By Executive Decree 876, on Friday, September 15, President Guillermo Lasso issued Regulations for the application of the Family Business Act which gives way to a tax reduction.

The rule establishes reforms to the regulations of the Law on the Internal Tax Regime. The Tax Administration (SRI) clarified that deduction of personal expenses for income tax calculation for natural persons, the register of taxpayers of the tax regime for micro-enterprises and popular trades (Rimpe) and the date of submission and payment of the tax return of the payer of special taxes.

As far as personal expenses are concerned, it is taken into account that natural persons will achieve a reduction in the realized income tax. That’s what the value is for basic family basket effective from January of the fiscal year for which the tax is settled.

Personal expenses that will be taken into account for the calculation The reduction will correspond to the spending realized in the country on: housing, health, food, clothing, tourism and education (including spending on arts and culture).

As housing cost Those paid for rent, condominium fees and/or common maintenance costs will be taken into account in cases where the property is not subject to horizontal ownership.

It also provides for the payment of interest on mortgage loans approved by the institutions, which are intended for expansion, remodeling, restoration, acquisition or construction.

And payment of property taxes, as well as special contributions or contributions for improvement and basic services.

As health expenses Health costs incurred for physical and mental well-being, as well as those intended for prevention, recovery and rehabilitation, among others, will be taken into account.

Within food costs Payments related to the purchase of food and the purchase of food at ready-made food outlets will be taken into account.

IN education costs, including arts and culture, they include: admission and enrollment at all levels of the education system (primary, basic general education, secondary and higher education, as well as school fees, refresher courses, vocational training seminars, among others). Expenditures for the purchase of school supplies and textbooks, special education services, uniforms and more are also planned.

Category of equip covers all types of clothing. And tourism costs include consumption in registered national facilities with one annual work permit.

To reduce income tax for personal expenses in the province of Galapagos, the basic family basket will be taken into account, which must be multiplied by the consumer price index (inflation).

While in the rest of the country, sales invoices in which the cost is substantiated, which can be in the name of the taxpayer or his/her registered family members, are taken into account to reduce the income tax.

It is reiterated that in no case may they consider the same person as a family dependent for the same fiscal period.

On the other hand, the regulations provide that companies that reinvest their profits in sports, cultural, responsible scientific research or technological development projects or programs, will have a 8 and 10% discount on the profit tax rate on the amount of reinvestment.

Taxpayers resident in Ecuador who are sports forecast operators are added as income tax withholding agents.

Regarding the registration of taxpayers who are a part Rimpe’s regime, the ordinance stipulates that the SEC will register taxpayers at the time of registration or by updating the Unified Register of Taxpayers (RUC). The said update can be ex officio or at the taxpayer’s request.

Within this section, the regulatory reform establishes that SRI may include, recategorize, or exclude taxpayers from Rimpe at any time during the fiscal year.

Likewise, it is established that for the determination of the tax base on which income tax rate of the Rimpe regime gross taxable, operating and non-operating income will be considered. Refunds or commercial discounts will be forfeited.

Enables simplification regime under the conditions stipulated by LEFAM. Among the highlights are:

These are some of the innovations brought by the reform of the regulations of the Law on the Internal Tax Regime, which in this case adds rules for the application of the Organic Law for strengthening the family economy.