ECUADOR Law and Practice Contributed by: Sebastian Corral Guevara, Miguel Pizarro Páez, María Fernanda Mencías Pérez, José Cisneros Pazmiño, Roque Bustamante Espinosa and Jorge Pizarro Páez, Flor Bustamante Pizarro & Hurtado
5.8 Tariffs Ecuador’s tariff policy is determined by the Foreign Trade Committee ( Comité de Comercio Exterior – COMEX), which approves the national customs tariff based on the Harmonized Commodity Description and Coding System (HS). Tariffs are administered by the National Customs Service of Ecuador ( Servicio Nacional de Aduana del Ecuador – SENAE) and gen - erally consist of ad valorem duties, although specific duties and mixed duties may apply in certain cases. Import duties vary depending on the type of goods imported. As a general rule, capital goods, machin - ery and raw materials that are not produced locally are subject to reduced or zero tariff rates, whereas finished consumer goods that compete with domestic production are generally subject to higher tariffs. Certain sectors of the Ecuadorian economy contin - ue to benefit from greater tariff protection, particu - larly the agricultural, textile, footwear and selected manufacturing sectors. In addition, Ecuador applies the Andean Price Band System ( Sistema Andino de Franjas de Precios ) to certain agricultural products, including rice, sugar, dairy products, maize, oilseeds and related products. Under this mechanism, variable duties may be added to the applicable ad valorem tariff when international reference prices fall below predetermined thresholds, with the objective of pro - tecting domestic producers against international price volatility. As a member of the Andean Community ( Comuni- dad Andina – CAN), Ecuador grants reciprocal tariff preferences to imports originating in Colombia, Peru and Bolivia. Ecuador also has trade agreements in force with the EU, the United Kingdom, the European Free Trade Association (EFTA), Chile, China and Costa Rica, under which qualifying goods may benefit from preferential tariff treatment, subject to the applicable rules of origin. Ecuador has also recently strengthened its trade rela - tionship with the United States through the Agree - ment on Reciprocal Trade (ART). While this is not a traditional free trade agreement, it is relevant to Ecua - dor’s tariff and trade policy because it addresses trade
cable, master file and country-by-country reporting obligations. The SRI may review related-party transactions and adjust the taxpayer’s taxable base where it determines that the agreed terms do not comply with the arm’s length standard. Failure to comply with transfer pric - ing reporting or documentation obligations may result in penalties under Ecuadorian tax law. 5.7 Anti-Evasion Rules Ecuadorian tax legislation contains both general and specific anti-avoidance rules designed to prevent tax evasion, abusive tax planning and the improper use of legal structures to obtain undue tax advantages. The principal anti-avoidance mechanism is the Gen - eral Anti-Avoidance Rule (GAAR), contained in the Tax Code and complemented by the Internal Tax Regime Law. Under these provisions, the SRI may disregard or recharacterise transactions that lack a valid business purpose and are implemented principally to obtain an improper tax benefit, subject to the applicable legal procedures and the taxpayer’s due process rights. Ecuadorian tax legislation also contains several spe - cific anti-avoidance measures, including: • transfer pricing rules applicable to transactions with related parties and, in certain cases, with enti - ties located in tax havens or low-tax jurisdictions; • enhanced tax rules applicable to transactions involving tax havens and preferential tax regimes; • mandatory disclosure of the company’s beneficial owners through the Beneficial Ownership Register; • extensive information reporting obligations; and • broad audit and reassessment powers granted to the SRI. In addition, Ecuador’s mandatory electronic invoicing system and withholding tax mechanisms facilitate the cross-checking of tax information and constitute important tools for detecting tax non-compliance. Failure to comply with these rules may result in tax reassessments, penalties, interest and, where appli - cable, the imposition of administrative or criminal sanctions under Ecuadorian law.
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