Key takeaways
- Ecuador will raise its VAT rate from 12% to 15% starting March 1, 2024, before reducing it permanently to 13% in the future.
- The temporary VAT hike aims to generate around $1 billion annually to strengthen national security and combat organized crime.
- Despite the increase, Ecuador will continue to have one of the lowest VAT rates in Latin America.
On February 9, 2024, Ecuador's new President Daniel Noboa took decisive action against the parliament's emergency VAT increase attempts. Originally proposing a temporary hike in VAT from 12% to 15%, he now plans to implement this increase but with a future reduction setting the rate permanently at 13%.
This move is part of a broader strategy to bolster national security. The additional revenue from the VAT increase will fund improvements in the military, police, and intelligence sectors to address the growing threat of organized crime.
The president initially sought approval from the National Assembly on January 13, 2024, for this tax adjustment, aiming for an effective date of March 1, 2024. The VAT hike is expected to bring in approximately $1 billion annually.
Ecuador, which reduced its VAT rate to 12% in 2017, has one of the lowest VAT rates in Latin America.
Frequently asked questions
What is the new VAT rate in Ecuador for 2024?
Ecuador’s President Daniel Noboa announced a VAT increase from 12% to 15%, effective March 1, 2024. The rise is part of a national security funding plan, though the VAT rate is expected to drop permanently to 13% in the near future.
Why is Ecuador increasing its VAT rate in 2024?
The temporary VAT increase aims to generate around $1 billion annually to strengthen Ecuador’s military, police, and intelligence forces. The move is designed to combat rising organized crime while maintaining long-term economic stability.
