Guillermo Lasso made official, via decree, the reduction of VAT to 8% for Carnival and Easter holidays

President Guillermo Lasso issued this Monday Executive Decree No. 339 with which the reduction of the Value Added Tax (VAT) from 12% to 8% during the next Carnival holiday is made official, counting on February 26, 27, 28 and March 1, 2022; and for the Easter holiday, which includes Friday the 15th, Saturday the 16th and Sunday the 17th of April this year.

This reduction will apply to all tourist services that have tourist registration, among which are: accommodation, food and beverages, transportation mainly dedicated to tourism, operation, intermediation and agencies, etc.

The Minister of Tourism, Niels Olsen, pointed out that the reduction of VAT “is a measure that will help to reactivate local tourism, which adds to the actions already undertaken by the Government of the Meeting with this objective, such as vaccination that is advancing to giant steps”.

The measure, which seeks to boost the tourism sector so hard hit by the coronavirus pandemic, is part of the tax reforms established in the Law on Economic Development and Fiscal Sustainability, which empowers the president to decide by decree the reduction of VAT from 12% to 8%, on certain dates, which may be holidays or weekends and may not exceed 12 days a year.

The Organic Law on Economic Development and Fiscal Sustainability after the COVID-19 pandemic, approved by the Ministry of Law in 2021 and published at the end of November, includes this reform: “The President of the Republic, by Executive Decree, may reduce the general VAT rate of 12% to 8%, to the provision of all services defined as tourist activities, for up to a maximum of 12 days a year during holidays or weekends, whether unified or divided; either nationally or regionally.

What activities are considered tourist?

Accommodations. Accommodations are establishments dedicated on a regular basis, for a price, to providing people with accommodation with or without other complementary services. They include: hotels, hostels, inns, etc.

Travel agencies and tourist services. Its corporate purpose is the professional development of tourist activities, aimed at providing services directly or as an intermediary, such as ticket sales for the different means of transport.

Food and beverage industry. Includes the provision of food services in restaurants, bars, cafeterias, etc.

Land, air, sea transport. Related to the mobilization of individuals or family groups, either through the use of passenger transport cooperatives, rental of vans, sale of air tickets, etc.

In Ecuador there are some 24,000 registered tourist establishments including hotels, restaurants, travel agencies, etc. 85% belong to accommodation and food services, according to the Ministry of Tourism. (I)