Taxpayers should review the new rules to determine whether they are operating under a special tax regime that would be treated as a tax haven by Ecuador.

The Ecuadorian tax authority established new rules and conditions under which a country, jurisdiction or location may be considered a special tax regime to which the tax haven rules apply.

Special tax regimes for tax haven purposes

A regime within a country or jurisdiction will be treated as a tax haven if at least two of the following conditions are met:

— It is expressly or tacitly established that the economic activity performed under the regime is not substantially developed in the jurisdiction to which the regime applies; this regulation does not apply to investment incentives because the legislation enacting them establishes their economic substance.

— The effective income tax rate (or similar taxes) is lower than 13.2% or the income tax rate is unknown for the Ecuadorian taxpayer.

— The country or jurisdiction does not require information to be maintained on beneficial owners, accounting books and records, bank information or similar financial information or does not require the information (totally or partially) to be given to the tax administration of the referred jurisdiction or other tax administrations.

— The jurisdiction requires information to be maintained for trusts, including information on the trustees, beneficiaries and the percentage of each share in the trust.

— The country or jurisdiction allows entities to hold the capital rights of property holders that cannot prove that they own the property (i.e., substance-over-form doctrine).

A jurisdiction or country will also be treated as a tax haven if there are:

— Special tax regimes for entities that are domiciled in one country, but are under the control of another entity in a different country (i.e., delimitation regimes); entities that may be subject to a special tax regime include administrative, domiciliary, mixed and principal companies

— Regimes permitting entities to keep capital rights for holders that cannot prove that they own their property and those entities whose beneficial owners are unknown

— Regimes granting an income tax exemption for foreign activities that involve merchandise that is not created in or intended for distribution in the territory in which the regime is established

— Regimes under which private entities are required to register with the tax administration of the country

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