New Digital Services Tax in Ecuador Starting September 16, 2020
Original Article in Spanish on El Universo: Between $ 0.71 and $ 1.79 will increase the monthly expense for the import of one of the digital services that are normally used
In Ecuador, a new tax will begin to be levied as of September 16, it is about the importance in digital services that was contemplated in the Tax Simplicity and Progressiveness Law.
Several services have already notified their subscribers of the increase in the final value of their plans, including this tax. For this purpose, the Internal Revenue Service is conducting a registry of digital services that will be ready on September 10, will be in force from September 16 and will be updated every three months (January, April, June and October).
“The basis for withholding will correspond to the total value paid by the tax resident in Ecuador or the permanent establishment of a non-resident, to the non-resident digital service provider in Ecuador. In payments for digital services that correspond to delivery and shipping services of personal property of a corporal nature or to the provision of services for which the digital service provider charges a commission, VAT will be applied on the commission paid in addition to the value of the good or service acquired “, is explained in the resolution for the retention of VAT of the imported service.
Given this, several families have chosen to suspend digital services until they know what the total increase in their budgets will be.
In the case of a household, you have a basic Netflix plan ($ 7.99), in addition to an individual premium subscription to Spotify ($ 5.99), pay your Microsoft service monthly ($ 7.99) and also pay monthly to Play Station Plus ($ 6.99) must pay a total of $ 3.44 more. That value will be retained by your credit card and 12% will be calculated in each of the services.
In the example above, Spotify only represents $ 0.71 of tax, Netflix and Microsoft $ 0.95 each, and Play Station $ 0.83.
In case of having more services, the total price of the additional tax to be paid will increase. In the case that you have a four-screen subscription to Netflix ($ 13.99), the value to be debited from the tax for that service alone will be $ 1.67 . Also, if you want to opt for a ZoomUS membership with which you can hold meetings without a time limit, you will have to pay $ 14.99 monthly and for the tax plus $ 1.79 .
Courses that you also take online such as Domestika, Open English and Coursera are also taxed with this tax.
These are several of the most common services included in the provisional list: Netflix, Amazon Prime, Spotify, Microsoft, Uber, Play Station Network, Norton, Uber Eats, Uber, Domicilios.com, YouTube Premium, Airbnb, DirectvGo, DisneyPlus , Nintendo and more.
UPDATE 9/14/2020: Facebook sent a notice that the 12% VAT will also apply to business and personal account advertisers who are in Ecuador.
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I’ve just spent an hour chatting with Airbnb support. They are sure only, they know nothing about this. They’ve asked me to contact Ecuador for information on Taxes imposed by Ecuador. My impression from the article posted here (which I cut and pasted to send them in full) was that this digital tax is imposed by Ecuador, not a US entity, but I am not sure. Can you provide some more detail on this? Links if you have them? Thanks in advance for your help.
According to the El Universo article linked in this post, the tax will be applied to the bill by the service provider. My guess is the government hasn’t completely defined the regulations yet or notified all of the service providers about the change. These types of things aren’t nearly as well organized here. In the US, businesses would have months or years to make these types of changes. In Ecuador, it’s common for the govt to institute a change like this to be effective within a month or two without providing any regulations or instructions to businesses or consumers. Then, over the course of a year or more, the changes slowly take effect. My guess is they mainly want to tax Netflix and the main streaming services used here, but they couldn’t discriminate by only taxing them so they taxed them all but aren’t enforcing the majority of them yet. That’s just a theory based on our experience here over the past 3 years.