13 Jan Advance Payment of Income Tax

The President of the Republic by Executive Decree No. 1109, ordered the anticipated collection of income tax charged to fiscal year 2020, in order to allocate them to the financing of priority expenses included in the General State Budget, to meet the needs caused by the health emergency. To calculate the advance payment of income tax, the following aspects must be taken into account:

Exempt from the advance payment of income tax:

Natural and legal persons that meet the following conditions:

• They are classified as micro, small or medium-sized companies.
• All 2020 income is exempt from income tax.
• Taxpayers with tax domicile in Galapagos.
• Regular exporters of goods or whose income is at least 50% from export activities.
• Its economic activity is in the following sectors:

– Airline operations.

– Tourism (exclusively accommodation and / or meals)

– Agricultural.

– Aquaculture.

Taxpayers required to pay an advance income tax:

Natural persons, legal entities or permanent establishments that meet the following conditions:

• Obtained income subject to income tax from January 1 to June 30, 2020 (income in a dependency relationship is excluded);
• Have accounting profit during the period from January 1 to June 30, 2020 (income from dependency is excluded); and,
• In 2019 they had revenues of more than USD 5,000,000.

Income tax advance calculation:

to). 85% of the accounting profit generated from January to June 2020 will be calculated.

b). 25% will be calculated on this value.

c). Withholdings at source made in January and June 2020 will be subtracted

d). Self-withholding of income tax will be challenged.

and). The resulting value will be the advance to pay.

Settlement and payment

• Tributary credit:

– If this advance will be used as a tax credit at the time of filing the income tax return for fiscal year 2020.

– Apply your refund in case of overpayment or income tax is not generated at the time of filing your return.

• Payment date:

– A single payment on August 14, 2020; or,

– Payment in three installments (August / September / October 2020)

– Does not apply to payment facilities

Remember:

When calculating the accounting profit, the following should be considered:

• The period for the analysis is from January 1, 2020 to June 30, 2020.
• Be consistent with statements already submitted to the SRI during the first semester.
• Verify the accounting effects that will generate a higher advance payment of income tax to be paid.
• Verify the exempt income that may affect the accounting profit generated.
• The decree does not consider expenses deductibility criteria.