Radar on Colombia

Grimaldi Alliance

Knowledge Management

Jun 05 2024

TAX

The Organic Law to Address the Internal Armed Conflict, Social and Economic Crisis, published on March 12, 2024, in the Official Gazette, introduces significant reforms in tax matters:

Value Added Tax (VAT):

  • The VAT rate is increased from 12% to 15%.
  • The VAT rate on local transfers of construction materials is set at 5%. The VAT increase takes effect on April 1.

Temporary Security Contribution:

  • A contribution of 3.25% on profits subject to income tax for the fiscal year 2022 is established for companies that generated profits during that period. This contribution must be paid in the fiscal years 2024 and 2025, with deadlines established by the IRS, and penalties for non-compliance.

Temporary Contribution to the Banking Sector:

  • A contribution is established on profits generated in the fiscal year 2023 by banks and savings and credit cooperatives, with rates ranging from 5% to 25% depending on the taxable profit.

Currency Exit Tax:

  • The ISD rate is raised to 5%, with the possibility of modification by the President following a favorable opinion from the public finance governing body. The regulation for the application of this law must be published by the President within a maximum of 30 days from its entry into force.

TOURISM

The Organic Law for the Strengthening of Tourism Activities and Promotion of Employment introduces significant changes to Ecuadorian tax legislation. Among the most notable reforms are:

  • Payments abroad for the organization, production, and presentation of artistic and cultural events in Ecuador, made by taxpayers registered as tourism service providers, will be subject to a 15% income tax withholding. If the recipient resides in tax havens, the withholding will be applied according to the general rate.
  • Additionally, the VAT can be reduced to 8% for tourism services on specific days.
  • Uncompensated VAT on the acquisition of goods for the production of construction materials can be considered a deductible expense.
  • It is established that payments abroad made by national and foreign airlines operating within, from, and to Ecuador, and having an operating permit, will be exempt from the Currency Exit Tax. The Internal Revenue Service will determine the procedures for its application.
  • Furthermore, the Organic Code of Territorial Organization, Autonomy, and Decentralization  is reformed, allowing Decentralized Autonomous Governments to qualify tourism investment or reinvestment projects to access a total exemption from municipal taxes, fees, and contributions for a period of seven years.
  • Individuals engaged in commercial transport using tricycles will be entitled to a tax credit for the VAT paid on the purchase of these vehicles. The commercialization of mineral substances is subject to a 10% income tax withholding, although it does not apply to Large Taxpayers.

ECONOMICS

Pitahaya Sets Export Record with Over USD 172 Million in 2023

In 2023, Ecuador’s agricultural industry marked a significant milestone with record-breaking fresh pitahaya exports reaching $171.7 million, a 72% increase from 2022, according to the Central Bank of Ecuador. This achievement positions pitahaya as a leading non-traditional export product.

Since opening the U.S. market in 2017, followed by Peru in late 2022 and China in April 2023, pitahaya exports have soared. The U.S. remains the primary market, receiving 80% of Ecuador’s production, valued at $137.1 million. Other key markets include Hong Kong (6.55%), Spain (3.53%), Peru (2.35%), and Canada (1.85%).

With a Free Trade Agreement with China underway, exports to China are expected to surge, as the current 20% tariff will be immediately reduced to 0% upon the agreement’s implementation.

Pitahaya farming supports around 15,000 families in Ecuador, primarily producing two varieties: yellow and red,

Renowned for its unique tropical flavor and aroma, Ecuadorian pitahaya benefits from exceptional soil and farming conditions. It holds the “Pitahaya Amazónica de Palora” designation of origin, Good Agricultural Practices certification, and international Global GAP certification.

EXTERNAL INVESTMENT

Ecuador Secures Over USD 4.8 Billion in Sustainable Mining Investments

At the World Mining and Exploration Convention in Toronto, Canada, Ecuador’s President and his official delegation participated in “Ecuador Day.” Organized by the Ecuadorian Chamber of Mining, the event aimed to highlight the country’s mining potential, attract foreign investment, and promote sustainable mining practices.

During the official agenda, the head of the Ministry of Production, Foreign Trade, Investments, and Fisheries, signed six investment agreements. These agreements formalized the mutual interest between the Ecuadorian state and investors to develop mining projects, laying the groundwork for future negotiations and collaboration focused on sustainable, responsible, and long-term business practices.

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Colombia

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LATAM

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