Taxpayers should review the requirements of the shareholders' annex to ensure that they have complied. Failure to file the annex could result in an increased tax rate.

Ecuador's Internal Revenue Service has issued Resolution No. NAC-DGERCGC15-00003236, establishing the requirements for completing the shareholders' annex.

Generally, all branches, permanent establishments and societies must submit the shareholders' annex. Companies must report the information for the following levels:

Frist Level: Direct shareholders or owners of the representative rights in the corporate capital

Second and Third Levels: All the intermediary entities through the individual beneficiary

Last level: Government institutions, missions and international organizations recognized by the Ecuadorian government, foreign government institutions

The annex must include the following information:

a) Corporate name or individual name

b) Tax ID number or ID number for individuals

c) Whether the taxpayer is an individual or an entity and if it is an LLC, corporation, etc.

d) For individuals, the origin country

e) The country and the jurisdiction of the tax residence

f) Shareholder's percent of participation in the corporate capital

g) Whether the shareholders, directors or administrators are related parties of the company

The IRS and the Superintendence of Companies may require additional information.

If the shares of the company are offered on the stock exchange market, the companies must report at least 80% of the information about their shareholders. In addition, the companies must report information for every shareholder with more than 2% of the corporate capital.

If the beneficiaries are domiciled in tax havens or lower tax jurisdictions, the company has to report the information of each of the levels through to the individuals.

The shareholders' annex must be submitted through the IRS web page.

If the IRS cannot identify the shareholders, their residence or the percentage of participation in the corporate capital from the submitted information, the information will be considered incomplete. The IRS may then impose sanctions as follows:

a) If a company does not submit the annex before its tax return, the company must apply a 25% rate to determine its income tax (the general CIT is 22%).

b) If a company does not submit the information for all of its shareholders, but reports information for more than 50% of its shareholders, a 25% income tax rate will apply to a percentage of its income equaling the percentage of missing information (e.g., if 40% of the information is missing, the 25% rate applies to 40% of the income). If the company does not report 50% or more of the shareholders, the 25% income tax rate will apply.

The information contained in the report is through December 31st for each year, and the report has to be submitted during February depending on the 9th digit of the company's Tax ID.

If there is any change in the corporate capital composition (direct or indirect), the company will have to report the information by the last day of the next month in accordance with the following chart:

Entities whose shares are sold through the stock exchange market abroad will have to report the required information every six months in accordance with the following chart:

This year, the annex for 2015 is due in April 2016.

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