Summary
- Strict interpretation of 0% VAT: The Ecuadorian tax authority (SRI) reiterates that the 0% VAT rate applies only to food products expressly listed in Article 55 of the Law on the Internal Tax Regime; all other food products are subject to the standard 15% VAT rate.
- Processing determines VAT rate: Food products that undergo processing, preparation, combination, or transformation (beyond minimal processes that do not alter their natural state) generally lose eligibility for the 0% VAT rate.
- Correction obligations for taxpayers: Taxpayers must review VAT treatment applied to imports and local transfers of food products and file corrective VAT returns where an incorrect rate has been applied, including payment of interest and penalties where applicable.
Article
On 31 March 2026, Ecuador’s Servicio de Rentas Internas (SRI) published Circular No. NAC‑DGECCGC26‑00000002 in the Official Gazette (Registro Oficial, Fourth Supplement No. 255), providing important clarification on the scope of the 0% VAT rate applicable to food products.
The Circular responds to ongoing practical uncertainty regarding which food products qualify for the reduced VAT treatment following changes in processing methods, product presentation, and commercialization practices. The SRI emphasizes that the 0% VAT rate is strictly exceptional and applies only to products explicitly listed in numbers 1, 2, and 3 of Article 55 of the Ley de Régimen Tributario Interno.
Key VAT Clarifications
The SRI confirms that products in their natural state—and only subjected to minimal processes that do not alter their nature—may continue to benefit from the 0% VAT rate. By contrast, food products that are processed, prepared, cooked, combined, flavored, fortified, or marketed in mixed or bundled presentations typically fall outside the scope of the reduced rate.
The Circular provides a detailed, non‑exhaustive reference list of food products subject to the standard 15% VAT rate, including:
- Processed fruit juices, smoothies, and ready‑to‑drink infusions
- Cooked, seasoned, marinated, or otherwise prepared meats
- Flavored, fortified, or imported dairy products
- Bakery, pastry, and confectionery products that do not meet strict technical definitions
- Processed, canned, or combined food products, including product bundles where at least one item is subject to 15% VAT
Compliance Expectations
The SRI explicitly reminds taxpayers of their obligation to:
- Apply the correct VAT rate when importing or transferring food products locally
- Correct past VAT returns through substitute filings where an incorrect VAT rate was applied
- Pay any resulting VAT differences, along with applicable interest and penalties
The SRI also notes that the criteria set out in the Circular are shared with the National Customs Service of Ecuador, ensuring consistent VAT treatment at the import stage, without limiting customs’ powers on tariff classification.
Practical Impact
This guidance reinforces a narrow and literal approach to the 0% VAT exemption and increases the risk of reassessments where businesses have applied the reduced rate to processed or value‑added food products. Importers, manufacturers, and distributors should therefore review product classifications, processing steps, and invoice VAT treatment to ensure continued compliance.
Overall, the Circular underscores Ecuador’s focus on tax certainty, correct VAT application, and protection of the tax base, particularly in sectors where food products shift between natural and processed forms.
Source esacc.corteconstitucional.gob.ec
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