Ecuador VAT on digital services Sept 2020
- Aug 10, 2020 | Richard Asquith
Ecuador has imposed 12% Value Added Tax on digital services from 16 September 2020. This includes non-resident providers who must register for VAT locally or suffer withholding VAT by payment providers to consumers.
Any electronic or digital service procured via the internet or similar electronic platforms / technologies are subject to VAT. See Avalara's global VAT on digital services tracker.
Digital services subject to VAT
The following services are subject to VAT, and must involve no manual support or intervention:
- Website hosting
- Data hosting, including data warehouses
- Online advertising
- Online software, including downloads and SaaS
- E-learning where entirely automated (no live webcast lessons)
- Online dating and other membership clubs
- Accommodation, auction, gig and sharing economy services
- Online news, blogs and journals
- Automated technical and administrative support
- Data processing based on information input or uploaded by the user
Foreign providers – withholding VAT
Non-resident providers of digital services to consumers are subject to VAT. They must either register with the tax authority or have VAT withheld by payment providers. These include: credit cards; bank transfers; mobile payments; ewallets; and payment acquirers.
Alternatively, the foreign provider may register as a non-resident VAT payer. They must charge and collect the 12% VAT, and remit it directly to the tax authorities each month.
For B2B transactions, the customer is assumed to be the importer and liable for VAT. They may apply the reverse charge reporting mechanism to self-assess the VAT due.