Ecuador to reduce from 5% to 4% tax on foreign currency outflows in 2022

RIO DE JANEIRO, BRAZIL – Ecuador will reduce from 5% to 4% the tax it applies to the outflow of foreign currency through shipment or transfer, which will favor imports, President Guillermo Lasso announced on Tuesday.

“We are going to lower the Tax on the Outflow of Foreign Currency (ISD) by one point in 2022, at a rate of 0.25 points per quarter,” said the president in dialogue with journalists at the presidential headquarters in Quito.

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He added that the measure will take effect next January 1 and that “all imports for which ISD is paid (…) will no longer pay 5%”, which will be reduced to 4%.

Lasso, who took office last May, stated: “We will gradually lower taxes as the country’s economic situation allows it”.

The ISD was applied by the government of former socialist president Rafael Correa (2007-2017) to prevent the outflow of the U.S. currency. Ecuador has been dollarized since 2000.

The payment is mandatory for those leaving the country carrying more than three basic salaries (above US$1,200) and is also applied in the case of transfers and remittances through the financial system.

Business people and analysts highlighted Lasso’s announcement.

“Excellent news to start dismantling this tax that makes all goods for production and consumption more expensive,” said the president of the Ecuadorian Federation of Exporters (Fedexpor), Felipe Rivadeneira, through his Twitter account.

Economist Alberto Acosta Burneo, from the consulting firm Grupo Spurrier, maintained through the same social network that the reduction of the ISD will benefit “everyone”. “It frees the flow of capital and will allow us to attract capital,” he said.

Ecuador’s imports between January and October 2021 reached some US$20.647 billion, against exports of US$21.559 billion.