NEW REGULATION THAT REGULATES THE TAXES IMPOSED ON SPORTS BETTING OPERATORS

On June 27^th, 2024, by Decree No. 313, the President of Ecuador, Daniel Noboa, amended the Regulations to the Internal Tax Regime Law to include the “Title V-A: Unique Income Tax Regime for Sports Betting Operators,” which establishes the guidelines for income tax return for such entities, with the following key points summarized:

• Taxable Income

A 15% tax rate will be applied to the taxable income, which will be calculated over the total revenues generated, including commissions, minus the total prizes paid out during the period, if the tax withholding was applied at the time of the prize payment.

Money or digital assets deposited by players and/or their intermediaries but not used for sports betting, are not included in the operator’s taxable income for tax calculation purposes.

If the taxable income is negative, the tax will be zero; negative values cannot be carried forward to subsequent periods or deducted as expenses against other sources of income.

• Monthly Declaration

The tax return and payment must be made monthly for all operations conducted in each monthly period, according to the form and deadlines set by the Internal Revenue Service, even in months where no operations are conducted.

• Annual Declaration

Sports betting operators residing in Ecuador must make their global income tax return annually, consolidating the values registered monthly.  

Costs and expenses related to this activity cannot be used to determine the profit of other economic activities.

Taxpayers engaging in additional activities subject to other income tax regimes must distinguish their taxed income with the Unique Income Tax Regime for Sports Betting Operators from the rest of their earnings.

Individuals earning income from sports betting prizes are obligated to include them in their annual income tax return and settle the respective tax.

• Tax Withholding

• • A 15% tax withholding applies to prizes paid to players, including non-profit entities.
    
    
  • The taxable income for this tax withholding is the total prize amount.
    
    
  • Withholdings serve as tax credits for income tax payment on sports betting prizes received by players.
    
    
  • Withholding agents may issue a single withholding receipt for all prizes paid to a player within a month.
    
    
  • Income tax is not withheld from registered sports betting operators.

• Implementation Deadline

Sports betting operators must adjust their systems and implement mechanisms to comply with these regulations within six (6) months.

These provisions will come into effect on July 1, 2024, regardless of their publication in the Official Gazette.

For more information, do not hesitate to contact our Tax Practice Partner, Iván García (igarcia@tzvs.ec).

© TobarZVS 

This publication contains information of general interest and does not constitute legal opinion on specific issues. Any analysis will require legal advice from the Firm.