0% VAT and ISD for Electricity Sector Goods in Ecuador: What Executive Decree No. 530 Changes

Ab. Gabriel Pinto

2 hours ago

5 min read

Equipment, turbines, inverters, generators, and the other goods set forth in the new Article 194 of the Regulations for the Application of the Internal Tax Regime Law may be purchased or imported at a 0% value added tax (VAT) rate, provided they are used in the installation, expansion, rehabilitation, repowering, operation, and maintenance phases of infrastructure intended for the generation, transmission, distribution, storage, and commercialization of electric power. In addition, operations related to their import will be subject to a 0% Currency Outflow Tax (ISD) rate. This is provided for in Executive Decree No. 530 of November 10, 2026.

However, it is not enough for the goods to be used in electricity-sector activities: they must appear on the official lists to be issued by the Ministry of Environment and Energy. The 0% rates will apply as of the day after the publication in the Official Registry (Registro Oficial) of the regulatory act issuing those lists.

Key Points of the Reform

VAT

Goods covered by the new Article 194 may be purchased in Ecuador or imported at a 0% VAT rate. These goods are equipment, turbines, inverters, generators, machinery, materials, supplies, components, systems, and installations, as well as their parts, pieces, and other accessories.

ISD

Transfers and payments of money abroad related to the import of these goods may be subject to a 0% ISD rate.

Conditions

The goods must be used in the installation, expansion, rehabilitation, repowering, operation, and maintenance phases of electric power generation, transmission, distribution, storage, and commercialization infrastructure.
They must appear on the official lists to be issued by the Ministry of Environment and Energy, together with the Internal Revenue Service (SRI) and the National Customs Service of Ecuador (SENAE). Using the goods in the electricity sector is not enough.

Aplication

The 0% rates will apply as of the day after the publication in the Official Registry of the regulatory act issuing those lists.

VAT Paid in 2026

If your company paid VAT when purchasing or importing these goods—provided they appear on the official lists—between January 1, 2026, and the date the decree enters into force, it may deduct that VAT as an expense when calculating its 2026 income tax. If it opts for this treatment, it may no longer use that VAT as a tax credit or request its refund or offset. See the requirements below.

What Goods Are Covered?

For purposes of applying items 11 and 19 of Article 55 of the Internal Tax Regime Law—the latter exclusively with respect to equipment and accessories for solar photovoltaic generation—the new Article 194 covers equipment, turbines, inverters, generators, machinery, materials, supplies, components, systems, and installations, as well as their parts, pieces, and other accessories.

Use

These goods must be used in the installation, expansion, rehabilitation, repowering, operation, and maintenance phases of infrastructure intended for the activities of generation, transmission, distribution, storage, and commercialization of electric power.

Energy sources

The provision covers goods related to thermal, wind, hydroelectric, solar photovoltaic, geothermal, tidal, wave, biomass, biogas and green hydrogen, and nuclear energy sources, and other transition energy sources, as well as electric power storage systems and their parts, pieces, and accessories.

Autonomous Energy Districts (DAE)

The infrastructure of Autonomous Energy Districts (DAE) is included, whether or not they are connected to the National Interconnected System, in accordance with the conditions of their respective enabling titles.

How Does the 0% Rate Apply?

The reform provides for a 0% rate for two taxes:

VAT

The replacement of Article 194 specifies the scope of the goods eligible for the 0% rate on their transfers and imports, as provided in Article 55 of the Internal Tax Regime Law.

That article establishes a 0% rate for transfers and imports of, among others, “electric power, which shall be developed in the Regulations to this Law” (item 11) and “equipment and accessories for solar photovoltaic generation and wastewater treatment plants” (item 19) (unofficial translation). The latter applies here exclusively with respect to equipment and accessories for solar photovoltaic generation.

ISD

Article 2 of the decree expressly establishes a 0% rate for the operations set forth in Article 156 of the Reform Law for Tax Equity in Ecuador that are related to the import of the goods covered by the new Article 194, provided those goods appear on the list of subheadings.

That article defines the ISD taxable event as the transfer or movement of foreign currency abroad, in cash or through the drawing of checks, transfers, remittances, withdrawals, or payments of any kind, except for offsets, made with or without the intermediation of financial institutions.

In both cases, application of the benefit will be conditioned on the goods being included in the corresponding official lists. Therefore, merely using goods in electricity-sector activities will not be enough to qualify for the 0% rates; it is essential to verify their inclusion in the official lists.

The Ministry of Environment and Energy, in coordination with the Internal Revenue Service (SRI) and the National Customs Service of Ecuador (SENAE), must issue the list of tariff subheadings and the list of local goods products covered by the reform.

Entry into Force and Application of the 0% Rates

The decree distinguishes between its entry into force and the effective application of the 0% rates:

Entry into Force of the Decree

Upon its publication in the Official Registry.

Application of the 0% VAT and ISD Rates

As of the day after the publication in the Official Registry of the regulatory act issuing the official lists.

What Happens to VAT Paid in 2026?

The sole transitional provision of the decree establishes that VAT paid on local purchases or imports of the goods set forth in Article 194 and in the list of subheadings and the list of local goods products, made between January 1, 2026, and the date the decree enters into force, may be recorded as a deductible expense for purposes of determining income tax for the 2026 fiscal year.

Requirements:

The goods must be covered by the new Article 194 and appear on the official lists.
That VAT must not have been used as a tax credit or offset against VAT generated on sales.
The company must keep records that allow those purchases and imports to be identified and verified.

Amounts that benefit from this treatment may not later be used as a tax credit or be subject to refund or offset.

What to Review Now

The reform is relevant for electric power generation, distribution, and commercialization companies, as well as for importers, suppliers, and developers of energy infrastructure. Accordingly, taxpayers should:

Verify the tariff classification and eligibility of their goods.

Review the tax treatment of their purchases and imports.

Assess the application of the transitional provision with respect to VAT paid during the 2026 fiscal year.

How We Can Help

The Tax Department of Meythaler & Zambrano Abogados advises clients on the application of tax benefits and incentives, tax planning for investments, import operations, and compliance with VAT, ISD, and income tax obligations. If your company purchases or imports goods intended for the electricity sector, contact us to review the eligibility of your goods and the treatment of VAT paid in 2026.