The Government of Daniel Noboa announced that it will lower the tax to 0% in January and March 2025, and from April the rate will be 2.5%.
As a measure to promote the competitiveness of local companies, the Government of Ecuador announced on Thursday that from January 1, 2025, the rate of the tax on the exit of foreign currency (ISD) will be 0%, until March of that year, for the tariff subheadings of raw materials essential for national production.
Starting in April, the rate will be 2.5%, which is half of the current rate of 5%. This will apply to imported raw materials used to produce goods for local sale and export.
The official statement states that “the subheadings that will benefit from the reduction of the ISD will be defined by the Government's economic team, in coordination with 17 productive sectors nationwide.”
This newspaper consulted the Ministry of Economy and Finance (MEF) about the 17 productive sectors. The entity responded on Thursday night and indicated that “the new ISD benefit”, which implies a “differentiated rate”, will be analyzed in the following sectors:
1. Food and drinks
2.Metal mechanics
3. Chemistry
4. Aquaculture
5. Animal protein
6. Wood
7. Plastic
8. Hygiene and cleaning
9. White line
10. Paper and cardboard
11. Textiles
12. Banana
13. Flat ceramics
14. Pharmacist
15. Fishing
16. Flowers
17. Cocoa
In the statement, the Government of Daniel Noboa argued that the decision is based on the Organic Law to Confront the Internal Armed Conflict, and it was adopted in order not to affect the productive sector with the ruling of the Constitutional Court that provides that the ISD tax credit will be in force until December 31, 2024.
The announcement by the Ecuadorian government has not been well received by some business associations, who maintain that in reality there will be no such reduction in the ISD rate.
The Ecuadorian Business Committee (CEE) said that "at this time the Government had the opportunity to keep these items at 0%, to generate investments."
The union said in a statement that tax policies should not confuse the outflow of foreign currency with production and investment. It also requested that the list of tariff preferences be drawn up “with technical criteria” and include strategic inputs that allow the country to maintain its competitiveness and development.
The Committee requests that the analysis take into account “the climate, energy and security challenges” that Ecuador faces. If this is not taken into account, “this measure will have a negative impact that will affect consumption and inflation,” as well as exports because they will have a direct impact on their costs.
