The last tax reform implemented by Guillermo Lasso before leaving the presidency changed the system of benefits and allowances for the payment of income tax for dependent workers, and therefore the form for the projection of income and personal expenses no longer needs to be submitted in January, but in February.

The reform of the new president, Daniel Noboa, did not change that, so the procedure for presenting this projection was maintained and, depending on family obligations, obtaining a larger reduction.

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Taxpayers who work in a dependent relationship are obliged to submit to their employer during the month of February, electronically or physically, in two identical copies, the form SRI-GP with detailed data related to their expected income in the dependent relationship for the entire period. and the number of family obligations and the projection of personal expenses that they estimate will arise in the current financial year.

This is in accordance with Resolution no. NAC-DGERCGC23-00000020 issued by the Tax Administration (SRI) on June 30, 2023, after the changes contained in the Decree of the Law on Strengthening the Lasso Family Economy came into force.

Monthly retention

In Article 5 of the said decision, it is clarified that the employer is obliged to calculate the income tax withholding monthly, taking into account the data in the personal expenses form, and based on the payments to employees for the month of February each year. “As for the wages corresponding to the month of January, the employer will refrain from the said suspension.”

To make the withholding, all the benefits corresponding to the worker, except the thirteenth and fourteenth benefits, provided for the entire financial year must be added and personal contributions to the Ecuadorian Social Security Institute (IESS) must be deducted.

The rate contained in the Income Tax Table for natural persons and undivided assets prescribed by the Law on the Internal Tax Regime will be applied to the obtained tax base, which will result in the estimated tax that will arise in the business year. The personal expense projection reduction will be subtracted from the resulting result and divided by the appropriate number of months within the same fiscal year to determine the monthly rate withheld for income tax.

That is, it will be distributed over eleven months: from February to December, since no withholding tax will be applied in January. What could be reflected in the role in January is the repeal of the 2023 tax again.

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Current regulations provide that the reduction will be in accordance with reported family obligations:

For the purposes of this calculation, the Law on Strengthening the Family Economy states that the value of the basic family basket is taken into account according to the situation in January of the fiscal year for which the tax is calculated, according to data published by the National Institute of Statistics and Censuses (INEC). Data on the consumer price index and basket for January will be published by this entity on February 6 according to its predetermined calendar.

The latest available official data is from November 2023, when the basic family basket was $784.65.

For fiscal year 2023, the rebates ranged from $963.53 to $2,752.96.

Personal expenses correspond to those incurred in the country for clothing, education, food and health, including those corresponding to pets for which taxpayers are responsible – one of the changes introduced by the Lasso reform – as well as expenses incurred through rent or interest payments for acquisition of housing, payment of alimony, national tourism in registered facilities with a unique annual work permit, and art and culture. In all these costs, VAT and ICE must be excluded from transactions.