The Tax Administration establishes the tax amount that a taxpayer must pay through determination acts and/or payment assessments after a tax audit process and/or verification process. Once the Act of Determination is notified, the taxpayer has two options:

• to accept the determination made and pay the tax; or
• to challenge the results determined by the Tax Administration, which gives rise to an administrative tax dispute.

The types of taxes administered by the Internal Revenue Service (SRI), as withholding and/or collection agents for natural and legal persons, include income tax and value added tax (sales tax).

Taxes administered by the National Customs Service (SENAE), there are the tariffs to be paid by natural and legal persons.

There are no updated statistics on the values involved in disputes at the administrative level.

The taxpayer can consult the competent tax administration about the legal regime applicable to specific situations and/or the legal regime applicable to certain economic activity before it starts and, in these cases, the response requires the Tax Administration to maintain this criterion. Similarly, federations and trade associations, professionals, production chambers and public sector entities can make enquiries about the meaning or scope of the tax law in matters of direct interest to said entities, with these responses being of informative nature. These consultations can be considered as a way to mitigate disputes.

In the transfer pricing regime, even though Ecuadorian legislation does not contemplate advance agreements, it does state the possibility that the methodology used by the taxpayer to determine transfer prices may be consulted, and in this case the response issued by the Tax Administration has a binding nature for the current fiscal year, the previous one and the three following ones. This would also help taxpayers to prevent conflicts.

Most of the double taxation treaties (CDIs) signed by Ecuador follow the OECD Model Convention, despite the fact that the country is not a member of this international organisation; for this reason, the country has not directly implemented the BEPS recommendations. However, in recent years there have been changes in the legislation tending to establish mechanisms to curb evasion and avoidance, especially regulations related to:

• costs assigned from abroad and interest payments abroad;
• operations with related parties in general and located in tax havens;
• transfer pricing control; and
• control of thin capitalisation operations.

The issuance of a determination act (tax assessment act) or a payment assessment implies the right of the taxpayer to challenge said act.

The challenge at the administrative level is not subject to the payment of any obligation, security or guarantee, regardless of the value of the tax.

In the coercive execution process, the coerced party may terminate or replace the precautionary measures, guaranteeing the entire balance of the obligation.

For tax audits, the Tax Administration carries out different processes depending on the type of taxpayer. Therefore, different rules are applied to individuals compared to legal entities, and the standards required for large taxpayers differ from those required for small taxpayers.

The main considerations determining tax audits for companies are:

• the relation between income/results in different periods;
• the relationship of income and costs between related companies, generally through the transfer pricing report;
• economic movement in the financial sector;
• the relation between income/results compared to the results obtained by the taxpayers that have the same activity, volume of sales, origin of the product purchased, etc;
• the existence of non-deductible expenses; and
• the relation between the ordinary expenses of the business during different tax periods.

The main considerations determining tax audits for natural persons are:

• the capital increase;
• economic movement in the financial sector;
• if the assessment order were to be notified when there is more than a year left for the expiration date, the determination act or the assessment act must be notified to the taxpayer within the established terms; and 
• if the taxpayer is not notified within said terms, it is considered that the expiration of the order of determination or assessment was not interrupted.

The Tax Administration may initiate a tax audit if after an analysis of the taxpayer’s behaviour it considers that a tax audit is warranted.

The only limitation on starting an audit is that the “determination power” has expired. 

In Ecuador, the “determination power” is considered to expire within the following time limits:

• the expiration operates four years from the date on which the tax return form or tax declaration is filed; and 
• if the tax return or tax declaration has not been filed, the expiration operates in six years.

The expiration is interrupted with the legal notification of the verification order. However, the assessment or determination order has no effect if the inspection acts are not initiated within 20 days from the date of the notification of the determination order or if, once initiated, the inspection acts are suspended for more than 15 consecutive days. The Tax Administration can issue a new assessment or determination order as long as the expiration period is still pending.

If, when notified of the determination order, there is less than one year left for expiration to take effect, the interruption of expiration by this determination order may not be extended for more than one year counting from the date on which the interruption occurred.

If the taxpayer is not notified of the determination act within one year, the determination power will have expired.

In general, tax audits are carried out at the headquarters of the Tax Administration, however the Tax Administration may order inspections, documentary or accounting reviews at the taxpayer’s offices.

