Regulation NAC-DGERCGC21-00000026 issued by the Tax Authority on 2021, established a special regime for income tax and value added tax (VAT) withholdings applicable to payment aggregators and online markets. This regime was amended by Regulation NAC-DGERCG22-00000035 issued on July 20, 2022 and published in the Supplement of the Official Registry 110 of July 22, 2022. The most important points are summarized below:

  1. Definitions
  • Payment aggregators:  Administrators of auxiliary payment systems authorized as such by the Central Bank of Ecuador for the provision of payment aggregation services.
  • Online marketplaces: Entities that, through technological platforms, allow: (i) the online supply and demand of goods and/or services of third parties or of several affiliated commercial establishments, and (ii) to accept and collect the corresponding payments on behalf of the commercial establishments.
  1. Requirements

To apply the special withholding regime, the following requirements must be met:

  • Payment aggregators shall:
  1. File an application before the Internal Revenue Service (IRS),
  2. Have the authorization of the Central Bank of Ecuador to operate as an administrator of auxiliary payment systems, for the provision of payment aggregation services, and
  3. Be qualified as special taxpayers or withholding agents by the SRI. If the entity has not been previously qualified as a withholding agent or special taxpayer, such qualification may be requested in the same application.
  • Online marketplaces shall:
  1. Have an entity incorporated in Ecuador,
  2. Have as its corporate purpose, activities that reflect its role as an online marketplace, particularly, intermediation through technological platforms for the online offer and sale of goods and/or services of third parties and/or affiliated commercial establishments,
  3. Be registered in the Single Taxpayers Registry,
  4. File an application before the IRS detailing the payment aggregator or payment gateway with which they will work.
  5. Be qualified as special taxpayers or withholding agents by the SRI. If it has not been previously qualified as a withholding agent or special taxpayer, such qualification may be requested in the same application; and,
  6. To not apply any simplified tax regimes, or single income tax regimes.

Online marketplaces may apply the special regime provided that the amounts collected on behalf of third parties come from: (i) payment aggregators registered with the IRS, or (ii) are processed through administrators of auxiliary payment systems authorized as such by the Central Bank of Ecuador for the provision of payment gateway services.

  1. Special Regime

The following payments shall not be subject to income tax or VAT withholding:

  1. Those made by entities of the financial system and credit or debit card issuers to entities considered as payment aggregators and/or online marketplaces, for the transfer of goods and/or services rendered by third parties and/or affiliated commercial establishments.
  2. Those made by payment aggregators to entities considered as payment aggregators and/or online marketplaces, for the transfer of goods and/or services rendered by third parties and/or affiliated commercial establishments.

Notwithstanding the foregoing, payment aggregators and/or online marketplaces shall issue a monthly settlement of payments or credits registered as income.

  1. Transitory Provision.

Taxpayers registered in the ‘online marketplace registry' of the IRS must submit the request described in section II above, detailing the payment aggregator or payment gateway with which they will work within 10 working days from the publication of the regulation in the Official Registry, i.e., until August 4, 2022. If the application is not submitted within such term, the registration will be revoked, and a new request must be filed.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.