This will reduce capital outflow taxes, special consumption and VAT

President Guillermo Lasso’s announcement to lower taxes materialized with the issuance of three executive decrees on January 10, 2023. They detail when and how much will be the reduction in taxes on the outflow of foreign currency (ISD), at the value aggregate (VAT) and special consumption (ICE).

This measure represents $140 million that the State will no longer receive, but that the Government indicates that it will put in people’s pockets.

The foreign currency outflow tax (ISD) will drop in three parts during this year:

• As of February 1, 2023, the rate will drop 0.25% and thus the ISD will be 3.75%.
• As of July 1, it will drop another 0.25% to settle at 3.50%.
• On December 31, the greatest reduction will be given, since it will go to 2%.

This is stated in Decree 643. During 2022, a rate reduction was also applied that was 0.25% each quarter, so this tax was reduced from 5% to 4% per year.

Decree 644, on the other hand, details the holidays on which the value added tax (VAT) will be reduced from 12% to 8% on all services defined as tourist activities. In total there will be eleven days during three holidays:

• In carnival: Saturday 18, Sunday 19, Monday 20 and Tuesday 21 February 2023.
• In Holy Week: Friday 7, Saturday 8 and Sunday 9 April 2023.
• In November: Thursday 2, Friday 3, Saturday 4 and Sunday 5 corresponding to the holiday for the Day of the Dead and the Independence of Cuenca.

Meanwhile, in the case of the special consumption tax (ICE), the reduction will be applied from February 1, 2023 and will in some cases strengthen citizen security and fight against smuggling and informality:

• Firearms, sporting weapons and ammunition that will have a fee ad valorem of 30%. The current fee is 300%.
• Tobacco from heated tobacco consumables and nicotine-containing liquids to be delivered via nicotine delivery system at a 50% fee.

In other cases to contain the inflationary impact on the economy:

• Cigarette with $0.16 per unit. It is currently 17 cents.
• Alcohol (use other than alcoholic beverages and pharmaceuticals) and alcoholic beverages at a rate of $10 per liter of pure alcohol.
• Industrial beer with a rate of $13.08 per liter of pure alcohol. The discount will be 48 cents.
• Craft beer with a rate of $1.50 per liter of pure alcohol. This is five cents less than the current one.
• Non-alcoholic and soft drinks with a sugar content greater than 25 grams per liter of drink with a rate of $0.18 per 100 grams of added sugar. The discount will be one cent.
• Plastic bags with a fee of $0.08 per unit. The current one is ten cents.

These reductions provided in Decree 645 also include airplanes, small planes, and helicopters, except those intended for the commercial transportation of passengers, cargo, and services; jet skis, tricars, quadroons, yachts and recreational boats, with a 10% rate. (YO)