Ecuador VAT on Digital Services: 15% Rules Explained

In late March, Ecuador’s Internal Revenue Service released a document clarifying how VAT applies to modern digital services in Ecuador, particularly in areas like online betting, gaming, and streaming. The document outlines several key points, including the scope, applicable VAT rate, and tax treatment depending on the type of provider.

VAT Rules for Digital Services

The Ecuadorian Internal Revenue Service underlines that a 15% VAT rate applies to digital services, specifically to online video games, whether paid, subscription-based, or downloaded, sports forecasting platforms, including both national and foreign operators, and the streaming of sports events.

One of the most important clarifications in the document concerns the treatment of cross-border services. If a service is provided by a non-resident to local users and paid through a financial intermediary, such as a bank or credit card, the intermediary is responsible for withholding 100% of the VAT and remitting it to the authorities.

When services are provided by locally VAT-registered suppliers, those suppliers are responsible for issuing sales receipts and charging users 15% VAT. Sports betting platforms are subject to additional operational rules. These platforms must aggregate all user activity over a month and issue a single monthly invoice per user that includes the 15% VAT. This simplifies reporting while ensuring full capture of taxable activity.

In cases where providers are not registered for VAT in Ecuador, and no intermediary is involved, the responsibility falls entirely on the Ecuadorian users. In such situations, users must self-assess the tax by issuing a “purchase liquidation” document, declaring the transaction, and paying the full VAT directly to the Tax Authority.

Conclusion

The document issued by the Internal Revenue Service explicitly defines services such as streaming sports events, paid access to online games, subscriptions or downloads, and sports betting as taxable digital services, leaving little ambiguity regarding the scope. Additionally, the Internal Revenue Service has established a three-layered compliance system that involves intermediaries, providers, and, ultimately, users, ensuring that VAT is collected and remitted regardless of how or from whom the digital service is supplied. 

Source: National Directorate – Government Financial Management Platform, Bloomberg