Ecuador to begin taxing many digital services September 16

Beginning September 16, Ecuador will begin applying the 12% value added tax to foreign-origin digital services. The Internal Revenue Service (SRI) is in the process of notifying 213 providers that offer 169 digital services of the new charge.

More than 100 digital services will be taxed beginning in September.

Among the services to be taxed are Netflix, Uber Eats, Amazon Video, Apple Music, Google Extra, Spotify, Zoom as well as dating services and streaming international television providers.

The tax was approved earlier this year by the National Assembly as part of the Tax Simplification Law. According to the law’s sponsors, Ecuador was playing “catch-up” with the rest of the world in taxing internet services. “Because commercial streaming services are a fairly recent development, they have gone untaxed for years,” says Quito communications consultant Carlos Maldonado. “The earlier argument against taxation, that the services originated overseas and that the internet deserved special treatment, have collapsed as internet-based companies have earned huge profits. Europe has been the leader in developing a taxing regime despite resistance from the providers.”

According to the SRI, most of the taxes will charged by credit card.

In Ecuador, some advocacy groups are pushing for exemptions of services that provide educational materials. “This is a legitimate request because the coronavirus has forced most education to be carried out online,” Maldonado says. “We are in discussions with the SRI about these cases and they tell us they agree that educational services, even those offered commercially, should not be taxed, and we expect a resolution within a matter of weeks.”