Ecuador has become the latest Latin American country to propose levying taxes on over-the-top (OTT) providers of digital services such as Netflix and Spotify. ecuador ott

The measure was approved by 83 votes in favor, 8 against and 37 abstentions, and extends the Value Added Tax (VAT) to international digital platforms.

The new law aims to increase revenues with a temporary tax increase for companies whose annual sales is greater than USD 1 million. It also applies additional taxes to mobile phone plans, and removes some tax exemptions for people who earn more than USD 100 thousand per year.

The initiative to increase taxes on foreign OTTs, as a result of an agreement between the Ecuadorian Government and the International Monetary Fund (IMF), ‘represents about one third of the amount that Ecuador needs to raise in 2020 to continue to fulfill the agreed objectives with the entity’, as reported by Colombian newspaper La Republica.

At a regional level, three of 16 countries already apply VAT to this type of service (Argentina, Colombia and Uruguay), while, according to the ECLAC report, Chile and Costa Rica also evaluate doing it together with Bolivia, Mexico and Peru.

“These are options that should be considered because they allow equal conditions in the market with other companies that are providing services and are domiciled here, which fulfill labor and tax obligations’, said Carrillo,  Ecuadorian Economy and Finance Vice Minister.  ecuador ott