The tax benefit of an income tax reduction for the donation of goods to law enforcement is regulated

The Regulations for the Organic Law on National Solidarity were published in the Fifth Supplement of Official Gazette 81 on July 15, 2025.

Among other aspects, these Regulations govern the tax benefit for donations to law enforcement agencies.

Below is a summary of the main provisions included in these Regulations:

Tax Aspects

1. Duration of the tax cut:

• The Regulations introduce a special rule for the duration of the income tax cut for donations to the National Police and/or Armed Forces, clarifying that it will be applicable to the 2025 fiscal year, starting on the day following the publication of the Organic Law on National Solidarity (June 11, 2025).

• Note that donations made between January 1 and June 10, 2025, will benefit from an additional deduction of 150% of promotion and advertising expenses, as provided for in Article 10 of the Internal Tax Regime Law in its version prior to the issuance of the Organic Law on National Solidarity.

• The Ecuadorian Tax Authority is ordered to establish the mechanisms for registering and declaring these amounts.

2. Reform of the Regulations for the Application of the Internal Tax Regime Law: Article 77.2 is added, establishing the rules for the reduction of the tax due:

• The tax cut benefit applies to individuals and companies that have generated income tax in the fiscal period in which the donation was made.

• If the donation exceeds 30% of the tax due, or if there is no tax due, the excess is recorded as a non-deductible expense.

3. Value of the donation:

• There is an obligation to record the total value stated on the respective invoice, including taxes where applicable, and it is established that the value must be in line with market prices. VAT paid cannot be recorded as an expense or as a tax credit.

• In the specific case of donations of real estate, the respective public deed must be signed, and the real estate appraisal must be used as the maximum reference.

• It is mandatory to have the donation contract or the instrument of transfer, as applicable.

• It is clarified that, in the case of donations of equipment and supplies, these must be tangible and consumable goods, without prejudice to the catalog established by the competent ministries. If the equipment is a fixed asset, its appraisal must include all the values necessary for it to be fully functional.

4. Maximum Annual Amount of Donations (Art. 10)

• It is established that there will be a maximum limit on donations that may be applied under the provisions of the Law. And, in this regard, it is provided that the Ministry of Economy and Finance, in coordination with the Ecuadorian Tax Authority, will determine the maximum annual amount that the National Police and the Armed Forces may receive through this mechanism, considering the institutional needs authorized by the Committee. 

Operational Aspects

1. The Solidarity Committee for the Strengthening of Law Enforcement (Art. 8 and 9)

• The Solidarity Committee for the Strengthening of Law Enforcement is created. This Committee is responsible for coordinating and approving donations of new real estate, equipment or supplies.  

• The Committee is composed of authorities from the General Secretariat of Public Administration and Cabinet, the governing body for citizen security and public order, the governing body for national defense, the governing body for public finances, and the Ecuadorian Tax Authority.

• This Committee will be responsible for approving or rejecting technical instruments developed by the National Police and the Armed Forces regarding personal property, equipment and/or supplies eligible for donation; and will determine, in accordance with the established catalog, the new personal property, equipment or supplies to be donated, as well as the suitability of the donation and the legality of the resources.

2. Catalogues of New Goods, Equipment or Supplies to Be Donated (Art. 11)

• The Regulations stipulate that the Ministry of National Defense and the Ministry of the Interior shall prepare catalogs of new personal property, equipment and/or supplies in optimal condition for use, in accordance with institutional needs, with prior approval from the Committee. These catalogs shall be published on the websites of both ministries.

• The following are considered donatable goods: motor vehicles, technological equipment, forensic equipment, weapons, protection and security equipment, aircraft, and others to be established after prior qualification.

3. Donation Procedure (Art. 12, 13, 14 and 15)

• It is established that law enforcement agencies or their governing bodies may receive donations of new personal property, equipment or supplies in optimal condition for use, in accordance with the procedures and mechanisms set forth in the manuals, instructions or instruments issued by the Armed Forces and/or the National Police, subject to approval by the Committee, as well as the regulations of the Comptroller General of the State and other applicable regulations.

• The donation procedure is as follows:

1. The donor sends a letter of intent to the Ministry of the Interior or the Ministry of National Defense.
2. The National Police or Armed Forces review the relevance of the donation through technical, legal, and economic feasibility reports.
3. Once the request is approved, the highest authorities sign the donation contract or transfer instrument.
4. The beneficiary (the recipient law enforcement agency) shall notify the Ecuadorian Tax Authority, by January 15 of the following year, of the details of the donations received during the previous fiscal period.
5. The governing ministries distribute the donated goods equitably and report monthly to the Committee on the distribution.

• It is clarified that the donated personal property must be new and acquired in the national territory, which will be verified with the respective invoice. If the goods are manufactured by the donor, the invoice will be issued to the recipient entity.

• The Ministry of National Defense and the Ministry of the Interior are ordered to distribute the donations equally among law enforcement agencies.

• The process of receiving, classifying, using, and controlling the donations shall be carried out in accordance with the institutional catalog and relevant regulatory provisions, prioritizing efficient, transparent use aimed at strengthening operational capabilities.