President Lenin Moreno signed the regulations of the Organic Law for the Reactivation of the Economy, Strengthening Dollarization and Modernization of Financial Management. There it is indicated that the provision of employer retirement and eviction is not deductible, but when the payment is effective yes.
“This regulation solves the problem that bothered businessmen,” Andersen Tax Legal partner Pablo Guevara told Diario EXPRESO.
The Law provided for an amendment to Article 10, numeral 13 in the Internal Tax Regime Law, which conditioned the deductibility to payment and no longer to the provision, explained the economist and adviser of the Chamber of Industries of Guayaquil, Ramiro Solano .
Since the Law was published in the Official Register, on December 29, 2017, the concern in the business sector was generated; because the rule only indicated that the provision for employer retirement and eviction was not deductible, then to make those savings and not be able to put it in the account of expenses in the process of saving, for when it will be paid either, because of previous fiscal years.
But, Regulation recently issued in this week clarifies everything. “The problem has been solved, now it is necessary that this document be published in the Official Registry”, added Guevara.
The Regulation specifically states: “the provisions made to cover payments for eviction and employer retirement pensions that are constituted as of the validity of the Organic Law for the Reactivation of the Economy, Strengthening Dollarization and Modernization of Financial Management, they are deductible; however, a deferred tax will be recognized for this concept, which may be used at the moment in which the taxpayer effectively discharges resources to cancel the obligation for which the provision was made and up to the amount actually paid, as provided in the Internal Tax Regime Law “.
Before the president signed the regulation he questioned that by controlling a few businessmen who do not respect the laws, it would affect those who do. What is sought to control is that the savings for employer retirement does reach the worker and prevent the provision was used only to pay less taxes, according to the vision of the authorities.
But in that controversy, more than one expert indicated in the past that it was important to rescue the deductibility of employer retirement and eviction, because as it had been written in the Law it affected employers who do respect the Law.
Last June of this year, Guevara mentioned that it did not make sense that a certain and necessary expense, which should be provisioned by accounting norm, should be conditioned to the payment that affects the result of the year, when it was known that this would not happen.
Then when the Regulation indicates that a deferred tax is going to be recognized for this concept, the problem has been solved.
The requirements to receive it
For a worker to access the benefit of employer retirement, in addition to the pension of the Ecuadorian Social Security Institute, it is necessary to have 25 years working with the same employer and if you are 20 years old or older, you can obtain a proportional value.
The calculation of the employer’s retirement is the sum equivalent to 5% of the average of the annual remuneration received in the last five years. This item must be multiplied by the years of service and the result is divided by the age coefficient established in article 218 of the Labor Code. This result is divided for 12 months.
Since 2015, the authorities have indicated that employer retirement is low; For example, the Minister of Labor of that year indicated that only 5% of workers in the private sector receive it.
The Government is now worried that more workers will be receiving the right of employer retirement. (I)