The tax audit is based on:

• information provided by the taxpayer and by third parties within their formal obligations, such as tax returns and transactional annexes;
• information from public institutions regarding activities related to the taxpayer; and
• information that the Tax Administration requires from the same taxpayer from other taxpayers and/or from public institutions.

This information is mostly electronic, and printed documentation is minimal.

The Tax Administration compares and analyses the information collected in the declared results on the tax returns with the information available in their database, establishing which are the most sensitive areas that deserve a more exhaustive and thorough review.

These areas are usually:

• income;
• purchases and imports;
• staff costs;
• depreciation;
• financial expenses; and
• non-deductible expenses. 

Ecuador is part of the Global Forum on Transparency and Exchange of Information for Tax Purposes (the "Global Forum") since late 2018 and the Convention on Mutual Administrative Assistance in Tax Matters (MCMAA) since 1 December 2019. Additionally, in 2017 Ecuador signed an Agreement for the Exchange of Information with Costa Rica; and, in 2022, it signed an Agreement for the Exchange of Information with the USA.

In 2019, the SRI issued "the rules and procedures for the effective implementation of the common communication and information standard and due diligence regarding the automatic exchange of information."

In August 2021, the Global Forum gave the green light to the SRI for the automatic exchange of tax information of financial accounts of Ecuadorian taxpayers in other countries, which allows for the reduction of the abuse of agreements, avoidance, evasion and international tax fraud; that is, the first automatic exchange of financial information was successfully executed, which allowed the reception of information from 43 countries on more than 44,000 financial accounts that taxpayers residing in Ecuador maintain outside the country.

In this way, Ecuador is increasing the controls that will enable the Tax Administration to initiate respective audits, if necessary. Until now, tax audits have not been initiated with authorities from other countries.

Within the tax audit process, the taxpayer must endeavour to:

• provide all the facilities for the auditor to fulfil its function;
• keep the information and/or documentation and make it available to the auditor when required;
• have the advice of a professional in the area to support the legal analysis should the auditor have any doubts about the application of any accounting aspects; and
• thoroughly review and analyse that the information and/or documentation required by the auditor is properly supported and deliver it within the time period granted.

Once the taxpayer has been notified of a determination/assessment act or a payment settlement, they have the option of filing an administrative claim. The administrative claim is optional; it is not mandatory in order to initiate the judicial phase.

The claim will be submitted to the authority that issued the challenged act.

Once submitted, the Tax Administration will verify that the claim meets the legal requirements and if it does not comply with the legal requirements, it will grant the taxpayer ten days in which to complete or clarify the claim. Once the claimant complies with the legal requirements, the Tax Administration will establish a term to present evidence, which may not exceed 30 (working) days. Within this time, the taxpayer will present the evidence that they consider pertinent to justify the claim.

Once the term granted has elapsed, the Tax Administration will issue a written resolution, thus concluding the administrative phase.

In the event that the taxpayer does not complete or clarify the request within the ten-day period, the Tax Administration will issue an order declaring the claim not filed.

Once a determination/assessment act (or payment settlement) has been notified, the taxpayer has 20 business days to present their claim.

The Tax Administration (SRI) has 120 working days from the date of presentation, clarification or extension to issue a resolution. To these 120 days the administration must add the term of proof granted at the request of the claimant, the term granted for the delivery of data or reports requested from public sector institutions at the request of the claimant and the suspension of the process when the Tax Administration orders the verification or complementary determination within of the claim process.

If the administrative authority does not issue a resolution within the legal term, the “administrative silence” is considered tacit acceptance of the claim. Despite this tacit acceptance, the Tax Administration has the obligation to issue a written resolution.

There is no tacit refusal.

Once the administrative authority has issued the resolution, the taxpayer may file a judicial claim before the competent judicial body.

The controversies between the tax authority and the obligated subjects or taxpayers usually arise when the assessment acts that determine tax obligations establish responsibilities, when there are consequences derived from these or when new regulations, ordinances or resolutions are issued on tax matters.

In judicial matters, the competent tax courts control the legality of administrative acts, controversies and even the abuse of power.

Resolutions that deny in whole or in part claims, compensation requests, payment facilities, administrative silence or final resolutions in claims or requests for excess payment or undue payment, sanctions for breach of formal duties and payment settlements are all challengeable.

