Although the National Assembly removed from the Organic Law on Economic Efficiency and Employment the articles related to income tax (PPD) from the occasional sale of real estate, for the real estate sector “the structural problem has not been corrected.”

The Association of Ecuadorian Entrepreneurs (Apiva) points out that “it is a lost opportunity to correct this problem, this guillotine hanging over people’s property”.

The change in the tax reform does not abolish the tax on income from occasional real estate transactions

In the initial executive reform, reforms were proposed to various legal bodies, such as the Organic Law for Economic Development and Fiscal Sustainability. There, Article 24 requested that the fifteenth transitional provision be struck out, but that strikeout was withdrawn during debate in the legislature.

In this provision, which will remain in force even now, it is indicated that the KPZ, which taxes the occasional transfer of real estate by natural persons or companies, will not arise with the first transfer of real estate ownership that is carried out. with a validity period of up to five years after publication in the Official Register in November 2021.

According to Apive spokesman Jaime Rumbe, the National Assembly withdrew some texts that were in the law on the subject, but “did not correct the brewing problem” and the text remained as it was, for which from 2027 onwards, physical persons who carry out occasional real estate sales will pay CC.

What to do in that situation?

Rumbea notes that the next opportunity for correction should not be missed, as this is an issue that is clearly moving citizens. “It was a very serious topic of conversation and what they (members of the assembly) said was that we eliminated it, but the reality is that the IR was not eliminated, it was left on hold.”

And he explains that there are two ways to correct this. The first is to eliminate the law with which the former president Guillermo Lasso created what Rumbe qualifies as “discrimination”, because in his opinion it cannot be that 1% of people who invest in papers, policies, etc. are not taxed, and that is not bad if wants to encourage savings, but believes that it is not correct to charge more than 63 percent of citizens who have their savings in real estate. “It is discrimination and it must be corrected.”

The real estate sector warns that, if the government’s urgent bill is adopted, it will affect those who occasionally sell real estate

Another alternative that Apive proposes and considers “even better, clearer and more transparent” is the modification of paragraph 14 of Article 9 of the Law on Internal Tax Regime “about what Lasso did so that it remains the same as it was before”, he states. .

Article 9 refers to exemptions from the payment of income tax on various incomes, and in section 14 it refers to “those obtained from the occasional sale of real estate by natural persons, provided that it is real estate intended for housing, including their ancillary property as what is parking, warehouses and the like, and land…”