Ecuador held its last elections last Sunday 4 February 2018, the Ecuadorian people was summoned to vote in a referendum that posed significant constitutional reforms, This process also included a popular consultation to citizens on issues of national importance.
The sixth question of that referendum, He asked citizens if they agree to repeal the “Organic Law to prevent speculation on land values and speculation Tributes”, known as Capital Gains Act, the same that was short-term profit punishing the sale of property with 75% tax. The response of Ecuadorian citizens to this question was largely favorable, so that 72% of the Ecuadorian population said that if the law is repealed Plusvalia, which gave way to the National Assembly of Ecuador processed a bill, as a matter of economic urgency, derogatory of the Law on Capital Gains; the bill was already approved by the National Assembly and will be published shortly in the Official Gazette of the State, where national legislation is published.
Eliminating Capital Gains Act, will reactivate the construction sector, will generate more jobs and boost the economy, because only the announcement of the repeal of this law resulted in a major revival of the real estate sector. Capital Gains Act was short-term, but it caused serious damage in the sector, Gross Domestic Product decreased GDP in at least 1.500 millions of dollars, subject to 115 thousand citizens who are now unemployed and caused the closure of several companies; paradoxically, It had an opposite effect than expected by the government, because it did not control land speculation, but it slowed the construction sector and generated distrust of investment in this sector.
Once repealed the confiscatory tax 75% the utility on purchases, remain in effect the previous tax 10% Usability in domain transfers.
Utility tax in urban land transfer and Plusvalía, It is a municipal tax, whose taxable are the owners of the property sold obtaining a taxable income; There are some deductions that apply in calculating this tax, especially the percentage of 5% for each year of ownership of the property counted from the date of acquisition. This city tax is also deductible from income tax of Ecuadorian natural and legal persons.
