VAT at 15% applies from April 1, 2024

People who purchase goods and services – taxed with value added tax (VAT) – will pay 15% for this tax from April 1, 2024. This means three percentage points more, in relation to the percentage in force until March 31, 2024. That is, 12%.

The VAT increase is contained in Executive Decree 198, which modifies the general rate of this tax, from 12% to 15%, for 2024. This instrument was signed on March 15, 2024.

The VAT increase is contained in Executive  Decree 198, which modifies the general rate of this tax to 15 % by 2024. This instrument was signed on March 15, 2024.

The initiative is part of the Law to confront the armed conflict that includes, among other measures, the increase in the (VAT) , with the purpose of generating resources to combat drug trafficking in the midst of the security crisis that the country is experiencing.

What implications does the increase in VAT have?

The increase in VAT will mean that people allocate a larger budget starting in April 2024 to pay for certain products and services. For example, Premium diesel, extra gasoline, ecopaís and liquefied petroleum gas (LPG) or domestic gas will rise.

In the case of the automotive sector, it is established that, including the terminal price, the profit margin and VAT, the values ​​as of 00:00 on April 1, 2024 will be the following:

Extra USD 2,465 per gallon.

Ecopaís USD 2,465 per gallon.

Premium Diesel USD 1,797 per gallon.

On average, it is between 4.97 cents and 6.5 cents per gallon, explained Ivo Rosero, president of the National Chamber of Petroleum Derivatives of Ecuador ( Camdeppe ).

Meanwhile, the price of domestic gas will also increase due to the increase in VAT. The domestic gas cylinder will increase by 5 cents in the deposit . That is, it will be sold at USD 1.65.

On the other hand, in the case of gas used in vehicles and in the agricultural sector , with the increase in VAT, the cylinder will increase by 15 cents.

Do all products pay VAT?

The  increase to 15% of the value added tax (VAT) will not apply to 151 products  that are part of the basic basket, which the National Institute of Statistics and Censuses (INEC) considers to calculate inflation.

According to the Guide for taxpayers of goods and services taxed at a 0% VAT rate, from the Internal Revenue Service ( SRI ), the payment of this tax does not apply to products of agricultural, poultry, livestock, beekeeping, rabbit farming, bioaquatic, forestry. This implies, among others: meat in its natural state, chicken, fish, bread, panela, salt, oats, cornstarch, noodles, fruits.

Preferential VAT for construction materials

In addition, reinforcing steel in bars, aggregates, concrete, binders, recyclable metal materials, mortars, cement precursors, precast concrete and clay, pavers, blocks, bricks and precast concrete products will have a value added tax (VAT) differentiated.

This measure will be applied after the Internal Revenue Service (SRI) established the list of construction materials in which the Value Added Tax (VAT) will be lowered to 5%, through the resolution. NAC-DGERCGC24-00000013 of March 28, 2024.