Ecuador issues Technical Sheet for standardization of transfer pricing analysis

Local contact

EY Global

7 Dec 2023
Subject Tax Alert
Jurisdictions Ecuador
  • The Tax Authority has issued a new version of the Technical Sheet for the Standardization of Transfer Pricing Analysis.
  • This Tax Alert highlights some of the changes established by the new document, including to filing procedures, the addition of new content to the Comprehensive Transfer Pricing Report, changes to the formulas for applying working capital adjustments and new comparability factors for the acceptance of comparable companies in Ecuador.

Executive summary

The Ecuador Tax Authority has issued the Technical Sheet (version 8) for the Standardization of Transfer Pricing Analysis, applicable as of fiscal year 2023.

The Technical Sheet makes substantial modifications to filing procedures, the content of the Comprehensive Transfer Pricing Report (Local File), formulas for applying working capital adjustments and comparability factors required for selecting comparable companies in Ecuador.

Main changes to the Technical Sheet

The following text highlights Changes made in version 8 of the Technical Sheet.

Comprehensive Transfer Pricing Report (Local File)

The Comprehensive Transfer Pricing Report must always be submitted in PDF format, through the available channels, verifying the complete uploading of all the documents and Annexes accompanying the report.

The printed index of the content must contain the signature of the legal representative (electronic signature) or the holder of the Tax Identification, in the case of natural persons, as part of the Report.

Inter-company transactions

Information pertaining to the profit and loss and/or balance sheet account recording a transaction with related parties must be included in the summary table of these transactions.

Although the Transfer Pricing (TP) Technical Sheet retains rules on the operations of Other Assets and Other Liabilities, the tax regulation and the current version of the DIMM1 Annexes of Transactions with Related Parties do not consider these transaction types (software provided by the Tax Authority to file the TP Annex), so taxpayers may find it difficult to report them.

Characteristics of the operation

There is a new obligation to report the development of intangibles in Ecuador that have been transferred to another country and their date of transfer.

The report includes a table with more detailed information on the characteristics of the agreements that support intangible exploitation operations:

  • Licensor and licensee
  • Type of contract
  • Territory (target market or use of the intangible)
  • Right of exclusivity
  • Right to sublicense
  • Nature of the intangible
  • Functions (licensor and licensee)
  • Risks (licensor and licensee)
  • Expected scope/benefits
  • Calculation basis
  • Royalty percentage
  • Amount
  • Validity
Characteristics of the operation

Financing operations: The Comprehensive Transfer Pricing Report requires the detail information regarding the amount of the loan, term, guarantees, solvency of the debtor, interest rate and the economic essence of the operation (not only its form). In addition, the new TP Technical Sheet also requires addenda to be included with the contracts if the financing conditions change.

Investment operations (financial returns): Characteristics that must be documented include the type of investment, amount, term, guarantees granted, interest rate and the economic essence of the operation (not just its formalities).

Functional analysis

The Tax Authority requires detailed information be included in the Local File regarding the Multinational Group, the taxpayer and the related parties with which the taxpayer conducted transactions.

This information is usually required by other Tax Authorities through a Master File, Local File and Country-By-Country Report, which are the deliverables under Action 13 of the Base Erosion and Profit Shifting (BEPS) initiatives established by the Organization for Economic Co-operation and Development (OECD).

Detailed information is required regarding the functions, assets and risks of the local company and the related parties with which it carried out operations through the fiscal period.

Documentation must be provided regarding the intangibles, activities and financial positions, corporate restructuring, acquisitions and divestments of the Multinational Group that have taken place during the fiscal year.

Copies and details of all of the Multinational Group's existing unilateral and bilateral/multilateral advanced price agreements must be provided.

Regarding the contractual terms, a new table must be included detailing the relevant characteristics, such as the price, amount of the transaction and profit margin.

Profit-level indicator selection

For the calculation of the profit-level indicator of comparable companies, the taxpayer must use the information from third parties at the end of the fiscal year. This requirement makes it impossible to use of quarterly issued information (i.e., 10-Q reports).

Financial information must be used if the fiscal year ended after 30 June of the year being analyzed.

For comparable companies, financial information from the previous year may be used if the taxpayer can demonstrate that the relevant conditions in both periods did not change.

For the selection of comparable companies, only the financial information available in Annual Reports will be accepted for the Transfer Pricing analysis.

In this case, the Tax Authority will not accept the use of audited statements reports or non-audited financial information. This may have implications when dealing with companies from jurisdictions with less information available (i.e., Asia, Europe, Latin America, Ecuador).

Information on selected comparables

The taxpayer must submit as an annex a description of the business activity and business characteristics of comparable companies, in addition to identifying the functions performed, assets used and risks assumed.

Additionally, the company's country of residence and the source of information must be declared (e.g., official websites).

If the comparable company does not have an annual report, it will not be acceptable to use audited financial statements or unaudited financial information as a replacement.

The submitted Local Files and their annexes will be final and binding once the Tax Administration initiates a determination process and, therefore, the taxpayer will not be able to submit substitute documents.


For additional information with respect to this Alert, please contact the following:

EY Addvalue Asesores Cia. Ltda.
  • Javier Salazar, Ecuador Managing Partner
  • Alexis Carrera, Transfer Pricing
  • Carlos Cazar, ITTS
  • Jorge Ramírez Cuesta, Transfer Pricing

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.