In general, those who consider themselves affected can challenge the relative administrative acts by Ecuadorian law.

Those who consider themselves affected by acts or decisions of tax authorities can challenge them in court proposing an ordinary trial that is conducted in first and only instance in the District Court of Tax Litigation of the plaintiff's jurisdiction. The procedural parties are: (i) the actor or plaintiff, which can be a natural or legal person, institutions, etc, who challenges the act or decision infringing on rights; and (ii) the defendant, which is authority that issued the contested act.

The tax trial is an ordinary procedure that is conducted in a district court in the plaintiff՚s jurisdiction.

The stages of the judicial procedure are set out below.

• Presentation of the claim or lawsuit, which initiates the litigation and that must meet the requirements of: 
1. legitimacy of the plaintiff: the persona legitimately affected;
2. opportunity: must be presented within 60 days of notification of the challenged act or three years in actions of excess payment, undue payment, or returns (these terms are calculated from the date of payment or determination/assessment); 
3. competent authority: the claim or lawsuit must be presented in the district court of the plaintiff’s domicile; and
4. comply with form and content requirements: indicating who appears, the right by which they do (their own right or on behalf of others), the act that is contested, circumstantial relationship of the contested act, factual and legal grounds of the lawsuit, authority against whom the claim is filed, place to receive notifications, enunciation of evidence, specific claim, amount, and attached documents.
• Qualification of the claim/lawsuit and payment of bond: the judge-rapporteur must analyse the admissibility requirements, being able to order to clarify or supplement the claim, after which they order the payment of the bond of 10% of the amount challenged in cases where the dispute is due to the difference in taxes, surcharges, interest and fines that the authority seeks to collect. The bond will be returned if the ruling is favourable to the plaintiff. If the payment was in cash, it will give rise to interest in the plaintiff’s favour at the same rate as the credits against the active subject. 
• Summons and answer to the lawsuit: Ecuador's procedural system establishes that these acts must comply with formalities to ensure the right to defence, acting in due form, within the legal deadlines and observing the formalities, notifying both the defendant authority and a third party that appears as the holder of a right in the administrative procedure. Failure to respond to the claim will be taken as the refusal or ratification of the challenged act or resolution. 
• Preliminary hearing: of the three magistrates/judges that make up the court, it is up to the rapporteur-judge to direct the procedural acts. They convene the preliminary hearing in which the parties and the court magistrates/judges intervene, giving way to hearing the parties. The actor/plaintiff formulates the points at issue, the right they consider assists them while the defendant raises the exceptions to the claim, the evidence is proposed, and the judges decide on the admissibility.
• Judgment hearing: this is carried out in the same way in the presence of all the magistrates/judges and the parties argue the legal and evidentiary arguments on the facts at issue, as well as the evidence and expositions of experts, granting the right of reply and opposition to each as well as cross-examination. 
• Sentence or decision: on the merits of the evidence, the court proceeds to issue the decision that puts an end to the dispute. The parties may request clarification or extension of the sentence without submitting an appeal. 
• A single trial hearing may be held when the nature the litigation focuses only on elements of law. 
• Cassation appeal: Ecuador's procedural regime does not contemplate an appeal, it could be said that the controversy ends with the sentence. The procedural regime provides for the cassation appeal that is the competence of the National Court of Justice (Supreme Court of Justice) in the Specialised Chamber of Tax Litigation. The aim of the cassation appeal is to carry out the control of the legality of the ruling but in no case does it give rise to the review of the evidence presented in the previous instance. The aggrieved party in the judgment is the only one who can file it and it may be filed up to 90 days after the execution of the order or sentence/decision. It is possible to suspend the execution of the sentence/decision or order by paying a security bond within ten days of the qualification of the cassation appeal; the decision of the District Tax Court will be executed. 
• The cassation procedure focuses on establishing whether there were procedural nullity defects that cannot be corrected such as: omission of precepts in the assessment of the evidence, lack of motivation, omission of issues raised, decision on aspects not requested in the lawsuit, lack or wrong application of rules of substantive law, including mandatory jurisprudential precedents, which were decisive in the decision. This process has fewer stages, no evidence is presented, it begins with the presentation of the brief filed for the cassation appeal, which must meet the requirements established in the procedural regime. Once admitted, the counterpart must be notified with the content of the appeal so that it can be answered within 30 days. With or without an answer, a hearing will be called and within 30 days the resolution/decision will be issued, either by rescinding the sentence, replacing the erroneous legal grounds with those it deems correct or by rejecting the appeal. 
• End of the litigation by mediation: the litigious processes are also terminated by total transactional agreement between the procedural parties that leads to the filing of the case without ordering costs. 

