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General Notes

• Wherever the text says "Tribunal Distrital de lo Fiscal," "magistrate," "the substantiating magistrate," "minister of substantiation," "Court," "Hall," "President," "President of the Hall," "President of the Court," it should be read as "the judge of the contentious tax matters"
• Wherever the text says "Secretary General," it should be read as "Secretary"
• Governed by Law No. 0, published in Official Gazette Supplement 544 of March 9, 2009
• The final second provision of the Reformatory Law for Tax Equity, published by Legislative Decree s/n in the Official Registry Supplement 242 of December 29, 2007, provides that the Tax Code will have the category of Organic Law
• By Executive Decree 1494, published in Official Registry 500 of January 6, 2009, the Regulation for the Sanction of Closure of Premises is issued, probably applicable to the sanction of closure for tax infractions

H. National Congress

• The Legislation and Codification Commission resolves to issue the following codification of the Tax Code

Introduction

• In accordance with the powers granted to the Legislation and Codification Commission by Article 139 of the Political Constitution of the Republic, the following have been suppressed in this Codification: from Book III, from Title I, Chapters II and III related to the District Tax Court and its Powers, as established in Article 191 and numeral 2 of Article 198 of the Political Constitution of the Republic; and, by what is provided in literal h) of Article 11 of the Organic Law of the National Council of the Judiciary; and, Title III, of the Cassation Resource, which is established in the Cassation Law.
• Likewise, Section 2a of Chapter II related to the Complaint is suppressed from Book IV, Title III; Chapters III, IV, V related to the Summary, of the Resources and Consultations, and, Processing of the Resources; and, of Chapter VI, Section 1a of the Contraventions, since at the moment the provisions contained in the Code of Criminal Procedure are applicable.

BOOK ONE

• OF SUBSTANTIVE TAX LAW

TITLE I

• FUNDAMENTAL PROVISIONS
• Art. 1: Scope of application - The precepts of this Code regulate the legal relationships arising from taxes, between the active subjects and the taxpayers or those responsible for them. They will apply to all taxes: national, provincial, municipal or local or of other entities that are creditors of the same, as well as to the situations that derive from or are related to them.
• "Tax" is the pecuniary provision required by the State, through national or sectional or exceptional entities, as a result of the realization of the taxable event provided for in the law, in order to satisfy public needs. Taxes are: taxes, fees and special contributions. *Note: Second paragraph replaced by article 67 of Law No. 0, published in Official Registry Supplement 587 of November 29, 2021.
• Art. 2: Supremacy of tax regulations - The provisions of this Code and other tax laws will prevail over any other rule of general laws. Consequently, the laws and decrees that in any way contravene this precept will not be applicable by the administration or by the jurisdictional bodies.
• Concordance with the Constitution of the Republic of Ecuador, Arts. 424 & the Civil Code Arts. 4, 12

Art. 3: Tax power

• Taxes can only be established, modified or eliminated by a legislative act of the competent body

• Tax laws with retroactive effect to the detriment of taxpayers will not be enacted

• Fees and special contributions will be created and regulated in accordance with the law

• The President of the Republic may set or modify customs tariff rates for aduanas

• The concordances are the Civil Code Arts. 1, 3, 5, 6, the Constitution of the Republic of Ecuador, Arts. 11, 120, 132, 301 & the Organic Code of Territorial Organization, COOTAD, Arts. 166, 172, 186

Art. 4: Reservation of law

• Tax laws will determine the taxable object, active and passive subjects, the amount of the tax or the way to establish it, the exemptions and deductions, the claims, resources and other matters reserved to the law that must be granted in accordance with this Code

Art. 5: Tax Principles

• The tax regime will be governed by the principles of generality, progressivity, efficiency, legitimate trust, administrative simplicity, non-retroactivity, equity, transparency and collection sufficiency; direct and progressive taxes will be prioritized *Note: Article replaced by article 68 of Law No. 0, published in Official Registry Supplement 587 of November 29, 2021
• Concordance to the Constitution of the Republic of Ecuador, Arts. 283, 284, 300

Art. 6: Purposes of taxes

• In addition to being means for collecting public revenues, taxes will serve as an instrument of general economic policy, stimulating investment, reinvestment, savings and their destination towards productive and national development purposes; they will attend to the demands of social stability and progress and strive for a better distribution of national income
• Jurisprudence adheres to the Constitution of the Republic of Ecuador, Arts. 283, 300

