As of June 1, some veterinary centers have informed their clients that they will start charging value added tax (VAT) for pet medical care. At the Royal Vet veterinary clinic, in the Los Chillos sector, in Quito, they have already started charging this month. Those responsible stated that their accountant explained to them that there had been changes and that they should start charging VAT at 12 percent. In the same way, DiagnoVet, a laboratory and veterinary clinic in Guayaquil, has informed its clients that all studies carried out on pets will be subject to VAT as of June 1.

The decision by these medical centers comes amid a deterrence campaign (visit of notaries public) launched by the Internal Revenue Service (SRI) at several of these veterinary centers, according to the owners of these establishments. But there is a whole controversy about whether or not a 12% VAT should be charged for pet health care.

Thus, the “advised” measure of DRI on the collection of VAT for medical care is met with complete rejection by veterinarians, who consider the intention of the Tax Administration to collect VAT on animal health care to be a violation of the Constitution.

Guido Granda, a veterinarian with many years of experience, explains: “Veterinarians are health professionals, closely related to people’s health” and explains that 12% has not been taxed for years, precisely in view of this situation. For Granda, there is a loophole in the constitutional part where veterinarians are not mentioned.

Namely, Granda says from his experience that without VAT taxation, it was already difficult for the owners to take care of bringing pets for care, and now that it would be taxed, it would be much more complicated, because it is more expensive. “It will be counterproductive, instead of raising more vets, we will have fewer patients, less work and less income.” He believes that the Government has announced that in the new tax reform there will be a new area of ​​deduction for the costs of pets, and this will be an advance payment for the new levy. However, it invites reflection that the veterinary issue should be considered within the health services.

Roberto Rueda, President Association of Small Species Veterinarians of Ecuador (global organization), He explains that this is a problem that has now become visible, but that it has been dragging on since 2014. He regrets that the criteria of the tax administration change every time.

Let us remind you that in 2014, in the government of Rafael Correa, the SRI ordered in an official letter that veterinarians charge medical fees including VAT. However, the entire work of dialogue and presentation was done with legal experts who explained to the authorities of the SRI the illegality of raising the said accusation. This is because the Constitution explains that health services are exempt from VAT. However, he admits that it is not clear whether it is about the health of people or veterinarians. His union believes that as doctors, veterinarians provide health services.

It also indicates that later, in the government of Lenín Moreno, an attempt was made to tax the veterinary health service and that this attempt is now happening again. He explains that in this regard, they again asked to approach the SRI and therefore already have an appointment on June 6. The idea is for union representatives, lawyers and even members of the academy to present their arguments. He regrets that these days the DZI goes to various veterinary centers, in a kind of intimidation, and advises doctors to charge VAT.

In any case, the Union told its employees that until there is an official decision:

Rueda, for his part, explains that one is health services that should not be subject to VAT, and the other is services such as hairdressers, bathrooms, food, toys, clothes, which are subject to VAT.

Meanwhile, SRI believes that according to the tax regulations that have been in force since 2007, veterinary services are taxed at the rate of 12% VAT, in contrast to health services, which are taxed at a VAT rate of 0%, and which, according to the Organic Health Act and its Regulations, refer to those intended for “individuals of the human species”.

On the afternoon of June 1, the subject pointed out that within the framework of his powers and as part of the tax control plan, he conducts social gatherings and reminds taxpayers of the obligation to issue and deliver sales certificates at the rate of 12% VAT for the veterinary services provided.

Article 56 of the Law on the Internal Tax Regime lists the services and conditions that are taxed at the 0% VAT rate. Health services are included in these specific services, but veterinary services are not detailed.

Article 191 of the Ordinance for the Application of the Internal Tax Regime Act establishes that exempted health services are “those intended for prevention, recovery and rehabilitation on an outpatient, home or hospital basis, and are provided by institutions or centers authorized to provide such services, as well as those provided by healthcare professionals with a third university degree (…).This also includes services provided by healthcare companies and prepaid medicine companies to which the law in question applies; as well as pharmaceutical and medicinal product manufacturing services for human and veterinary use provided by companies that are legally authorized to provide them”.

It is on this last article that Pablo Guevara, a partner in the Andersen company, a tax consultant, explains that veterinary services have always been exempt from VAT and that the attempt to collect them now would not be legal, and if this had happened, it means that the SRI was not filled before and the SRI should then be recorded for it.

For Guevara, Article 191, which states that health services are exempt from VAT, does not discriminate against human and animal health care services. However, one of the points refers to services for the production of medicines and medicines for human and veterinary use. By mentioning them, this article actually opens the door to consider human and veterinary health issues, he says.