Importance and Relevance of the Evidence

The procedural regime provides that all the facts alleged by the parties must be proven. In tax disputes, the evidence must refer to the economic transactions that give rise to the conflict, to establish the veracity of the taxable facts that are being challenged, the generating or operative event, and the existence of the obligation and its amount. 

Admissible Evidence

Any type of evidence that does not violate due process or the law is admissible, except the declaration of public servants. 

Documentary Evidence

The documents that are duly certified and do not suffer from amendments that compromise their content will have probative value. 

Chance

In order for them to attest to the process, all the evidence must be stated in the initial claim or lawsuit document and attached at the time of filing.  

Evidence Practice

Evidence will be given orally at the trial hearing or in the second phase of the single hearing.

The plaintiff must prove the facts that they have stated in the affirmative in the complaint and that the authority has denied. The administration is not obligated to announce evidence if its response is purely negative. The Tax Code establishes that on contested acts, the Tax Administration has the burden of proof responsible for the evidence of the facts and acts of the taxpayer from which it has concluded that there is a tax obligation and its amount. However, the law establishes that tax administrative acts enjoy the presumptions of legitimacy and enforceability, and so the taxpayer needs to prove the inadmissibility or illegality of the act that they challenge.

Submission of Evidence

The evidence must be submitted with the claim, since the law states that the documentary evidence available to the parties or which it was possible to obtain shall be attached to the claim, the response to the claim, the counterclaim and the response to the counterclaim. 

The evidence to which it is impossible to have access must be announced in the claim and, if the documents or information are not in the possession of the parties and must be obtained through the assistance of the court, the claim will request that the court order the other party or third parties to deliver or facilitate it. 

The evidence that is not announced in the lawsuit may not be introduced or reproduced in the trial; however, evidence not announced in the claim, the response to the claim, the counterclaim and the response to the counterclaim may be requested, even before the trial or sole hearing is called, provided that it is proven that the party was not aware of it or if, having known of it, could not dispose of it; this request may be accepted or rejected by the court according to its sound judgment. 

In the judicial sphere, disputed tax or direct actions must be filed within a maximum term of 60 days from the day following the notification of the tax administrative act or the event or act on which the action is based. The actions of undue payment, excess payment or returns of what was duly paid will be proposed within a period of three years from the time the payment was made or from the determination. Therefore, this is the time frame within which evidence should be obtained and submitted. 

Admissibility of Evidence

In the preliminary hearing, the parties will announce the evidence, as indicated in the complaint and their counterclaim. At this stage, the court will admit or reject, ex officio or at the request of a party, irrelevant, useless and irrelevant evidence. 

Evidence Practice

All evidence must be given orally at the trial hearing. Documentary evidence will be read and publicly exhibited in their pertinent part. In the case of electronic or dematerialised documents, the delivery will be carried out by the appropriate technological means. 

In the case of expert evidence, although the evidence is presented with the lawsuit, the expert must appear at the trial hearing and support the report; otherwise, the report will not have probative value. At this stage, the parties may question the expert under oath about their suitability and impartiality and about the content of the report. 

Possibility of Agreement

The parties can reach an agreement through a mediation process at any time in the judicial process; however, only if it is raised during the preliminary or single hearing, will the judicial process be suspended. If there is already a sentence, the agreement may only deal with the forms of compliance with the obligation and possible facilities that may be agreed for this, including the imposition of precautionary measures. 

The jurisprudence issued by the ECJ and the ECHR is not binding on Ecuador and, therefore, national courts do not usually consider it. The judgments of the Court of Justice of the Andean Community are binding and considered. The doctrine and sentences of other countries are usually taken as a reference if the internal legislation is similar. The international guidelines of the OECD are not usually considered in judgments as Ecuador is not a member of this organisation and does not apply BEPS recommendations in a mandatory manner. However, in terms of transfer pricing, the internal regulations do expressly state that the "Guidelines on Transfer Pricing to Multinational Companies and Tax Administrations", approved by the OECD, should be taken as a technical reference; therefore, in that particular case they are relevant. 