Art. 7: Regulatory power

• Only the President of the Republic is responsible for issuing regulations for the application of tax laws
• The General Director of the Internal Revenue Service and the General Manager of the Ecuadorian Customs Corporation, in their respective areas, will issue circulars or general provisions necessary for the application of tax laws and for the harmony and efficiency of its administration.
• No regulation may modify or alter the meaning of the law or create tax obligations or establish exemptions not provided for therein.
• In the exercise of this power, the application of laws may not be suspended, added to, amended, or not complied with, on the pretext of interpreting them, the official or authority who dictates the illegal order being responsible for any abuse of authority exercised against those under administration. Concordance is the Civil Code Arts. 3, the Internal Revenue Service Creation Law, Arts. 8, the Organic Code of Territorial Organization, COOTAD, Arts. 492 & the Constitution of the Republic of Ecuador, Arts. 120, 147, 226, 425

Art. 8: Regulatory power of municipalities and provincial councils

• The provisions of the previous article will also apply to municipalities and provincial councils, when the law grants these institutions the regulatory power
• Concordance is the Code of Territorial Organization, COOTAD, Arts. 186, 492

Art. 9: Tax management

• Tax management corresponds to the body established by law and includes the functions of determining and collecting taxes, as well as resolving claims and absolving tax consultations.
• Jurisprudence aligns with the Code of Territorial Organization, COOTAD, Arts. 492 & the Constitution of the Republic of Ecuador, Arts. 293

Art. 10: Regulated and impugnable activity

• The exercise of regulatory power and management acts in tax matters constitute regulated activity and are subject to challenge through administrative and jurisdictional channels in accordance with the law.
• Concordance with the Constitution of the Republic of Ecuador, Arts. 76, 173, the Tributary Code, Arts. 139, 220 & the Juridical Legal Regime Statute Executive Function, ERJAFE, Arts. 65, 69, 74

Art. 11: Validity of the law

• Tax laws, their regulations and general circulars will govern from the date of publication in the Official Registry, unless later dates of validity are established in them.
• However, the regulations that refer to taxes whose determination or liquidation must be carried out for annual periods, as a merely declarative act, will be applied from the first day of the following calendar year, and, from the first day of the following month, when it comes to shorter periods *Note: First paragraph replaced by article 7 numeral 1 of Law No. 0, published in Official Registry Supplement 744 of April 29, 2016
• Jurisprudence aligns with the Civil Code, (Preliminary Title), Arts. 6, 13, the Constitution of the Republic of Ecuador, Arts. 132, 137, 140, The Internal Tax Regime Act, LRTI, Arts. 7 & the Tributary Code, Arts. 19

Art. 11.1

• Resolutions, circulars and other administrative regulations may not, in any case, alter or change the meaning of the law or expand or restrict its scope.
• Note: Article added by article 69 of Law No. 0, published in Official Registry Supplement 587 of November 29, 2021

Art. 12: Terms

• The terms or deadlines referred to in the tax regulations will be computed as follows: Continuous terms in years and months will expire on the equivalent day of the respective year or month; and terms established by days will always be understood as business days
• In all cases where the terms or deadlines expire on a disabled day, they will be extended until the next business day
• Jurisprudence goes hand in hand with the Civil Code, the article 7, 33, 35, the Civil Codie(Book IV), Arts. 1510, 2103, 2104 & tThe Organic General of Process, COGEP, Arts. 73, 78

Art. 13: Interpretation of law

• Tax regulations will be interpreted in accordance with the methods admitted in Law, taking into account the purposes of the same and its economic significance
• The words used in the tax law will be understood in accordance with their legal, technical or habitual meaning, as appropriate, unless they have been expressly defined
• Jurisprudence matches the Civil Code (Preliminary Title), Arts. 3, 18 & the Constitution of the Republic of Ecuador, Arts. 120

Art. 14: Supplementary rules

• The provisions, principles and figures of the other branches of Law will be applied only as supplementary rules and provided that they do not contravene the basic principles of taxation
• Analogy is an admissible procedure to fill the loopholes in the law, but by virtue of it, taxes, exemptions or other legal matters reserved to the law cannot be created
• Jurisprudence links to the Civil Code (Preliminary Title), Arts. 4, 12 & the Constitution of the Republic of Ecuador, Arts. 132, 300

