Ecuador: Royalties, payments to related parties | KPMG | BE

Ecuador: Percentages for deducting royalties, other payments to related parties

Ecuador: Royalties, payments to related parties

A resolution (published 18 August 2015) establishes the standards relating to transactions between related parties, and specifically for the purpose of determining the threshold for claiming deductions of amounts paid as royalties or paid for technical, administrative, consulting, and similar services. In general, the deductibility threshold is set at 20%. However, a higher percentage may be available if the methodology relating to transactions between related parties is approved by means of a consultation with the tax administration.

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Consultation requests

The deadline for filing a consultation for a valuation determination is the last business day of March of the tax year for which the application of a higher deductibility threshold is sought.

  • Taxpayers that satisfy the consultation process: The higher percentage for deductibility would apply from the date on which the consultation application is filed.
  • Taxpayers that do not file a consultation application request within the established deadline: The higher percentage for deductibility would apply as from the year following that year when the application is filed.

If the taxpayer request a consultation for previous assessment and the tax administration notifies the taxpayer of its determination after the due date for filing the income tax return for the corresponding tax year, the taxpayer may file an amended or substituting return that reflects the higher deductibility threshold.

 

For more information, contact a tax professional with KPMG’s Americas Center:

 

Devon Bodoh | (202) 533-5681 | dbodoh@kpmg.com

Alfonso A-Pallete | (305) 913-2789 | apallete@kpmg.com

 

Or contact a KPMG tax professional in Ecuador:

 

Gino Erazo | (593) 4 - 229-0697 | gerazo@kpmg.com

Gabriela Cervantes | (593) 4 - 229-0697 | gcervantesgarzone@kpmg.com

Karina Rubio | (593) 4 - 244-4225 | krubio@kpmg.com

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