There is no appeal against the judgment handed down in the first and sole instance by the District Court for Tax Litigation. The legislation contemplates only the cassation appeal, before the National Court of Justice (Supreme Court), which only controls the legality of the ruling, but does not analyse the procedural evidence. 

The cassation decision is final. However, there is the possibility of appearing before the Court of Constitutional Guarantees if it is considered that rights guaranteed in the constitution have been violated. 

The District Court for Tax Litigation acts as the first and sole instance, and the Specialised Chamber for Tax Litigation of the National Court of Justice is responsible for dealing with cassation appeals. 

The aggrieved party in the decision may file their appeal up to 90 days after the order or sentence/decision has been executed. It is not appropriate to sue again for acts that have already been judicially resolved. 

There is no appeal against the judgment handed down in the first and sole instance by the District Court for Tax Litigation. The legislation only contemplates the cassation appeal before the National Court of Justice (Supreme Court), which controls the legality of the ruling but does not analyse the procedural evidence. 

Ecuadorian legislation does not contemplate the possibility of appealing judgments on tax disputes. This means that the plaintiff can only file a cassation appeal.

In the first and sole instance, the case is processed in the District Court for Tax Litigation of the domicile of the plaintiff.  The District Court is composed of three judges of the provincial jurisdiction.

The cassation appeal is substantiated in the Specialised Chamber of Tax Litigation of the National Court of Justice in which three national judges will decide the case.

Since 2021, conflicts related to any tax can be resolved through the alternative method of conflict resolution of mediation. This is the only alternative method to resolve tax conflicts allowed in Ecuadorian legislation.

Considering that tax conflicts can be resolved through a mediation agreement, this implies that a consensus must be sought between the taxpayer and the Tax Administration in certain conflicts. 

Mediation procedures are carried out before a mediation centre authorised by the Council of the Judiciary and are confidential. They are led by a mediator, who is a person trained in methods to improve communication between the parties. If there is consensus, an agreement act is signed, which produces the same effects as an enforceable judgment. 

The process is flexible; therefore, the duration and the number of hearings that are held depend on the will of the parties.

Ecuadorian law contemplates agreements that reduce interest or surcharges. The law expressly establishes the possibility of reducing up to 100% interest, or failing that, reducing the applicable rate, if the taxpayer agrees to pay the main obligation in cash. 

Ecuadorian law also establishes that fines are the object of a transaction, however, the SRI has indicated that they will only mediate in these disputes regarding the payment terms.

Ecuadorian law establishes the possibility of making consultations to the Tax Administration; the responses or pronouncements from the tax authority are binding. This allows taxpayers to know the Tax Administration’s criteria in certain specific situations. 

Through a general memorandum, the Tax Administration has indicated that the responses to consultations are intended to provide legal certainty to taxpayers, regarding the interpretation, scope and specific application of the legal provisions relating to taxes under its jurisdiction, competence and management. 

The pronouncements of the Tax Administration, in this context, do not have the legal effect of the declaration or recognition of a right, or the certification of compliance with tax obligations of the taxpayer. 

The response to a tax query cannot qualify and guarantee compliance with the factual budgets for an exoneration, deduction, reduction, refund or any other type of tax incentive or benefit. 

The response or pronouncement of a formal tax consultation does not constitute a title, certificate or endorsement that must be required to carry out administrative or private procedures, since the facts exposed in the consultation are subject to subsequent verification by the SRI in the respective tax control processes carried out. 

There is no limitation regarding the value of a claim for it to be submitted to mediation. However, the concessions that the tax administrations can make within these processes are regulated; the administrations can only concede in factual aspects of uncertain valuation and on precepts of indeterminate legal terms. To define the elements, equity must be used since said agreements are not subject to strict rules. 

In the event of signing a full or partial agreement in a mediation process, this document has the same effect as an enforceable judgment and therefore cannot be challenged in judicial or administrative proceedings. 

Normally, the mediation processes are directed by a single mediator, the mediators can be those who have accredited compliance with 120 hours of training and are registered as mediators at a mediation centre approved by the Council of the Judiciary. 

