globaltaxnews.ey.comSign up for tax alert emailsPrintDownload

17 August 2020

Ecuadorian Constitutional Court declares unconstitutional executive decree requiring estimated income tax payments for fiscal year 2020

The Ecuadorian Constitutional Court has declared unconstitutional Decree 1109, which had established a requirement for certain taxpayers to make estimated tax payments in advance for fiscal year 2020 to assist with COVID-19 relief efforts.

Background

In July 2020, the Ecuadorian President ordered certain taxpayers to pay estimated income taxes for fiscal year 2020, rather than paying the entire tax by the April 2021 deadline. The Government considered the early income tax payments as necessary to address the social and economic effects of COVID-19. See EY Global Tax Alert, Ecuador requires certain taxpayers to pay estimated income taxes for fiscal-year 2020, dated 30 July 2020.

Reasons declared unconstitutional

The Constitutional Court had to analyze whether this measure requiring the advanced payment of income tax was suitable, strictly necessary and proportional to address the circumstances motivating the declaration of the state of emergency in Ecuador.

The Court determined that there was no link or relation between the emergency that the country was facing and the advance collection of estimated income tax that was sufficient to consider the measure the only solution for facing the COVID-19 pandemic and resolving the state of emergency. Furthermore, it was not possible to prove that the income that the Government would receive through this measure would be applied exclusively to cover the expenses related to facing the pandemic or assisting in overcoming this emergency.

Effects and remedies

After the declaration that the estimated income tax obligation is unconstitutional, the obligation is considered nonexistent.

Taxpayers that paid this estimated income before the declaration of the Constitutional Court can choose one of the following remedies:

  • Request a refund of the paid amount
  • Use the paid amount as a tax credit
  • Consider the paid amount as a voluntary income tax payment, which, under the Humanitarian Support Law provisions, will be entitled to interest, with interest running from the date that the voluntary payment was made until the due date of the income tax payment

_____________________________________________________________________________________________________________

For additional information with respect to this Alert, please contact the following:

EY Addvalue Asesores Cia. Ltda., Quito
EY Addvalue Asesores Cia. Ltda., Guayaquil
Ernst & Young LLP (United States), Latin American Business Center, New York
Ernst & Young Abogados, Latin America Business Center, Madrid
Ernst & Young LLP (United Kingdom), Latin American Business Center, London
Ernst & Young Tax Co., Latin American Business Center, Japan & Asia Pacific

ATTACHMENT

Document ID: 2020-6131

 
 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 2024, Ernst & Young LLP.

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.

 

"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

 

Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct Opt out of all email from EY Global Limited.

 


Cookie Settings

This site uses cookies to provide you with a personalized browsing experience and allows us to understand more about you. More information on the cookies we use can be found here. By clicking 'Yes, I accept' you agree and consent to our use of cookies. More information on what these cookies are and how we use them, including how you can manage them, is outlined in our Privacy Notice. Please note that your decision to decline the use of cookies is limited to this site only, and not in relation to other EY sites or ey.com. Please refer to the privacy notice/policy on these sites for more information.


Yes, I accept         Find out more