This is the form and the personal expenses that apply for the income tax reduction

Workers in a dependency relationship have these two weeks to present the projection of personal expenses that will allow them to obtain a reduction in the payment of income tax for 2023.

Although this projection must be presented until January 31, some companies receive them internally as a maximum days before and in the public sector they are already requiring their staff this week.

Who could pay less income tax in 2023?

The maximum value of these expenses is equivalent to seven basic family baskets and the December one is taken into account, which was $763.44. Thus, it is calculated that the projection of expenses will have a ceiling of $5,344.08.

The Internal Revenue Service (SRI) enabled the form for the projection of personal expenses. Here you can download it.

In this form, the amount of projected income must be placed: the salary multiplied by the twelve months of the year, overtime, commissions and the income that is exempt as the tenth and fourth salary must also be added. “Do not discount the value of the contribution to the IESS”, notes the SRI. And it is that these values ​​are included in the projection to calculate the reduction, but they are not taken into account to calculate the tax payment.

The personal expenses that are considered for the calculation of the reduction correspond to those carried out for the concept of: housing, health, food, clothing, tourism and education, including in this last item the concepts of art and culture. Article 34 of the Regulations to the Tax Regime Law details them:

Housing expenses: are considered among others:

1. Lease, payment of condominium fees and common maintenance expenses in cases where the assets are not subject to horizontal property.
2. Mortgage loan interest for expansion, remodeling, restoration, acquisition or construction. In this case, the certificates issued by the institution that granted the respective credit or debit reflected in the account statements or savings books will be sufficient evidence.
3. Property tax and basic services. These expenses will be considered only with respect to a property used for housing.

Health expenses: those carried out for physical and mental well-being, and those intended for prevention, recovery and rehabilitation, among others those paid for:

1. Fees of doctors and health professionals with a professional degree.
2. Health services provided by clinics, hospitals, clinical laboratories and pharmacies.
3. Medications, medical supplies, lenses and prostheses.
4. Prepaid medicine and health insurance premium in individual and corporate contracts. When they are from a corporate policy and discounted from the taxpayer’s payment list, this document will be valid to support the corresponding expense.
5. The unreimbursed deductible from the private insurance settlement.
6. Those carried out to cover health expenses due to catastrophic, rare or orphan diseases, duly qualified and identified.

Food expenses:

1. Purchases of food for human consumption.
2. Purchase of food in prepared food outlets.

Education, arts and culture expenses:

1. Tuition and pension at all levels of the educational system, initial, basic general education, high school and higher, as well as tuition, refresher courses, professional training seminars held in Ecuadorian territory. In higher education, those carried out by any of his dependents, even of legal age, who do not receive income and who are economically dependent on the taxpayer, will also be deductible for the taxpayer.
2. School supplies and texts, didactic materials used in education and books.
3. Special education services for disabled people, provided by centers and professionals recognized by the competent bodies.
4. Services provided by child care and development centers.
5. uniforms.
6. Art and culture expenses are considered exclusively those related to payments for training, instruction -formal and non-formal- and consumption of goods or services transferred or provided by natural persons or companies, related to living and performing arts; plastic, visual and applied arts; literary and narrative arts; cinematographic and audiovisual arts; musical and sound arts: and the promotion and dissemination of social memory and heritage. Acquisition of crafts made by hand by qualified artisans.

Clothing Expenses: made by any type of garment.

Tourism expenses: National tourism expenses will be considered those made in registered establishments with a single annual operating license.

What you should know about the income tax for natural persons in Ecuador

Where are alimony included?

The alimony established in the mediation act or judicial resolution may be considered as personal expenses in any of the aforementioned items.

For the reduction of income tax caused by personal expenses, sales receipts are required to support the expense and these may be in the name of the taxpayer or members of their family unit: parents, spouse or common-law partner, and children who do not receive taxable income and depend on it. The spouses or cohabitants of the family unit may use said voucher individually or in combination without in any case exceeding its total value.

In the case of personal expenses corresponding to the parents, the vouchers may be issued in the name of the father or mother, or of the child who assumes said discount. However, in the case of expenses borne by several children, the voucher may be issued in the name of each one of them, in the corresponding amounts, or in the name of the father or mother, in which case the children may make use of this document. in a combined way.

If the taxpayer’s gross income (all remunerations, including tenths, reserve funds) does not exceed the equivalent of 2.13 basic fractions: that is, $24,967.86, 20% of personal expenses may be deducted from the tax; and, if it exceeds that value, you can only apply 10% of said expenses.

For one case and the other, the formula is applied: R= L x 20% or R= L x 10%, where R is the reduction for personal expenses, L is the value that is less between the projected personal expenses of the annual fiscal period. and the value of the basic family basket multiplied by seven.

That is to say that for the reduction the lesser of the two values ​​is applied: seven times the basic basket or the amount supported in invoices. Thus, if the limit is the value equivalent to seven basic baskets determined by the INEC, for this 2023 if the income does not exceed $24,967.86 it can be discounted up to $1,068.82 (20% discount) and if the income exceeds $ 24,967.86 can only be discounted $ 534.41 (reduction of 10%). (YO)