TITLE II

• OF THE TAX OBLIGATION

Chapter I

• General provisions
• Art. 15: Concept- Tax obligation is the personal legal bond, existing between the State or the entities that are creditors of taxes and the contributors or those responsible for them, by virtue of which a provision in money, species or services appreciable in money must be satisfied, upon verification of the generating event provided for by law.
• Concordance is the Organic Code of Production, Commerce and Investments, COPCI, Arts. 113

Art. 16: Generating event

• The generating event is understood as the budget established by law to configure each tax.
• Jurisprudence aligns with the Constitution of the Republic of Ecuador, Arts. 120, 30 & the Organic Code for Production, Commerce and Investments, COPCI, Arts. 109

Art. 17: Qualification of the generating event

• When the generating event consists of a legal act, it will be classified according to its true essence and legal nature, whatever the chosen form or denomination used by the interested parties
• When the generating event is delimited according to economic concepts, the criterion for qualifying them will take into account the economic situations or relationships that effectively exist or are established by the interested parties, regardless of the legal forms that is used

Chapter II

• On the birth and enforceability of the tax obligation
• Art. 18: Birth- The tax obligation arises when the budget established by law to configure the tax is realized
• Jurisprudence links this to the Constitution of the Republic of Ecuador, Arts. 301

Art. 19: Enforceability

• The tax obligation is enforceable as of the date indicated by law for this purpose
• In the absence of express provision regarding that date, the following rules shall govern:
  • 1a: When the liquidation must be carried out by the contributor or the responsible party, from the expiration of the deadline set for the presentation of the respective declaration; and,
  • 2a: When by legal mandate it corresponds to the tax administration to carry out the liquidation and determine the obligation, from the day following that of its notification
• Jurisprudence aligns with the Civil Code (Preliminary Title), Arts. 6 & the Organic Code of Production, Commerce and Investments, COPCI, Arts. 113

Art. 20: Stipulations with third parties

• The contractual stipulations of the obligated subject with third parties, may not modify the tax obligation or the subject of the same
• However, whenever the law does not prohibit the transfer of the tax, the active subjects may demand, at their discretion, the respective provision from the passive subject or from the person obligated contractually
• Book IV, Arts. 1567, 2109 align with the Civil Code

Chapter III

• Concerning the interests

Art. 21: Interests charged to the obligated party

• The tax obligation that was not satisfied in the time established by law will cause in favor of the respective active subject and without need for any administrative resolution, the annual interest equivalent to the active reference rate for ninety days established by the Central Bank of Ecuador, from the date of its enforceability until that of its extinction; this interest will be calculated according to the interest rates applicable to each quarterly period that the default lasts for each month of delay without place for daily liquidations; the fraction of month will be liquidated as complete month
• In the case of tax obligations established after the exercise of the respective powers of the Tax Administration, the annual interest will be equivalent to 1.3 times the active reference rate for ninety days established by the Central Bank of Ecuador, from the date of its enforceability until that of its extinction.
• This system of collection of interest will also be applied to all obligations in default that are generated in the law in favor of State institutions, excluding financial institutions, as well as for cases of employer default before the Ecuadorian Institute of Social Security.
• The Tax Administration will transact on the collection of interest in the terms provided in this code
  • Note: Article amended by Art. 1 of Legislative Decree No. 000, published in Official Registry Supplement 242 of December 29, 2007. Note: Article replaced by Article 58, numeral 1 of Law No. 0, published in Official Registry supplement 309 of August 21, 2018. Note: Final Paragraph added by article 70 of Law No. 0, published in Official Registry Supplement 587 of November 29, 2021

Art. 22: Interests charged to the active subject

• Credits against the active subject, for the payment of taxes in excess or unduly, will generate interest equivalent to the active reference rate for ninety days established by the Central Bank of Ecuador, indicated in the previous article from the date on which the respective request for return of the payment in excess or the claim for undue payment was submitted
  • Note: Article replaced by Article 58, numeral 1 of Law No. 0, published in Official Registry supplement 309 of August 21, 2018

Chapter IV

• Of the subjects
• Art. 23: Active subject- Active subject is the public entity that owns the tax.
• Concordance is the Organic Code of Production, Commerce and Investments, COPCI, Arts. 111

