Foreign currency outflow tax (ISD) is paid on money sent abroad in cash or via debit and credit cards or online payment methods. It was created in 2007, and in the presidential debate it was contested by two candidates: Daniel Noboa said that he would eliminate it, and Luisa González said that its elimination has very little impact on the economy and benefits only the richest.
Currently, this tax is 3.50%, and in December it must be lowered to 2%, which was the initial rate when it was created 16 years ago, since there is a judgment of the Constitutional Court that declared the Law on the Promotion of the Environment from 2011 – promoted in the administration Rafael Correa in which the ISD increased from 2% to 5% – and gave a deadline of December 2023 to remain in force until a new tax reform is sent.
The tax on the outflow of foreign currency is already 3.50%, with the change of Government, will it continue to fall to 2% as determined by Guillermo Lasso?
ISD has been decreasing in the last two years. In September 2021, the government abolished this tax for the aviation sector and set a progressive reduction for other activities in 2022. Thus, it was reduced by 0.25% every three months, and in 2023 the reductions continued to apply until reaching 3.50% .
The reduction in the foreign exchange outflow tax is supported by the Manufacturing Development Act of 2018, which authorizes the president to gradually reduce this tax.
This reduction in ISD was a factor that motivated international brands to enter Ecuador. The CEO of Costa Rican company AR Holdings, Antonio Burgos, spearheaded the opening of Old Navy in the country in 2022, and in 2023 he did the same with the first GAP store. “Something that helped a lot was the reduction of taxes on the outflow of foreign currency, because if it didn’t make the operation too expensive, the taxes on imports are already quite high in Ecuador. It is a tax that goes directly to the price of what people buy. (The reduction) helped a lot to want to invest more,” he commented last June.
What is ISD?
More than 85,000 people did not pay foreign exchange tax when buying with credit cards abroad
Who should pay?
Exceptions:
The reformed Law on Tax Fairness and the Rulebook for the Application of ISD establish the following exemptions:
Source: Eluniverso
Alia is a professional author and journalist, working at 247 news agency. She writes on various topics from economy news to general interest pieces, providing readers with relevant and informative content. With years of experience, she brings a unique perspective and in-depth analysis to her work.
