The president may reduce the general rate of VAT from 12% to 8%, to the provision of all services defined as tourist activities.
The drop of 4 percentage points in the value added tax (VAT) will only apply to tourist activities.
President Guillermo Lasso announced that this Carnival in Ecuador, from February 26 to March 1, will issue the first decree to lower VAT to 8% for 4 days to revitalize the tourism sector so hard hit by the coronavirus pandemic.
It is part of the tax reforms established in the Economic Development and Fiscal Sustainability Law, 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, up to a maximum of 12 days a year during holidays or weekends, whether unified or divided; either nationally or regionally.
What are tourist activities
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)
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