Preferential tax regimes are jurisdictions where income is subject to tax at a rate 60% lower than in Ecuador (Ecuador current corporate income tax is 23%).
US LLCs have been declared to be a preferential tax regime if owned by US non resident aliens and if income is not subject to federal income tax either at the entity level or that of its members.
Preferential tax regimes are treated in the same manner as tax haven jurisdictions. As a consequence, dividends distributed to this type of entities will bear a 13% withholding at source and expenses from certain transactions between Ecuador and this regime may be disqualified as deductibles.
Furthermore, thin capitalization rules will apply to loans granted from US LLCs and transfer pricing regulations and compliance may be triggered.
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