In Ecuador, it is possible to resolve disputes resulting from transfer pricing or indirect determination through the mediation procedure, considering that the Administration may only cede on factual aspects of uncertain valuation and on indeterminate legal precepts. 

Additionally, Ecuadorian legislation provides for the possibility of formulating consultations on prior valuation of operations carried out between related parties for the determination of transfer prices with this mechanism, the aim being to avoid possible conflicts with the Tax Administration. 

There is a direct relationship between the tax determinations or assessments and the establishment of tax infringement or offenses. Despite the lack of an express rule regarding this relationship, the criteria are that it is necessary for the determination process to have previously been completed and said act to be final in order to initiate a sanctioning process. 

There are different tax offenses codified by the Tax Code and the Comprehensive Organic Criminal Code (COIP) that carry different sanctions. 

In reference to contraventions, each administration must carry out the corresponding sanctioning procedure. 

For tax crimes, the tax authorities are obliged to make the corresponding complaints so that the prosecutor’s office begins with the investigative processes into possible crimes against the Tax Administration.

There is a clear differentiation between administrative and criminal processes: administrative processes are carried out to determine offenses classified as contraventions while criminal judicial processes are for offenses classified as crimes. 

Ecuadorian legislation does not establish as a condition that the determination process of a tax obligation must be completed to initiate a sanctioning process; however, the judicial bodies have specified the need for the existence of a firm determination to be able to proceed with the sanctioning processes. 

The tax authorities oversee the initiation of a tax sanctioning process when they consider that a tax offense has occurred.

Normally, the possible infringement is detected during a tax inspection. 

Criminal proceedings against a taxpayer must be initiated when the prosecutor’s office considers that there is evidence of the commission of a crime established in Article 298 of the COIP.

It is necessary to distinguish between the administrative sanctioning process and the judicial criminal process. 

Administrative Sanctioning Process

The administrative sanctioning process begins ex officio through an administrative act issued by the investigating body. The administrative act of initiation will be notified, with all the proceedings, to the petitioning body, the complainant, and the accused person. 

The taxpayer has a term of ten days to argue, provide documents or information that they deem appropriate and request the practice of evidentiary proceedings. They will also be able to recognise their responsibility and correct their behaviour. 

The instructor will carry out ex officio the actions that are necessary for the examination of the facts, collecting the data and information that are relevant to determine the existence of responsibilities subject to sanction to finally issue the resolution or decision regarding the possible administrative infraction or contravention. 

Judicial Criminal Process

The criminal tax process begins with the inquiry stage. 

In the preliminary investigation phase, the elements of conviction, charge and defence will be gathered, which allow the prosecutor to decide whether to formulate the accusation and, if so, will enable the person investigated to prepare their defence. 

The purpose of the investigation stage is to determine elements of conviction, charge, and discharge, which allows the formulation or not of an accusation against the person prosecuted. 

The purpose of the evaluation and trial preparation stage is to know and decide on issues of procedural, prejudicial, jurisdiction and procedure; establish procedural validity, assess and evaluate the elements of conviction on which the prosecutor’s accusation is based, exclude elements of conviction that are illegal, delimit the issues to be discussed in the oral trial, announce the evidence that will be practised at the trial hearing and approve the evidentiary agreements reached by the parties. 

The trial is the main stage of the process. It is substantiated based on the prosecutor’s accusation. 

For administrative infractions, it is possible to make an upfront payment of the additional tax assessment and thereby obtain reductions in the potential fines if the offender acknowledges their responsibility, corrects their behaviour, and records these facts in the file. 

Ecuadorian law does not establish the possibility of reaching agreements on tax crimes. In fact, Article 663 of the COIP expressly excludes infractions against efficient public administration or that affect the interests of the state from all types of ADR. 

The possible appeal routes against a decision adopted by the court of first instance on a criminal tax offense are: 

• a second instance appeal, in which the evidence and arguments are analysed again; 
• a cassation appeal, which falls under the jurisdiction of the National Court of Justice and will proceed against the decision in which the law has been violated, either for expressly violating its text, or for having made an improper application of it, or because it has been misinterpreted or not properly interpreted; 
• an appeal for review before the National Court of Justice after execution of the conviction for one of the following causes: 
1. when the existence of the person believed to be dead is proven; 
2. when there are, simultaneously, two convictions on the same infraction against various sentenced persons that, because they are contradictory, reveal that one of them is wrong; or 
3. if the judgment has been handed down based on false documents, false witnesses or malicious or erroneous expert reports; and 
• the recourse of fact, which will be granted when the judge or court denies the recourses opportunely filed and that are expressly determined in the law. 

