VAT will be returned to construction inputs

Ecuadornews:

The Government makes a nod to the builders by offering incentives that motivate them to build more social housing in the country and, with this, help accelerate the recovery of the sector, one of the hardest hit in the last years of recession. In the bill recently delivered to the Assembly, it is requested to return to this sector the Value Added Tax (VAT) that pays for the local acquisitions of goods and services required to carry out their projects.

Measures of this type are important in a market where about 70% of the houses that are built in the country are of social and priority interest, says Jaime Rumbea, president of the Association of Real Estate Developers of Housing of Ecuador. This will allow, he says, comply with the public demands of producing affordable housing at low prices.

The impact of this incentive has yet to be measured, but it explains that “this would not have to be calculated on the total price of the good, but on a part of the price of the home, that which remains after subtracting items such as land, labor, transportation and taxes that do not compute VAT, “he says.

In productive activities, this tax can usually be recovered to the extent that it is possible to sell a good or a final service with VAT. “A concessionaire that imports a car, for example, pays the VAT for import, but sells it with the same rate. In the case of housing that was not happening, “explains Pablo Guevara, partner of the tax firm Fides Buró, who calls this measure” smart “because it will serve to stimulate construction companies who believe that their investment can also be recovered through this tax.

Guevara has dedicated these days to review the changes that arise in the new project that should be discussed and approved by the Assembly. But this is not the only positive, he clarifies. In the Organic Law for Productive Development, Investment Attraction, Employment Generation, Stability and Fiscal Equilibrium, the idea of taxing health and life insurance and reinsurance is also reversed with VAT, a measure that had been proposed by the previous economic authorities and that, if approved, would affect at least 939,859 people who have private health insurance. In the list of services that still have a zero rate “even what is being done is adding to others: the medical assistance, prepaid medicine, personal accidents, as well as those required by land traffic accidents. This is not being eliminated, which was what was thought. ”

On the other hand, it also highlights the single rate of 8% that, as income tax, is being set on the profit that is perceived in the sale of shares of any type of company. “It’s not that a tax is being created here, it’s a different way of calculating it.”

Since 2014, Guevara explains, “the transfer taxes not only direct sales but also indirect sales, which made the process much more complex. Now with this proposal it will be easier to calculate this tax, which before could mean a payment of up to 35%, a cost that made it no longer business to sell shares “.

Some reforms

Consturction

According to the proposal, the companies that build low-income housing will be refunded VAT paid for local goods and services used in the project.

Insurance

The economic plan proposes to keep health and life insurance and reinsurance with 0% VAT. It also adds other services to the list, such as medical assistance.

Actions

The plan modifies the form of payment of Income Tax  for the profit generated in the sale of shares. Now this transaction will have a unique tax of 8%. (I)

Source: http://www.expreso.ec/economia/economia-iva-construccion-impuestos-mercado-AX2198200