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
Generally the OECD Transfer Pricing Guidelines are followed in Ecuador. However, when the OECD guidelines contradict with the national regulations, the national regulations prefer.
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.
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
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
Advance Pricing Agreements
Rules for transfer pricing in Ecuador do not provide for an option to obtain an Advance Pricing Agreement.
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.