Ecuador: New tax on sports forecasting companies from 2024

After the Constitutional Court occured, on June 16, 2023, the tax reform or Law for Strengthening the Family Economy, the new Single Tax on Sports Forecast Operators will enter into force on January 1, 2024.

In Ecuador, gambling businesses have been prohibited since the Popular Consultation of May 2011. However, these platforms are defined as sports forecasting sites, since bets are made based on the participant's knowledge of the sport in the one who is betting, and not on chance or luck.

This is how the new tax will work: Tax for national sites National sports forecasting companies; that is, who have a Single Taxpayer Registry (RUC) in Ecuador, have to pay 15% tax on their net income. This means that, from the income they receive, they have to subtract the value that they have paid for prizes to the winners of the bets and, on that value, pay 15%, explains the tax lawyer Javier Bustos.

Thus, for example, if the company receives USD 1,000 from the bettor and had to pay a USD 200 prize, it will have to pay 15% tax on the net USD 800 received. In addition, national sports forecasting platforms have to withhold 15% tax on the value of the prize from the winners of bets. Hence, if the player won $500, the company will withhold $75 of tax and the player will only receive $425.

And what about the international platforms? 

The SRI has not yet found the mechanism for international sports forecasting platforms to pay the tax directly, since they do not have offices in Ecuador or representatives in the country. Therefore, the tax reform establishes that in these cases, 15% of the tax is withheld from the player. Thus, for example, when the player makes a payment of USD 1,000 on the international platform, using credit or debit cards, or using collection systems such as couriers, 15% of that tax will be withheld. Hence, the player would not be betting USD 1,000, but USD 850.

María Augusta Díaz, representative of the local company SportBet, said that the measure contravenes the principles of equality that must govern the tax companies, since international companies would not be directly paying the tax.