People who work in a dependency relationship who in 2022 filled out the personal expenses projection form to reduce their income tax payment must now submit the annex to those expenses. In February, the deadline for this procedure, which corresponds to last year’s tax, begins to run.
This is independent of the projection of expenses that is presented this month of January. In this case, it is the projection of what is planned to be spent during 2023 so that the company calculates the monthly discount of the role for tax purposes. But at the end of the year, the workers must justify with invoices that those projected expenses were actually carried out and this is done through the presentation of the annex that is no longer presented to the employer, but to the Internal Revenue Service (SRI).
Reduction in income tax: who must submit a projection form for personal expenses and how to do it
The difference is that before, the norm established that it was an obligation to present the personal expenses annexes only when the worker had personal expenses of more than 50% of the basic fraction deducted, and for this reason some people presented their projection for $2,000 or $3,000 of expenses no longer worried about the annex. But that changed with the tax reform approved at the end of 2021 and which began to be applied in 2022. Now if you use the reduction you must present the annex, explains the zonal director 8 of the SRI, Carlos Marín.
After this reform, article 34 of the regulations to the Internal Tax Regime Law indicates that “in order to carry out the reduction, the taxpayer must submit the annex of personal expenses, in the manner established by the Internal Revenue Service” .
Limit of personal expenses will be $5,344.08 to apply to a reduction in income tax
Resolution NAC-DGERCGC22-00000018, which amended previous resolutions and which is in force after its publication in the Third Supplement of the Official Gazette No. 60 of May 11, 2022, also gives details of this change whereby all workers who apply to the rebate must present the annex:
- The information related to personal expenses must be submitted by natural persons who make use of the reduction for their personal expenses of their income tax caused, including those who are in a relationship of dependency.
- The information in the personal expenses annex will be delivered in accordance with the format provided by the Internal Revenue Service, which is available on its website www.sri.gob.ec.
- The information registered in the personal expenses annex will be considered binding for the presentation of the income tax return.
This annex is presented in February 2023, but it corresponds to the expenses of the year 2022. This will be the first income tax return to be made based on the new law. On the website, the SRI will be defeated if this annex is not presented in February, recalls Marín.
We are updating our system so that you can make your declaration of #Income tax 2022 with new benefits for you.
✅ Follow our social media to find out when you can use it. pic.twitter.com/Ht0UheVUkD
— SRI Ecuador (@SRIoficialEc) January 23, 2023
At the moment, the SRI updates its system to enable a new form for the income tax declaration with new benefits.
Two common cases in which the SRI reports a non-declaration
People who work in a dependency relationship have an exception in the income tax declaration if they have income with only one employer and do not re-liquidate their personal expenses, in this case the form 107 that the employer gives is considered a declaration.
But in practice, if the SRI detects that that person has a financial return, interest earned on their savings or policies, they no longer meet the conditions for the exception, since they are income from other sources, whether it be $2 or $3 of return, and it’s time to file the statement.
Having to declare interest earned from savings surprises taxpayers who have been notified by the SRI
Another case that usually surprises the taxpayer because they are notified of a lack of declaration is related to per diems. If the company you work for has reimbursed you for expenses, for example. The worker goes on a trip and when he returns he represents the invoices for his expenses of $800, the company issues him a purchase statement and they upload it to the system, then it appears that that person received $800 for a purchase statement. It is not a taxable income, he will not pay taxes for that, but since he had other income, he has to declare it. Travel expenses (lodging and food) are exempt income.
“You have to be transparent, you have to declare it, it doesn’t mean you’re going to pay more, you’re just declaring it,” says the SRI area director. (YO)
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