The limit is reduced for those who are already taxed. It may be deducted from the payment of income tax up to a maximum of $ 1,000 per year in personal expenses.
Of the $ 452 million that is expected to be collected with the changes in the payment of income tax established in the tax reform of the Government, more than 80% have to do with the reduction of personal expense deductions.
One of the biggest criticisms of reform, which will be in force since January 2022, is that more pressure is put on the few people (around 274,000 in the whole country) who have been paying the treasury in full.
In this sense, the greatest debt of the Government of Guillermo Lasso is the fight against evasion and avoidance, that is, seeking a way to expand the taxpayer base so that more Ecuadorians pay taxes.
However, social networks proliferate messages that socialize alleged content and opinions of the tax reform. Some are true, others inaccurate, and most are false. Here, we review some possible conditions of deduction of personal expenses that will rule from next year.
1.- Expenditure deductions for catastrophic illnesses are not eliminated
In the reform, published on November 29 in the Official Registry, it is established that deduct personal expenses for rent, payment of interest for the acquisition of housing, food, payment of alimony, clothing, national tourism, health and education (includes art and culture)
According to Javier Bustos, a tax lawyer, health issues include expenses for catastrophic and rare diseases.
“The possibility is not being eliminated, but what is certain is that the total amount that can be deducted is much less. As a counterpart, since an additional $ 1.9 billion is being asked from taxpayers, the State should guarantee that patients are provided with the treatments and medicines they require, ”he said.
Busto pointed out that in order to measure the real impact, data should be had on how many people and in what quantity are currently discounting expenses for catastrophic diseases.
LA HORA newspaper consulted with the Internal Revenue Service (SRI) about how many Ecuadorians make deductions about those kinds of expenses; but the answer is that the institution does not have information with that level of detail.
2.- Maximum $ 1,000 per year as a tax credit
With the regulations that will be in force until the end of 2021, the personal expenses they were subtracted from income to establish the tax base; that is, the amount on which income tax is charged.
With the law that will take effect from 2022, the personal expenses they become a tax credit. In other words, income tax is calculated on the basis of income (without any tax deductions); and the personal expenses they serve to reduce that final payment.
If the income is up to $ 24,090.3 per year, up to $ 1,000 may be deducted in personal expenses.
If the income is greater than $ 24,090.3, those personal expenses it can be up to $ 500.
3.- Ecuador has one of the highest levels of deduction for personal expenses
According to the Minister of Economy, Simón Cueva, the current limit of $ 14,576 in personal expenses to deduct it is one of the highest in the world. The official gave as an example that in the United States the cap is $ 12,000, in Spain it reaches $ 1,000 and in Colombia it does not exceed $ 10,000 a year.
But in practical terms, registering invoices for the total amount of $ 14,576 does not mean that you can deduct all that value.
Bustos pointed out that the deduction it reaches a maximum of 25% of that limit, that is, around $ 3,500.
Thus, not even the highest range, between $ 5,000 and $ 100,000 of income, will lower the tax payment by the total amount established by law.
The change established by the Government of Guillermo Lasso does mean a significant reduction in the field of personal expense deductions; but it all depends on the level of income.
According to information from the Ministry of Economy, a person with an income of less than $ 2,007 per month registers personal expenses, on average, for $ 486. In this sense, the reform increases its space for deduction to $ 1,000.
In the case of income between $ 2,007 and $ 2,500 per month, the average amount of personal expenses reaches $ 9,704; that is, a possibility of deduction of $ 2,426.
Also, if the income is $ 5,000, the average level of personal expenses is $ 11,259, which represents about $ 2,800 to reduce the payment of income tax.
4.- The door is opened for personal expenses with income greater than $ 100.00
Under current regulations, Ecuadorians with incomes greater than $ 100,000 cannot deduct not a penny in personal expense. In the reform Lasso’s government does not establish that exclusion, so the door is reopened so that the stratum with higher resources is discounted somewhat.
However, as a counterpart, the income tax rate is increased from 35% to 37%.
Bustos assured that, contrary to what has been said in various political and social sectors, the new rules of the game will not cause less use of invoices or formalization of the economy.
The biggest problems of informality are in the lowest income segments, where there is not even a high percentage of payment of other taxes such as VAT. (JS)
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