Government backtracks on new food VATs, says most dairy and bakery products will remain untaxed

Ecuador’s Internal Revenue Service (SRI) is backing down on plans to charge a 15% value added tax on most dairy and bakery products. SRI said it was “correcting the interpretation” of its Wednesday announcement of new taxes that sparked complaints from dairy and bakery producers, retail outlets and social organizations.

In a correction of a Wednesday announcement, the SRI said most breads will continue to be sold tax-free.

In an updated circular, SRI said that only dairy products that contain flavorings, fruits and other additives – such as chocolate and strawberry flavored milk — will be subject to the 15% tax. Skimmed, semi-skimmed and lactose-free milk will not be taxed, SRI said.

The new circular also extends tax-free status to most of breads that would have been taxed under Wednesday’s rules. Among the products covered under the corrected rules are all breads containing wheat or whole wheat flour, water, yeast, salt, sugar, milk and eggs. Previously, only pan de agua, an artisanal product that represents less than one percent of bread sales, was covered.

In a social media statement, SRI Director Alexandra Navarrete said the original announcement contained “errors of interpretation” that were clarified in Friday’s circular. She apologized for the confusion.