1st Bac - ESTR - Ecuadorian Simplified Tax Regime

 ESTR – Ecuadorian Simplified Tax Regime (RISE – Régimen Impositivo Simplificado Ecuatoriano)

 

According to the IRS, the ESTR is a new regime of volunteered incorporation, it replaces the value added tax and income tax through monthly payments and it is in favor of improving the tax culture in the country. 

 

What is it used for?

The ESTR has two objectives, for the contributor it helps with the process of paying the taxes on time, and for the tax administration it helps to build a tax culture. This helps the population to be aware that the payment of taxes helps to distribute the wealth across the country.

 

Among the main benefits of having the ESTR, according to the IRS, are the following:

 

-       There is no need for declarations, no cost of forms and the hire of third parties to fill them out

-       Avoid taxes retaining

-       Allows to give out simplified sales slip with the date and amount of sale

-       No accounting

-       For every new employee added to the business and that is a member of IESS, a 5% discount will be applied to the payment, up until 50%

 

 

How to obtain it?

First, you need to analyze if your business qualifies to obtain the ESTR. The following requirements should be met:

-       Do not have incomes greater than $60000 in the year, or have low dependency ratio, the income under this concept cannot be greater that the basic fraction of the income tax with 0% tariff for each year

-       Not be a producer of restricted activities

-       Not have been an retention agent during the last 3 years.

 

It is recommended to do the pre-registration online before going to the IRS to start the ESTR process. The documents needed to register are identification, voting proof of the last elections and a document to help locate the address of the business. Once you have fully registered, the monthly payment will be due the following month.

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