Organic Law for the Strengthening of the Family Economy

 

On June 20, 2023, the Executive Decree of the Organic Law for the Strengthening of the Family Economy was published in the Official Gazette, issued by the President of the Republic, which contains a series of tax changes summarized below:

 

Reforms to income tax:

A. The limit of expenses that families can deduct when calculating their income tax is increased. The amount of the deduction will be equivalent to 18% of the value that is lower between the personal expenses declared in the respective fiscal year and the value of the basic family basket, multiplied by the number of baskets corresponding to them, according to the following table:

Number of dependents	Number of family baskets
1	9
2	11
3	14
4	17
5	20

*The basic family basket (canasta familiar) is an annual indicator of the total value of the set of products and services considered essential for the subsistence and well-being of a standard family made of four people.

 

The equation to calculate deductions from your income tax would be the following:

R = 0.18 * L

R = discount

L = the lesser value between personal expenses and (basic basket * value corresponding to the number of family dependents)

 

B. The income tax table is modified. The tax rates of 5% to 37% remain the same, but the applicable income ranges are expanded.

Basic Fraction	Excess Up To	Tax on Basic Fraction	% Tax on Excess Fraction
–	11.722,00	–	0%
11.722,01	14.930,00	–	5%
14.930,01	19.385,00	160,00	10%
19.385,01	25.638,00	606,00	12%
25.638,01	33.738,00	1.356,00	15%
33.738,01	44.721,00	2.751,00	20%
44.721,01	59.537,00	4.768,00	25%
59.537,01	79.388,00	8.472,00	30%
79.388,01	105.580,00	14.427,00	35%
105.580,01	En adelante	23.594,00	37%

 

Reforms to the tax regime for entrepreneurs and popular businesses (RIMPE), effective from January 2024:

• Businesses generating annual income of less than USD 2,500.00 will no longer pay a single income tax.
• Businesses with income exceeding USD 2,500.00 and up to USD 20,000.00 per year will pay a maximum of USD 60 annually.
• Artisans are no longer included in the RIMPE regime.
• Adjustments to the formal obligations related to the RIMPE regime.

 

Reforms to VAT on public shows, effective from July 1st of this year:

• A 12% VAT is imposed on all businesses in the category of public shows.

 

Reforms to income tax for sports forecasting companies, effective from January 2024:

• A single tax of 15% per month is imposed on the income received by operators of sports forecasting platforms operating in Ecuador.