Art. 24: Passive subject

• The passive subject is the natural or legal person who, according to law, is obliged to comply with the tax provision, either as a contributor or as responsible.
• Also, passive subjects will be considered to be dormant inheritances, communities of property and other entities that, lacking legal personality, constitute an economic unit or an equity independent of those of its members, susceptible to taxation, provided that this is established in the respective tax law.
  • Jurisprudence links this concept to the Civil Code, the Organic Code of Production, Commerce and Investments, COPCI, Arts. 111 and the Civil Code, Arts. 508, 1263

Art. 25: Contributor

• Contributor is the natural or legal person on whom the law imposes the tax provision for the verification of the generating event
• The condition of contributor will never be lost to anyone who, according to law, must bear the tax burden, even if he carries out its transfer to other people

Art. 26: Responsible party

• A responsible party is the person who, without having the character of contributor, must, by express provision of law, comply with the obligations attributed to the contributor
• Every tax obligation is joint and several between the contributor and the responsible party, safeguarding the right of the latter to repeat what was paid against the contributor, before the ordinary courts and according to the procedure provided for in the Organic General Code of Processes
  • Note: Article replaced by Third Reformatory Provision, numeral 1 of Law No. 0, published in Official Registry Supplement 506 of May 22, 2015 and in force since May 22, 2016

Art. 27: Responsible for representation

• For tax purposes, those responsible by representation are:
  • 1. The legal representatives of unemancipated minors and the tutors or curators with administration of property of the other incapacitated persons;
  • 2. The directors, presidents, managers or representatives of legal entities and other collective entities with legally recognized personality;
  • 3. Those who manage, administer or have the availability of the assets of collective entities that lack legal personality;
  • 4. The mandataries, diligent agents or voluntary managers with respect to the assets they administer or dispose of; and,
  • 5. The trustees of bankruptcies or of creditor conciliations, the representatives or liquidators of de facto or de jure companies in liquidation, the judicial depositories and the administrators of others' property, designated judicially or conventionally
• The responsibility established in this article is limited to the value of the assets managed and to the income that has been produced during its management
  • Jurisprudence aligns with the Organic General of Process, COGEP, Arts. 1464, 2055, 2220 & the Civil Code Article’s 28, 40, 367, 370, 570

Art. 28: Responsibility as acquirer or successor

• Those responsible as acquirers or successors of assets are:
  • 1. The acquirers of real estate, for the taxes that affect said properties, corresponding to the year in which the transfer was made and for the immediately preceding year;
  • 2. The acquirers of businesses or companies, for all taxes that the transferor is found to be owing, generated in the activity of said business or company that is transferred, for the year in which the transfer is made and for the previous two years, responsibility that will be limited to the value of those assets;
  • 3. The companies that replace others, taking charge of the assets and liabilities, in whole or in part, whether by merger, transformation, absorption or any other form. The responsibility will cover the taxes owed by those until the date of the respective act;
  • 4. The successors to universal title, with respect to the taxes owed by the deceased; and,
  • 5. The donees and successors to particular title, with respect to the taxes owed by the donating party or the deceased corresponding to the assets bequeathed or donated
• The responsibility indicated in numerals 1 and 2 of this article will cease in one year, counted from the date on which the making of the transfer was communicated to the tax administration
• All listed articles align with the Code of Companies, Arts. 10, 190 & the Civil Code, Arts. 603, 700, 702, 714

Art. 29: Other responsible parties

• The following will also be responsible:
  • 1. The withholding agents, understood as such the natural or legal persons who, by reason of their activity, function or employment, are in a position to withhold taxes and who, by legal mandate, regulatory provision or administrative order, are obliged to do so
  • The heirs and, where appropriate, the executor shall also be retaining agents for the tax corresponding to the bequests; but the obligation of the executor shall cease when the assignment is terminated without the bequests having been paid
  • 2. The perception agents, understood as such the natural or legal persons who, by reason of their activity, function or employment, and by mandate of law or regulation, are obliged to collect taxes and deliver them to the active subject; and,
  • 3. The substitutes for the contributor, understood as such the persons who, when a tax law so provides, are placed in the position of the contributor, remaining obligated to the compliance of the material and formal provisions of the tax obligations.
  • The Concordance is the Civil Code, Arts. 993, 996, 1293 & the Code of Private Rights
  • Private International Sánchez De Bustamante, Arts. 156

