Official Gazette No. 153, dated October 28, 2025, publishes the GENERAL REGULATIONS TO THE ORGANIC LAW ON SOCIAL TRANSPARENCY. The following is a synopsis of its contents.
I Transitional Provisions
Fifth: The advance on undistributed profits – AUND to be paid in 2025 will be calculated based on the 2024 income tax return. Thus:
(+) Income for the year = box 615 of the 2024 income tax return.
(-) Loss for the year = box 616 of the 2024 income tax return.
(+) Retained earnings from prior years = box 611 of the 2024 income tax return.
(-) Accumulated losses from prior years = box 612 of the 2024 income tax return.
(+/-) 2024 Adjustment for Valuation of Income under the equity method (companies that recognize income from investments in other companies under the equity method).
(-) Dividends distributed from January 1 to July 31, 2025.
The table of Art. 39.2.1. of the Internal Tax Regime Law – LRTI will be applied to the result obtained.
The institutions of the financial and insurance system will not consider the amount of profits that they are prevented from distributing by provision of the corresponding control entity.
Ref. Sixth.- For the calculation of the AUND to be paid in 2025, taxpayers will be bound by the 2024 income tax returns filed by July 31, 2025 [without considering the amending or substitute returns].
Eighth.- Ref. For the offset or refund of AUND, corresponding to 2025 and 2026, the acquisition of new productive assets, property, plant and equipment, intangible assets, biological assets and/or inventories made by the taxpayer during the two immediately preceding fiscal years is also considered capitalization.
Ref. 9. Holding companies will not be subject to the payment of the AUND in fiscal year 2025.
II Reforming provisions
Ref. Second.- The following amendments should be made to the Regulations for the Application of the Internal Tax Regime Law – RLRTI:
1.- In the 5th Article numbered after Article 7, after the third clause, add the following:
Dividends are considered to be: (i) donations made to shareholders, their related parties or their relatives up to the fourth degree of consanguinity and second degree of affinity; and, (ii) any figure whose purpose is the decapitalization of a company [when such capital comes from undistributed profits].
The concept of distribution of dividends excludes the yields granted by Mutual Funds or Investment Trusts.
2.- Replace the third unnumbered Article after Article 67 [related to the alienation of rights representing capital]. Thus:
Ways of determining the profit – The greater value will be taken, between the proportional equity value – PPV of the company corresponding to the fiscal year immediately prior to that in which the disposal takes place and the acquisition value; in relation to the real value of the disposal.
Undistributed profits will not be considered for the calculation of PPV. Distributed profit is understood to be only that profit whose distribution has been ordered and is recorded in the minutes of the general shareholders’ meeting, and which is paid or recorded in liabilities.
Adjustments derived from asset revaluations that are recognized directly in equity, without affecting the results of the year, are not considered for the calculation of the PPV.
When the capital rights to be disposed of have been acquired in several transactions and at different times, the PEPS inventory valuation method is used.
3.- Replace Article 125 with the following:
Dividend withholding – When a resident company or a permanent establishment in Ecuador distributes dividends, it shall act as follows:
1.- Companies that distribute dividends will withhold 100% of the tax incurred.
When the distribution is in favor of individuals residing in Ecuador, the taxable base for the determination of the tax due will be the value distributed considering an exempt band of 3 unified salaries of the worker in general, with respect to each company that distributes the dividend, and within the same fiscal period. In the event that a company makes 2 or more distributions in the year, the value of the exempt band applied in the year may never exceed 3 salaries. In these cases, the withholding voucher will be issued in the name of the holder of the capital rights or its equivalent.
The beneficiary of the dividend must report the amount of the dividend in his income tax return. In case the beneficiary of the dividend has not been subject to withholding by the distributing company, he/she must declare and pay the tax considering the exempt bracket per company.
3.- When the distribution of the dividend is in favor of a person not resident in Ecuador, provided that the dividends are not attributable to permanent establishments in the country, whose beneficial owner is a natural person resident in Ecuador, the provisions of the preceding paragraph shall apply. In these cases, the withholding voucher will be issued in the name of the beneficial owner resident in Ecuador.
4.- When the distribution is made directly to non-residents of Ecuador, provided that the dividends are not attributable to permanent establishments in the country, and the beneficial owner is not a resident of Ecuador, the withholding voucher will be issued in the name of the non-resident, direct holder of the rights representing capital, at the time of the distribution of the dividend.
When a resident company or a permanent establishment in Ecuador distributes dividends in favor of a non-resident in Ecuador, provided that the dividends are not attributable to permanent establishments in the country, failing to comply with the duty to inform about its corporate composition prior to the distribution, the withholding at source of income tax of 14% will be made, only with respect to the percentage of those beneficiaries on which this obligation has been omitted. The withholding voucher will be issued in the name of the non-resident, direct holder of the rights representing capital, at the time of the distribution of the dividend.
6.- When a resident company or a permanent establishment in Ecuador distributes dividends in favor of a person not resident in Ecuador and the following assumptions are verified: (a) that at any level of the chain of ownership there is a resident in a tax haven or jurisdiction of lower taxation; and, (b) that the effective beneficiary of the dividend is resident in Ecuador, a rate of 14% will be applied, only with respect to the percentage of those beneficiaries who incur in these assumptions.