There is no express rule or judicial decision that excludes operations under the GAAR, SAAR, transfer pricing rules or anti-avoidance rules from administrative or criminal sanctions. Article 298 of the COIP that establishes the crimes of tax fraud does not make any differentiation and so these types of actions can be classified as crimes. 

Usually, the Tax Administration, through acts of determination or assessment, establishes the tax to be paid when it considers that the tax agreement should not have been applied, or that it was applied incorrectly. To cancel the tax burden, the taxpayer will need to challenge the value determined in administrative and/or judicial proceedings. 

Agreement procedures or arbitrations are not usually initiated to resolve these conflicts. Ecuador does not have legislation on the mutual agreement procedure in the application of CDIs, even though most of the agreements contain clauses that provide for an amicable procedure. Ecuador has not signed the MLI. 

In Ecuador, the principle of reality over form, contained in Article 17 of the Tax Code, applies to all situations, including cross-border operations. The jurisprudence and tendency are to allow its application in a general way; it has even served as a basis for ignoring the application of tax agreements and treaties. Ecuador has not signed the MLI and, therefore, it is not expected that there will be an impact on the current situation. 

The transfer pricing regime is regulated in the Internal Tax Regime Law. When the Tax Administration establishes reassessments under this regime and the act of determination is challenged, the challenge is usually based on these internal regulations and the "Guidelines on Transfer Pricing to Multinational Companies and Tax Administrations", approved by the Council of the OECD in force as of 1 January of the corresponding fiscal period. 

Ecuadorian legislation does not contemplate advance agreements on transfer pricing; however, it does establish the possibility for the taxpayer to consult the methodology to define transfer prices. The response or resolution of the query issued by the Tax Administration is binding for the current fiscal year, the previous one and the three following ones. In the same way, the Tax Administration can formalise agreements with other administrations for the purpose of jointly determining the value of the operations. 

Resolution No NAC-DGERCGC14-00001048, issued by the SRI, specifies the stages of the procedure to be followed as set out below: 

• The presentation of the query or consultation, the provision of the information required in the resolution, and the inclusion of a proposal for the applicable valuation method in accordance with the arm’s length principle. 
• The admission or in admission of the consultation when it is decided whether or not it meets the necessary requirements. 
• The Tax Administration may request, at any time, from both the taxpayer and third parties, the additional information it deems necessary in order to form a complete criterion regarding the query; the taxpayer may also present additional information not requested but that they consider necessary for the resolution. 
• The resolution of the query is to be issued by the general director of the SRI within a period of two years from the date of submission of the query or consultation. 

The situations that generate the greatest conflict in cross-border issues are loans and the payment of interest, which are usually ignored in the application of the general anti-abuse rule to be understood as a payment of dividends. Another topic that generates controversy is transfer pricing. 

This issue does not arise in Ecuador, a non-EU jurisdiction.

This issue does not arise in Ecuador, a non-EU jurisdiction.

This issue does not arise in Ecuador, a non-EU jurisdiction.

This issue does not arise in Ecuador, a non-EU jurisdiction.

Ecuador has not signed the MLI. Most of the CDIs have a specific clause on the possibility of initiating a friendly procedure; however, only two agreements, with Canada and Chile, provide for the possibility of resorting to arbitration. 

As first noted at 8.1 Mechanisms to Deal With Double Taxation, Ecuador has not signed the MLI. Most of the CDIs have a specific clause on the possibility of initiating a friendly procedure; however, only two agreements, with Canada and Chile, provide for the possibility of resorting to arbitration and no legislation has been developed to regulate such a procedure. 

In any case, the provision contained in both CDIs establishes the following. 

• If any difficulty or doubt arises related to the interpretation or application of the agreement and cannot be resolved by the competent authorities according to the mutual friendly agreement procedure, and the difficulty or doubt is the result of a determination made by one or both contracting states, the case may be submitted to arbitration. 
• Both competent authorities and the taxpayer must agree, in writing, to abide by the decision of the arbitration tribunal. 
• The arbitration award in a particular case will be binding on both states. 
• The procedure will be established through the exchange of notes between the contracting states. 

