Nonresident taxpayers should review the refund requirements to determine whether they qualify.

The Ecuadorian Tax Authority established the maximum amount and procedures for the automatic application of benefits under a Double Taxation Treaty (DTT). The Tax Authority also established a procedure for nonresidents to follow to claim a tax refund.

Maximum amount for the automatic application of benefits

For a taxpayer to receive automatically the benefits under a DTT, the maximum amount of income a taxpayer may have is USD$ 223,400 for fiscal year 2016.

The referred maximum amount is calculated by considering all payments collected by a withholding agent or a supplier in a single fiscal year, but only if they are considered deductible by the payor.

If these payments exceed the maximum amount, the withholding agent must apply the withholding rate under current tax law, without considering the benefits of the DTT, from the date the amount is exceeded until the end of the fiscal year.

Basic requirements for the automatic application of benefits

DTT benefits will automatically apply at the time of withholding if the withholding agent proves the tax residence of the income beneficiary with the tax certificate issued by the competent authority of the other country. If the withholding agent does not fulfill this obligation, the withholding agent will be required to pay a fine according to Ecuadorian Tax Regulations.

Nonresident tax refund

The Tax Authority established the procedure that allows the indirect application of a DTT by permitting nonresidents to file a tax refund request. The nonresident subject to withholding may file separate refund requests before the Tax Authority for each month per withholding agent or may file a refund request for several months. The nonresident also may file a refund request in the same month for different withholding agents.

The nonresident must attach the following documents to the request:

a. Withholding receipts
b. Agreement and invoice showing the link between the nonresident and the Ecuadorian individual/entity recipient of the service provided
c. Sales and purchase receipts related to the tax refund request
d. Payment support document for every transaction, including all of the bank accountholder's information, all of the financial institution's information and bank account numbers, and the amount and date of the transactions

To show that the nonresident does not reside in Ecuador, the nonresident will have to file the following documentation:

— Original passport and copy of the nonresident or legal representative's appointment, if the nonresident is a company
— The tax residence certificate
— The power of attorney in case a third person files the refund request

The nonresident may file the tax refund request on the first business day of the month following the month in which the income tax return was filed.

The Tax Authority will review the refund request within 60 business days.

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