VAT withholding always occurs in purchase operations, in which the one who acquires a good must pay part of the tax the issuer should pay.
It must be performed at the moment of the payment or credit in account.
Among the 70% of services withholding, it is added those paid through commissions, including intermediates, that operate through third parties in the acquisition of assets and services.
Financial Institutions are able to issue only a withholding statements for the operations performed per month, on the same customer.
When a withholding agent acquires, on the same transaction, assets and services, these items must present separately the distinct withholding percentages, in the withholding certificate. In the event the values are not separate, a 70%-withholding is applied on the purchase amount.
Companies that issue credit card under the Banks Superintendence control, should withhold from associated establishments to its systems, in their payments, 30% for assets and 70% for services.
Entities and bodies from public segments and state companies, whose transactions were exempt from taxes in income, previously to the State Companies Organic Law, as of November 1, 2009, will pay 12% VAT for all acquisitions of assets and services, whenever the generating factor was not produced between January 01, 2008 and October 31, 2009, when applicable rate is 0% and withholding is applicable. When generating factor is a transference contract of assets or provision of services per steps, development of works, and those adopting the future treatment form, VAT is given as all conditions for each period, step of stage is fulfilled, which means, when a sales statement must be issued.
Withholding Table and Calculation Rule
Check withholding table and more details about the tax on:
http://www.sri.gov.ec/sri/portal/main.do?code=3&codeContent=3#anchor4
http://www.sri.gov.ec/sri/portal/main.do?code=14#anchor12
Withholding is not applicable to airline companies and travel agencies, in the sales of an air ticket. So, as it is not applicable to distribution centers, commercialization, final distributors and service stations that commercialize fuel only when refers to fuel from oil. |
Calculation Method |
VAT Calculation Basis/VAT = Goods/Services Value – Discounts Fee = Rate entered in Products File or Variable Taxes Withholding VAT/IVC = Calculation Basis * Fee VAT Example: Calculation Base: 790.00 Fee: 12% Tax amount: 94.80 Withholding Calculation Basis = 94.80 Fee: 30% VAT Withholding: 28.44 * for the outflow, trade note value is 884.80 and the remaining 28.44 is written-off in the financial module, when the customer delivers the withholding certificate (insurance, freight and expenses are not part of calculation basis, as according to the country's rule, they are entered as items, in separated documents). |
When invoice installment is performed more than once, withholding value can be deducted from the first installment or apportioned among them all. Configure the field Tax Apport. Withh., in Class Register.
TIO x Tax Binding also must be checked where the field Add to Trade Note (from Variable Tax Register) = 2 (subtract), for its value to be deducted from the main bill.
The Payment Term function is also driven by the Sales Order and Purchase Order so taxes value must be checked with the installment values.
Withholding Certificate
Operations with suppliers generate certificates, which means, only in inflows.
According to the Ecuatorian legislation, taxpayer has 5 days to issue the certificate when issuing an invoice.
In the outflow it is necessary to receive the certificate. The customer also has 5 days to deliver it. |
Certificates controlled by the System, must be registered. Generating a bill from the invoice which is no longer pending on the certificate. So, each invoice presents its withholding certificate.
In this case, bill value is always in total value and will present withholding bill if the customer presented the certificate correctly.
Withholding percentage is defined in the Variable Taxes, with description and the corresponding withholding code, according to the rule below:
Canceling/Return
In the events of return/canceling of total or partial value of services installment, debit or credit notes (Invoicing) or debit or credit notes (Purchases) are generated, depending on the case. These debit or credit notes will be used in tax calculation to be paid.
See Also
Tip: