Ecuador's Internal Revenue Service (SRI) has published Resolution NAC-DGERCGC20-00000013 of 20 February 2020 concerning the rules for the withholding of income tax on dividend distributions introduced by the Law of Simplicity and Tax Progressivity ({News-2020-01-10/A/5-previous coverage}). In particular, the resolution provides rules for withholding tax on the distribution of dividends by a resident company or a permanent establishment in Ecuador to a natural person resident in Ecuador or to a non-resident entity where the ultimate beneficiary is a natural person resident in Ecuador.
Under the new rules, tax must generally be withheld on 40% of the dividend amount. In the case of distributions to a natural person resident in Ecuador or to a non-resident entity where the ultimate beneficiary is a natural person resident in Ecuador, the resolution provides that tax must be withheld according to the following progressive rates depending on the taxable amount:
- up to USD 20,000.00 - 0%
- USD 20,000.01 to 40,000.00 - 5%
- USD 40,000.01 to 60,000.00 - 10%
- USD 60,000.01 to 80,000.00 - 15%
- USD 80,000.01 to 100,000.00 - 20%
- USD 100,000.01 and over - 25%
Where the same resident company or permanent establishment in Ecuador distributes dividends on more than one occasion within the same fiscal year to the same beneficiary, then the applicable rate is the rate corresponding to the total taxable amount for the year, with the resulting tax to be withheld reduced by the tax amount withheld on previous distributions for the year.
The Resolution entered into force on 20 February 2020.