Taxation of lotteries (Ecuador)

Taxation of lotteries

Shortly

Ecuador has withholding income tax from lottery/drawing prizes, unless otherwise provided by law. Organizers act as retention and enumeration agents.

There is an exception to this rule: winnings in lotteries/draws held by Junta de Beneficencia de Guayaquil (Lottery National, Pozo Millonario, etc.) and Fe y Alegría are exempt from income tax under Art. 9 LORTI (LRTI). This is confirmed by both the Ministry of Finance (state reports on "tax expenditures") and the current SRI benefits.

Legal framework and roles

LORTI, Art. 9 (Exenciones): directly refers to the winnings from lotteries/draws exempted from IR if they are sponsored (organized) by Junta de Beneficencia de Guayaquil (JBG) or Fe y Alegría. This is the current norm and is reflected in the documents of SRI/Ministry of Finance 2024-2025.

Retention agents: under SRI regulations, organizers of lotteries, draws, bets, etc. are required to withhold IR from prizes (except for JBG and Fe y Alegría).

Rates and "why 14% vs 15%"

In practice and training materials, there is a "single" withholding rate of 15% from lottery/drawing prizes for unreleased cases (organizer - withholding agent; payment in the month following the payment of the prize).

The internal regulations of a number of Lottery National products (for example, Pozo Millonario) have historically included a 14% deduction "by law" - this can be seen in the texts of the regulations posted by JBG. These documents reflect the old norm and/or internal mechanics of the product, while the overall current "frame" for non-exempt cases is 15%. For JBG draws, the exemption under Art. 9, and the actual tax burden on the recipient of the winnings is zero on IR.

Responsibilities of organizers and winners

Promoter (unless it is JBG/Fe y Alegría): Withholds 15% IR from each prize and remits the withheld monthly within the timeframe set by SRI rules; a single retention document per month per player is allowed.

Winner: withholding tax is considered an IR loan (can be taken into account in the annual declaration). For JBG/Fe y Alegría winnings released, revenue is not included in the IR database.

What's with VAT/ICE?

VAT/ICE are not key taxes for the winnings themselves. ICE tariff lists and lists of goods/services with 0% VAT are regularly updated, but IR for prizes is the main issue for lotteries. In the open explanations of SRI 2024-2025, the emphasis is on IR and withholding (and not on VAT/ICE to win).

Practical scenarios

1. Pozo Millonario (JBG) ticket

The winnings were paid for the product of the National Lottery. Since the organizer is JBG, there is an exemption under Art. 9 LORTI → there is no IR for the tax winner. (Some old Pozo regulations indicated "14%," but the current exemption status was confirmed by SRI/Ministry of Finance).

2. Private brand draw/lottery (not JBG/Fe y Alegría)

The organizer must act as a withholding agent and withhold 15% IR from the prize amount, then declare and pay the withheld in the month following the payment.

3. Payment "in kind" (goods)

Deduction is calculated from the value of the prize; retention/declaration obligations remain. (General withholding mode by prize.)

Frequent questions

Why do I see "14%" in the Pozo Millonario rules?

Because some of the regulations were written/updated during periods of other rates/approaches. Now the benchmark for not exempt cases is 15%, but the prizes of JBG and Fe y Alegría are exempted by law (Article 9 of LORTI), which is confirmed by the current publications of SRI and the Ministry of Finance.

Do I need to declare an exempt prize?

Exemption means that IR is not accrued on such income; at the same time, the general duties of declarations depend on the aggregate status of the taxpayer. Follow SRI's general annual declaration rules.

Basic Logic in Ecuador: Organizer withholds IR from lottery/raffle prizes.

Key exception: Prizes, audited by JBG and Fe y Alegría, are exempt from IR (Art. 9 LORTI) - this is confirmed by SRI/Ministry of Finance documents (2024-2025).

Mentions of 14% in the rules of individual products - a rudiment of past editions; for non-exempt cases, focus on the 15% withholding and monthly reporting of the organizer to SRI.

• LRTI, Art. 9 (Exenciones) - exemption of JBG/Fe y Alegría prizes; confirmation in current organ publications.
• SRI norms on JBG/Fe y Alegría retention agents and exclusion.
• The practice of withholding 15% at the source for prizes (materials on retentions).
• Regulations of Pozo Millonario (14% mention).