On April 7, 2021 an agreement for the exchange of information for tax purposes was signed between the Ecuadorian Tax Authority and the Internal Revenue Service of the United States of America.
As announced by the authorities of Ecuador and the United States, this agreement will allow an effective exchange of tax information which will be relevant for the assessment, settlement and collection of taxes, strengthening tax transparency.
The exchange of information by the tax authorities in the framework of this agreement can be automatic or spontaneous and both countries guarantee the confidentiality of the exchanged information. It also opens the possibility of conducting cooperative examinations between the two tax authorities.
The execution of the agreement does not imply its immediate application, since in order to enter into force the following formalities must be completed:
- The President must send the signed agreement to the Constitutional Court so that the Court can decide within eight days of receipt whether the agreement requires legislative approval.
- If the Constitutional Court determines that legislative approval is not necessary, the President will proceed to ratify the agreement and have it published in the Official Register, at which point it will enter into force.
- If the Constitutional Court determines that legislative approval is necessary, it must first carry out the corresponding control of constitutionality.
- If the Constitutional Court declares that the agreement is in line with constitutional rules, it will send it to the National Assembly for the respective approval.
- With the approval of the National Assembly, the President can ratify the agreement and it will enter into force once it is published in the Official Register.
The execution of the agreement with the United States is a very important milestone in the process to negotiate and sign bilateral agreements for the exchange of information for tax purposes.
If you would like more information about the agreement and its impacts, contact us at utlegal@pbplaw.com
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