Transfer pricing in Ecuador

Transfer pricing in Ecuador at a glance

Regulation Type National regulations
Are there specific transfer pricing regulations? Yes
Submission deadline Two months after filing the income tax return
Submission deadline upon request N/A
Annual update required Yes
Official language requirements Spanish
Potential impact of penalties US$ 15,000

 

Ecuadorian tax law

Rules for transfer pricing in Ecuador are based upon:

  • Internal Revenue Service Executive Decree No. 2430

OECD

Generally the OECD Transfer Pricing Guidelines are followed in Ecuador. However, when the OECD guidelines contradict with the national regulations, the national regulations prefer.

Methods

Accepted methods 

Accepted methods are:

  • The comparable uncontrolled price method
  • The resale price method
  • The cost plus method
  • The profit split method
  • The transactional net margin method

Priority of methods

Rules for transfer pricing in Ecuador prescribe that the order as shown above should be applied when selecting the applicable method.

Documentation requirements

Information that should be included in the documentation:

  • All transactions with foreign related parties
  • The methods applied in analyzing each transaction
  • Calculated adjustments for each transaction, using software provided by the tax administration
  • Full functional analysis of the multinational group and the local party
  • Risk analysis of the local company and assets detail
  • Intercompany transactions detail and functional description
  • Market analysis including global and local descriptions and a demand analysis for both levels
  • Economic analysis

Language

Rules for transfer pricing in Ecuador prescribe that all documentation should be submitted in Spanish.

Requirements to prepare documentation annually

Transfer pricing documentation in Ecuador should be updated annually if a taxpayer exceeds the threshold. The documentation should be submitted two months after the filing of the income tax return, which takes place in June of the following fiscal year.

Submission deadline upon request by tax authorities

Not applicable.

Advance Pricing Agreements

General

Rules for transfer pricing in Ecuador do not provide for an option to obtain an Advance Pricing Agreement.

Terms 

Not applicable.

Penalties

Failure to comply with the transfer pricing requirements that are in place in Ecuador may result in a fine up to US$ of 15,000.

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