	USD 225,800
2017	USD 223,400
2018	USD 225,400
2019	USD 565,500

Tax refunds for non-residents’ income in Ecuador

Foreign companies which have paid withholding tax on income tax in applying a DTT can request a refund of 100% of the amounts withheld, by submitting a formal claim to the Ecuadorian Tax Authority, with copies of the transactions with their clients in Ecuador.

This process takes 60 working days (three months). If the information submitted is incomplete, it can take up to an extra 60 working days.

From March 2019, if a non-Ecuadorian resident requests a refund and recovers 100% of the requested amount, the Ecuadorian Tax Authority will issue a determination stating that transactions with that non-Ecuadorian resident will be no longer be subject to the withholding tax, even if its transactions exceed the maximum amounts. This determination lasts for 36 months.

However, for this to apply, the conditions of the transactions between the non-resident and the Ecuadorian resident must not change.

It is important for companies to be aware of amounts and conditions when implementing the agreements that Ecuador maintains with several countries, to ensure that they recover refundable amounts and improve liquidity.

Countries with which Ecuador has a DTT

Country	Start of application (Year)	Country	Start of application (Year)
Germany	1987	France	1993
Argentina *	1983	Italy	1991
Belarus	2018	Mexico	2002
Belgium	2005	Qatar	2019
Brazil	1989	Romania	1997
Canada	2002	Russia	2019
Chile	2005	Singapore	2016
China	2015	Switzerland	1996 (Original text) 2020 (Protocol)
Korea	2014	Uruguay	2013
Spain	1994	Andean Community of Nations (Bolivia, Colombia, Peru)	2005
* Only applicable to air transport revenues

Jessica Pasquel
jpasquel@advice.com.ec