Beer and foreign-based internet services are among the products that will see a tax increase or be taxed for the first time beginning in 2020. Most new taxes take effect January 1 but others will apply beginning in February and March.
The excise tax on beer will increase 10 percent and digital services such as Netflix, Airbnb, Uber and Cabify will be subject for the first time to the national 12 percent VAT tax. In addition, non-reusable plastic bags will be taxes at four cents per bag in 2020, increasing to 10 cents in 2023.
The new taxes were passed December 17 as part of the Tax Simplification Law after President Lenin Moreno’s first economic reform package, submitted in November, was rejected by the National Assembly.
The tax on internet-based services is being opposed by Netflix and Airbnb, the companies claiming they should be exempt since their administrative functions are based out of the country. The finance ministry has responded that it is unfair that all services provided in Ecuador not be taxed equally, whether they are based in the country or not. It points out that other Latin American countries, including Colombia and Uruguay, have recently instituted similar taxes.
The ministry says the new tax on beer will be offset, in the case of small craft breweries, with tax breaks provided to entrepreneurs. The country’s large beer makers say they will pass the tax hike on to consumers.
Ecuador’s Internal Revenue service says it could take as long as 90 days to work out details on internet-based services.
Also to be worked out are how the tax on plastic bags used in grocery and department stores and markets will be applied and collected. The law exempts plastic bags used for industrial, agricultural and export purposes as well as those used for frozen products or that contain 50 percent recycled material. Plastic products manufacturers and distributors say they will challenge the tax in court.