Are you over 65? Consider taking your VAT refund and dontating to a Cuenca charity

By Garry Vatcher

The Value added tax (VAT) or IVA refund for seniors is one benefit that stirs up much debate and emotion within the expat community. Some consider it a benefit they are entitled to while others feel the money should be left in government coffers to help the disadvantaged of the community. Given the current financial situation of the country, it makes sense to leave it for the government. Or does it?

I think many of us thought this benefit would stop. In January, the government released the September 2023. refunds and over this past week, released the October 2023 refunds. The government has announced that they will bring the program up to date by the end of April and will continue the refunds.

How does the program work?
Anyone over the age of 65 and with an Ecuadorian cedula is entitled to receive a refund of IVA paid on basic living expenses. There is a registration process at SRI to receive the refunds. You then do an application monthly on-line to receive the refund for that month. There are many items that are exempt, so if you are doing your own application you need to be very careful. Make a mistake and they could come back to you looking for the money. The maximum you can receive monthly is $108.00, however in our experience most refunds are $20-$40.

Should you claim this refund? The argument against it.
Ecuador is in a financial crisis and needs cash. This program cost millions each month. In order to bring crime under control, the government has to invest in security. The only way they can do that is by cutting programs and increasing taxes. By not taking the refund, you are doing a small part in supporting the government.

Should you claim this refund? The argument for it.
Governments are governments and no matter how much money they have, they are going to spend it. Millions are wasted each year with corruption, inflated expenses and other inefficiencies. As this is a legal benefit, some feel better receiving it and choosing to spend it again to support the local economy. Some receive it and donate it to help others.

Is there a better way?
For the past six years, Foundation Hogar de Esperanza has given expats the option of donating their monthly IVA refunds to the foundation. After the initial set-up, we do all the work and you never have to worry about it again. You will receive an acknowledgement of how much refund you received that went to support our work. An added benefit is that we open a separate bank account for IVA transactions, so we have no access to your regular accounts.  All the money we receive in this program goes to help those in need with medications, transportation and other assistance.

In a way, it is a very effective and valuable use of your IVA refund. Government cutbacks have resulted in fewer medications and supports for the poor. The service we actually provide cuts government expenditures as the supports we provide results in healthier patients and better outcomes. Over and over the doctors in the hospitals tell us that with our programs, patients spend less time in the hospital and have fewer emergencies. We also make sure patients can get to their appointments resulting in less wasted time with missed appointments.

What if you really want to receive the refund yourself?
There are many processing services and facilitators that usually charge a set-up fee and a monthly charge of 10% or more of your refund. Although you can do it yourself, it is probably best to let someone else handle it for you. There is a concern of giving all your personal information to an individual facilitator. They do have access to your banking, spending history and other information. For continuity, we recommend only using established businesses where your information is secure. In the event, a facilitator quits, someone else will take their place.
Our Expat Services Center can also provide this service to you. The added benefit is that profits go back into the foundation. The Expat Services Center has all the security protocols in place to protect your personal information. Our staff are committed to the work of the foundation and therefore have the same honesty and integrity required of all foundation employees.

The choice is yours.
The important thing is that you have a choice in what you want your VAT refund to do. Expats have made a valuable contribution in Ecuador by supporting organizations that reduces the services government has to provide. Each year expats supports the economy and jobs by spending millions in the local economy. Your little IVA refund will not do a lot, but collectively, it can make a huge difference.

If you wish to participate in the IVA program Foundation Hogar de Esperanza offers, you can contact Fernando at our Expat Services Center at services@hogaresperanza.org. We are located at Juan Montalvo 8-28 and Mariscal Sucre, Tel: 099-094-7611.

If you would like to learn more about Hogar de Esperanza or to support our work, you can visit our webpage at: https://hogaresperanza.org/en/donations/