In these cases, the withholding voucher will be issued in the name of the beneficial owner resident in Ecuador.
7.- Withholding at the source shall not be applicable in the cases of exemption of Art. 15 of these regulations, nor in the cases in which the exemption range for individuals residing in Ecuador is equal to or greater than the distributed dividend; however, the respective voucher shall be issued with the withholding at zero.
The provisions also apply to anticipated profits, dividends or benefits, without prejudice to the respective withholding that constitutes a tax credit for the company making the payment.
4.- After Art. 126, incorporate the following:
Payment on account on undistributed profits: Resident companies and permanent establishments in Ecuador of non-resident companies that, up to July 31 of the current fiscal year, do not distribute the accumulated profits of previous years, shall pay an advance payment based on a percentage of such balance in accordance with Art. 39.2.1 of the LRTI.
Calculation of the payment on account – Taxpayers must calculate the advance payment on undistributed profits based on the following formula:
(+) Profit or (-) loss for the immediately preceding fiscal year (accounting profit or loss less labor participation, less income tax expense, less the legal reserve, in the percentage required by the applicable regulations).
(+/-) Retained earnings or losses from prior years other than those mentioned above.
(-) Dividend distribution made between January 1 and July 31 of the fiscal year in which the advance payment is determined.
(-) Capitalization of profits made between January 1 and July 31 of the fiscal year in which the advance payment is determined.
(+/-) Adjustment for valuation of income by the equity method for the prior period.
The institutions of the financial and insurance system will not consider the amount of profits that they are prevented from distributing by provision of the corresponding control entity.
Forms and dates of payment – Companies subject to the AUND must declare and pay, during the month of August of each year, the amount of the advance payment determined according to the ninth digit of the RUC.
Special taxpayers shall file and pay until the 11th day of the respective due month of each obligation.
The taxpayer may defer payment in up to 3 equal installments to be paid in August, September and October of each year, considering in the same manner the ninth digit of the RUC. No additional payment agreements will be granted.
Extinction of the credit for payment on account – The companies subject to the payment of the AUND may offset or recover this credit in the following cases:
Provided that the distribution of dividends has been made, the taxpayer may offset the credit against the amount payable for withholdings made in the distribution of dividends derived from retained earnings.
In cases where, despite having distributed dividends, the taxpayer is unable to fully offset the credit, it may offset the balance against the income tax of the tax period in which the dividends are distributed, or against the income tax due for other periods. The offset may be made up to 3 years after the credit became due.
The balance of the credit that could not be offset after the procedure provided for in this paragraph, may be returned within the statute of limitations provided by law.
When the capitalization of profits is made, the taxpayer may offset the advance payment against the income tax due for any period, provided that, until December 31 of the year in which the capital increase is made, it is perfected with the registration of the respective deed in the Commercial Registry, or the corresponding procedure according to the type of company. The balance of the credit that could not be offset may be returned within the terms provided by law.
Holding companies and companies subject to the single income tax regime may have access to the refund of the credit as from the first day of the month following the month in which the capitalization or distribution of dividends is made, to the extent that the credit has not been offset.
Companies that do not distribute or capitalize accumulated profits during the 2 fiscal years following the one in which the obligation established in this Article is paid, will not be able to offset it; neither will they be able to obtain a refund. In these cases, the balance of the amounts paid shall be recorded as a non-deductible expense in the fiscal year in which said term expires.
Credit of the payment on account for capitalization of profits – The payment of the advance payment will give rise to a tax credit, which may be offset or refunded according to the rules set forth in these regulations, when the capitalization of profits is carried out alternatively complying with any of the following conditions:
1.- Acquisition of new productive assets.
2.- Acquisition of new inventories as of August 28, 2025.
3.- Generation of employment. The taxpayer must prove a net increase in employment positions of no less than 5% with respect to the base year.
In cases where a company does not have workers as of the date of publication of the Law, it will not be able to immediately access the compensation or refund. It will be able to do so only after its second registration of workers, at which time the corresponding analysis will be made.
5.- In Art. 136 [related to taxes paid abroad] replace paragraph (a) with the following text:
(a) The above provisions shall also apply in the case of dividends distributed by foreign companies on profits obtained abroad to companies or individuals resident in Ecuador.
Both the withholding tax paid to the recipient of the dividends and the tax paid by the foreign resident company directly attributable to such dividends constitute income tax credits, provided that the foreign company has been taxed abroad on the income generated by such dividends.
The net dividend received plus the tax credit to which it is entitled, in accordance with the preceding paragraph, is considered as taxable income for purposes of calculating global income.
When the beneficial owner who is a tax resident in Ecuador had previously been taxed on dividends distributed directly to a non-resident by a resident company or a permanent establishment in Ecuador, the exemption will apply to the corresponding proportion of such dividends, with respect to dividends distributed from abroad.
6.- Substitute the following for the first paragraph of Art. 216:
Excluded activities and limitations to the regime – Taxpayers who carry out the activities established in paragraph (d) of Art. 97.4 of the LRTI are not eligible for the RIMPE Regime. This prohibition does not extend to Popular Economic Units.
7.- The following is hereby added as a Transitory Provision:
Taxpayers subject to the AUND corresponding to fiscal year 2025 must declare and pay this obligation in November and December, in 2 equal installments without interest.
Quito D.M. / Guayaquil, November 2025