As first noted in 8.1 Mechanisms to Deal With Double Taxation, Ecuador has not signed the MLI. Most of the CDIs have a specific clause on the possibility of initiating a friendly procedure; however, only two agreements, with Canada and Chile, provide for the possibility of resorting to arbitration and no legislation has been developed to regulate such a procedure. The procedure will be established through the exchange of notes between the contracting States.

As first noted at 8.1 Mechanisms to Deal With Double Taxation, Ecuador has not signed the MLI and no arbitration cases have been initiated in relation to the agreements with Canada and Chile; to date, it is unknown whether any arbitration processes have been initiated to resolve conflicts. 

As first noted at 8.1 Mechanisms to Deal With Double Taxation, Ecuador has not signed the MLI and no arbitration cases have been initiated in relation to the agreements with Canada and Chile.

As first noted at 8.1 Mechanisms to Deal With Double Taxation, Ecuador has not signed the MLI and no arbitration cases have been initiated in relation to the agreements with Canada and Chile. Nor has a procedure been developed to be able to start friendly proceedings as provided in the above-mentioned CDIs. Therefore, there is still a long way to go in the application of processes that allow for the mitigation of controversies in the field of international taxation. 

As first noted at 8.1 Mechanisms to Deal With Double Taxation, Ecuador has not signed the MLI; the CDI agreements with Canada and Chile do not establish any responsibilities in regards to confidentiality. 

In Ecuador, to resolve tax conflicts, the taxpayer can file a challenge at the administrative or judicial level; mediation is a form of alternative dispute resolution methods that can be used; this method was only implemented at the end of 2021 and has been very well received because, at first, it entailed the possibility of applying remission on interest and surcharges. In relation to conflicts of an international nature, as previously noted, Ecuador has not signed the MLI and no arbitration cases have been initiated in relation to the agreements with Canada and Chile. 

As first noted at 8.1 Mechanisms to Deal With Double Taxation, Ecuador has not signed the MLI and, to date, there have not been any arbitration cases in relation to the agreements with Canada and Chile. Nor has a procedure been developed in order to be able to start friendly proceedings as provided in the CDIs.  

However, usually in mediation and/or judicial proceedings that are carried out internally, independent lawyers are hired by taxpayers. The state is always defended or represented by public officials that work in the same tax administration. 

In Ecuador, filing a challenge at the administrative level is free and there are no fees to be paid to the authorities. 

In Ecuador, access to justice is free and, therefore, filing a challenge in all instances, in any matter, is free. In the case of tax matters, trials have only one instance; but it is possible to file a cassation appeal against the sentence or court decision. Another possibility is the Extraordinary Action of Protection against the resolution or decision that resolves the cassation appeal. 

However, and although access to justice is free, if the taxpayer wants to suspend the execution of the administrative acts, they must pay a 10% bond in the first and sole instance. If a cassation appeal is filed against the sentence or court decision, the court will set a new bond, which will suspend its execution. 

The law allows public sector institutions to be liable for duly qualified damages arising from their actions or omissions. However, before a public authority is ordered to pay the damages in a tax dispute, it will be necessary for the taxpayer to initiate another process to demonstrate the existence of the damage and the right to repair.  In the case of taxpayers, the indemnity to the administration is set at a surcharge of 20% of the determined obligation value.

In tax matters, the only alternative method of dispute resolution allowed in Ecuadorian legislation is mediation; the cost must always be borne by the person requesting the mediation, which is usually the taxpayer, and its value will depend on the rate of each mediation centre. The mediation centre of the Council of the Judiciary provides free mediation. 

There are no publicly available statistics on pending cases. 

There are no publicly available statistics on the number of cases relating to different forms of tax. 

There are no publicly available statistics on the proportion of tax cases that end in total or partial success for either the inland revenue (Servicio de Rentas Internas) or the taxpayer.

In the authors’ experience, the following strategies can be employed to mitigate the risk of tax controversy:

• keep the information and/or documentation of the key transactions;
• employ the advice of a professional in the area during the legal analysis of the accounting process;
• have up-to-date advice on tax reforms; and
• implement comprehensive and accurate tax compliance procedures.