Ecuador’s Internal Revenue Service (IRS) has issued the rules and procedure for the effective implementation of the Common Standard for Information Communication and Due Diligence for the Automatic Exchange of Financial Account Information in Tax Matters. It was approved by the Council of the Organization for Economic Cooperation and Development to comply with international requirements that Ecuador must meet as part of the Global Forum on Transparency and Exchange of Information for Tax Purposes. The Annex of Financial Accounts for Non-Residents (CRS Annex) was also approved[1]. The Resolution establishes that:
  • New accounts are those opened in a company that is obliged to file information from July 1, 2019; while pre-existing accounts are those held by a company obliged to file information as at June 30, 2019.
  • A high-value account is a pre-existing account held by an individual with a balance of more than USD1,000,000 as at December 31 of the given fiscal year.

Annex of Financial Accounts of Non-Residents (CRS Annex)
  • Companies defined as a “Financial Institution with a filing obligation” are obliged to file the Annex:
    • Custody institutions: any company that holds financial assets on behalf of third parties as a significant part of its economic activity.
    • Depository institutions: any company that accepts deposits in the regular framework of its banking activity or similar.
    • Investment entities (includes trusts).
    • Insurance companies (specific): any company that is an insurance company (or the holding company of an insurance company) that offers an insurance contract with a cash value or an annuity contract, or that is obliged to make payments in respect thereof.
  • This obligation applies to Ecuador resident companies and branches of foreign companies established in the country.
  • The following are not obliged to file information:
    • Central Bank of Ecuador.
    • Ecuadorian Social Security Institute.
    • Ecuadorian Social Security Institute Bank.
    • National Financial Corporation.
    • Ecuadorian Development Bank.
    • Foreign branches of an Ecuador resident company.
    • The Internal Revenue Service will publish a list of other companies with no filing obligation on its website by December 31 each year.

  • Taxpayers must report information on: interest, dividends, account balances, income from certain insurance products, deposits from the sale of financial assets and other income from assets held in account that belong to individuals or companies who are not tax resident in Ecuador. This information must be submitted in the CRS Annex. If there are no reportable accounts in the relevant period, the Annex must be filed and state zero. The Resolution also establishes the information that does not need to be reported.
  • From 2019, the information for each year must be reported in May of the following year, according to the 9th digit of the company’s Taxpayer (RUC) Number.
  • The company with the filing obligation may amend the content of the Annex up until the last business day of June of the year the information is submitted.
  • To determine the accrued balances of financial accounts, the company must add all its financial accounts, or those opened in a related company.
  • The Resolution establishes the applicable procedures to identify which accounts must be reported out of the new and pre-existing accounts of individuals and companies; as well as the periods and deadlines to be taken into consideration.

Penalties for Non-Compliance:
  • If inconsistencies are detected in the Annex, the IRS will notify the taxpayer so that the inconsistency can be justified or corrected within 10 days.
  • Non-compliance with the information issued by the tax authority will be punished with a fine equating to 250 consolidated basic salaries for each requirement.
  • The same penalty will apply if the company with the filing obligation fails to submit the CRS Annex or fails to report information on any reportable account.
  • Payment of the corresponding penalty does not exempt the company from performing its reporting obligation. For the 2019 tax year, companies with a filing obligation will submit the CRS Annex with information on (i) low-value pre-existing accounts of individuals, and (ii) pre-existing accounts of companies, in May 2021 in accordance with the dates given in article 6 of this Resolution.
[1] SRI Resolution No. NAC-DGERCGC19-00000003, published in Official Register Supplement No. 428 on February 14, 2019.

Warning: This newsletter by Pérez Bustamante & Ponce is not and cannot be used as legal advice or opinion since it is merely of an informative nature.