SRI received 110 mediation requests for tax disputes since the Economic Development Law came into effect

The option of reaching tax agreements, through mediation processes, has been well received by different economic actors. This door was opened with the validity of the Economic Development and Fiscal Sustainability Law which introduces, on the one hand, the possibility that the tax issue is also a transmissible matter (that agreements can be reached), with the participation of a qualified mediation center; and on the other hand, implements a temporary remission process, through mediation, for tax debts. That remission process (elimination of interest, fines and surcharges), which is in full force, lasts three months which are due at the end of February.

The law entered into force on November 29, 2021, and since then, according to the Internal Revenue Service (SRI), it has received around 110 settlement hearing notices, notified by different mediation centers in the country. Furthermore, until On January 18, 2022, 14 invitations for transaction have been presented that originate in legal proceedings. At the moment these transactional processes are not yet concluded.

Francisco Alarcón, former president of the Guayaquil Chamber of Industries, and current director of the Center for Business Mediation (CME), explains that there has been an interest and a positive response from several companies towards the new concept introduced in the Development Law, which allows tax issues to be negotiated or mediated. In these few months, as a Center they have received at least 26 requests for mediation in tax matters, but 75% of them have sought to benefit from the debt mediation or remission process established in the Seventh Transitory.

Some hearings have already been held, which have taken place in a very constructive atmosphere, although they have not yet been final. There are later dates for holding a second hearing in which definitive results could be obtained.

According to Alarcón, the SRI is taking these processes seriously and is attending the hearings openly. Meanwhile, the companies that have come to request the center’s mediation services belong to various sectors: commerce, manufacturing, services, among others. Although the center is based in Guayaquil, he explains that thanks to telematic and digital facilities, cases of Pichincha, Guayas, Azuay and Manabi.

Emilia Grijalva, director of the Arbitration and Mediation Center of the Chamber of Commerce of Quito, It also states that since the law and its regulations were enacted, there was an interest on the part of the lawyers in knowing about the subject. In December and January several requests arrived. And although the term for the 100% remission ended on January 29, they have continued to arrive, now to seek to benefit from 75%, in the third month of validity. Grijalva explains that To date, they have received some 40 cases, of which 98% correspond to the SRI and 2% to tax authorities of decentralized autonomous governments. None of them is intraprocedural. No cases related to Senae have yet been received, he adds. In addition, he comments that the SRI has responded very well to requests and is taking time to review case by case. Thus, the topics that were presented in December had their first hearings at the end of January. Those who filed in January expect a hearing between February and May.

According to the law, the processes can be intra-procedural (a challenge has already been initiated in court) and extra-procedural (which has not yet reached judicial instances).

When asked the SRI on the amount they calculate could be recovered of the debts that would be dealt with through this process, states that it is not possible to determine an estimated amount as it depends, first, that the taxpayer present the petition and, second, to reach an agreement.

However, within the explanations given by the Government to promote mediation through the tax law, there are approximately $4,925 million (principal, interest and surcharge) in various challenge procedures or payment facilities, which are pending collection. Of these, $2,905 million correspond to the capital of the obligation.

For his part, Grijalva considers that there is still a lack of knowledge and doubts about how the process works and in which cases it can be applied, which is why training has been carried out from the centers themselves. However, he considers that this should also be done by the SRI. In any case, it indicates that in general the law considers a broad spectrum of transigible matters: acts of determination, calculations, processes that are already coercive, among others. However, he explained that in the case of already being coercive, there is no longer an option for remission, but there is for the granting of payment facilities. At the moment, comment There are two issues that generate concern among the actors. On the one hand, the time that the authority may take in the analysis, and also the time that the Attorney General’s Office will take to give its guarantee when the amount of the transaction is greater than $ 20,000, according to what the norm indicates.

In any case, according to the Government’s explanation in the law itself, the idea is precisely to generate agility in the resolution of this type of problem. As an example, the tax law says, in the Ecuadorian legal order, after a determination of obligations by the tax authorities, the citizen can challenge them in administrative or judicial headquarters. While it is contested, it is not enforceable as long as a guarantee of 10% of the amount of the obligation is presented. Before the COVID-19 pandemic, a tax litigation could last between 2 and 4 years (under the General Organic Code of Processes – 2016) or even up to 10 years (litigations prior to the General Organic Code of Processes, all previous processes to 2016) until reaching a final pronouncement.

Submission deadlines

Regarding remission, the law provided that those who availed themselves in the first two months of the law’s validity will have the right to remission of 100% of the interest and surcharges of the tax difference established by the administration that the taxable person agrees to pay in the mediation act. The opportunity to apply for this process ended at the end of January.

Additionally, in the three months counted from its entry into force, they will have the right to remit 75% of interest and surcharges, of the tax difference established by the administration that the taxpayer agrees to pay in the mediation act. That is, they would have one more month.

Between three months, one day and six months counted from its entry into force, they will be entitled to remission of 50% of interest and surcharges.

In all cases, provided that they include in their mediation request a commitment to immediately pay at least 25% of the capital of the obligation, even if a total or partial agreement is not reached. (I)