Ecuador: Tax Authority issues new transfer pricing regulations


On 22 November 2023, the Ecuadorian Tax Authority released a new edition of the technical sheet for the standardization of transfer pricing analysis, effective for fiscal year 2023. This updated document introduces significant changes to filing procedures, reporting requirements, and comparability analysis for transfer pricing purposes. New features and updates are outlined below:

  • The Comprehensive Transfer Pricing Report must be consistently submitted in PDF format via the designated channels, ensuring the successful upload of all accompanying documents and annexes. The index of the content, when printed, should bear the electronic signature of the legal representative or the tax identification holder for natural persons, serving as an integral part of the report.
  • A new reporting obligation has been introduced in Ecuador concerning the development of intangibles that have been transferred to another country, along with the respective date of transfer. The reporting requirement entails a detailed table outlining the characteristics of agreements supporting operations related to intangible exploitation. This table includes information such as the licensor and licensee details, contract type, specified territory (target market or intangible use), exclusivity rights, sublicensing rights, nature of the intangible, functions of both licensor and licensee, associated risks, anticipated scope and benefits, calculation basis, royalty percentage, amount, and validity period. Compliance with these reporting parameters is essential for entities involved in the cross-border transfer of intangibles in Ecuador.
  • Data related to profit and loss or balance sheet accounts, documenting transactions involving related parties, should be incorporated into the summary table for such transactions. While the Transfer Pricing (TP) Technical Sheet outlines guidelines for handling Other Assets and Other Liabilities, the existing tax regulations and the current iteration of the DIMM Annexes for Transactions with Related Parties do not account for these specific transaction types in the software provided by the tax authority for filing the TP Annex. Consequently, taxpayers may encounter challenges in reporting these transactions due to the absence of consideration for such categories in the provided software.
  • The Tax Authority mandates comprehensive details in the local file concerning the multinational group, the taxpayer, and related parties engaged in transactions with the taxpayer. This requirement aligns with the international standards set forth in Action 13 of the Base Erosion and Profit Shifting (BEPS) initiatives by the Organization for Economic Co-operation and Development (OECD). Typically encompassed in a master file, local file, and country-by-country report, this information encompasses the functions, assets, and risks of the local company and related parties over the fiscal period. Documentation is expected on intangibles, activities, financial positions, corporate restructuring, acquisitions, and divestments within the Multinational Group during the fiscal year. Additionally, the submission should include copies and details of all unilateral and bilateral/multilateral advanced price agreements of the Multinational Group. Notably, a new table specifying contractual terms, including price, transaction amount, and profit margin, must be incorporated.

The changes made in Version 8 of the Technical Sheet are significant and will require taxpayers to significantly modify their transfer pricing practices in Ecuador. It is important for taxpayers to be aware of these changes and to take steps to comply with the new requirements.



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