Art. 30: Scope of liability

• The liability of the withholding agents or of perception is direct in relation to the active subject and consequently they are the only ones obligated before this one in the measure in which the retention or perception of the taxes has been verified; and it is joint and several with the contributor before the same active subject, when the retention or perception has not been total or partially effected
• Without prejudice to the administrative or penal sanction to which there may be place, the retention or perception agents will be responsible before the contributor for the amounts withheld or collected contravening the corresponding tax regulations, when they have not delivered them to the entity by whom or in whose name they verified them.
• *The codes are relevant: the Civil Code (Book IV), Arts. 1527, 1541

Art. 30.1 Rights of Passive Subjects

• In addition to the ones established in other normative bodies, these constitute rights of passive subjects To be treated with impartiality, respect, without discrimination, with courtesy, consideration, and ethics by the personnel of the tax administration To be informed and assisted correctly and truthfully by the tax administration in the exercise of their rights and the fulfillment of their tax obligations To formulate queries and to obtain a timely reply, pursuant to the legal deadlines established To submit requests, claims, and rebuttals pursuant to Law and to receive a timely response To access the information that rests at the tax administration, having to do with himself, or his goods To access the administrative actions and to know the processing status of the processes, such as to request copies of the administrative records of which he is part, at his expense To be informed at the beginning of the actions of control or oversight regarding himself or his goods, on the nature and scope thereof, such as of his rights and duties in the course of said actions and that these be developed pursuant to the terms of Law To know the identity of the server of the tax administration, under whose responsibility the proceedings of which he is part are processed To not provide documents already submitted, and found at the disposal of the tax administration To the correction of declarations, in the form and with the limits prescribed in this code and the Law To challenge the actions of the tax administration in which it is considered affected, pursuant to the provisions of this code, and to obtain an express and reasoned pronouncement by the tax administration To submit tax complaints, administrative, grievances, and suggestions before the tax administration To obtain the repayments of taxes unduly or excessively paid that proceed in accordance to law with the interest from defaults, prescribed in this code without the need that the later be requested expressly To the acknowledgement of the benefits or tax regimes that are applicable, in accordance with the Law; and, To request acknowledgment in the records of the documentation exhibited or delivered to the server, and of all the verbal manifestations that are undertaken, on the part of the servers and the taxpayers, within the administrative processes

Art. 30.2 Hierarchy and Application of the Laws

• Officials of the Tax Authority shall apply the laws that regulate aspects relative to the tax relation with the respective passive subjects, considering the exclusive hierarchical criterion prescribed in the Constitution of the Republic
• All the current Laws must be applied by the Tax Authority, so much if all the elements of a precise tribute are regulated in this it, such as also in the cases in that the content of said laws refers only to one or several specific aspects of the tributary juridical relation

Art. 30.3 Criteria for rating of juridical and economic essence

• When the Tax Authority performs procedures for determining tax obligations, or resolves claims or resources submitted by the passive subjects, and qualifies the essence and juridical nature of an act of the taxpayer, or the economic relations actually existing between taxpayers, regardless of the legal forms adopted, it shall consider the following fundamental criteria:

Art. 30.4 Demonstration of actions and facts of economic content

• It will be understood that all administrative act of determination of tax obligation or that resolves claims formulated by the passive subjects finds itself insufficiently reasoned, if it is based exclusively on the non-conformity of the acting official with the content of the documentation provided by the passive subject for the justification of the existence of acts and facts of economic content
• The Tax Authority must factually and juridically motivate the motive why the juridical act is inexistent, or is lacking of economic substance

Art. 30.5 Effects of the Revocatory in the Absolution of Tax Consultations

• The Tax Authority that considers motivated that the absolution of a consultation previously emitted is contrary to the juridical regime applicable to the time in that that was emitted, it may revoke it, but in this last case, the effects of the new pronouncement will be applied by the Tax Authority exclusively to the acts and facts performed with posteriority to the revocatory

Art. 30.6 Treatment to natural persons or juridical no Residents in Ecuador

• The Internal Revenue Service will watch for that the procedures installed for the application of International Agreements subscribed by the Republic of the Ecuador are reliably applied and is granted an expeditious treatment to the requests formulated by natural persons or juridical no residents in Ecuador, that are sheltered in said instruments

Art. 30.7 Of the Liability of the Legal Representative

• This last one should respond before third parties for the obligations