LATIN AMERICA
their literal sense, that is, referring to businesses engaged in games whose results are exclusively determined by chance. Betting games which are not exclusively games chance are therefore not prohibited in Ecuador. Executive Decree 742 recognizes the legality of sports betting, as it has created a tax on this sector that will come into force on January 01, 2024. This means that there will be no special tax on sports betting until that date. Likewise, their legality cannot be questioned because, formally, with Executive Decree 742, the government has recognized it as an economic activity on which it can create and collect taxes. However, the method of the tax created by Executive Decree 742 also presents constitutional problems because it violates the principle of equality before the Law. The tax varies depending on whether the operator is or is not domiciled in Ecuador, although the profits in either case come from Ecuadorian sources. Indeed, the taxed activity is the receipt of income from Ecuadorian sources for live sports betting through the Internet or any other means.
The tax rate is 15 percent, but the taxable fact is different depending on whether the operator is domiciled abroad or in Ecuador. If an operator is not domiciled in Ecuador, the taxable fact is the total of the “bets” or the “deposits” made by the players on a monthly basis. Unfortunately, the law is unclear. Obviously, it is worse for the international operator to pay tax on deposits rather than on bets, since deposits do not constitute income of the international operator. But in both cases, it is unconstitutional due to its confiscatory effects. Through Decree 876, issued on September 15, 2023, President Lasso regulated Decree 742, however, he did not clarify the taxable fact with regards to the tax on international operators. The only thing he did was ratify that only betting on sports predictions is allowed, but not online casino games or any other type of game of chance, whether physical or remote. For operators domiciled in Ecuador, the taxable income will be the total amount of the monthly income generated from bets made by the players minus the total amount of prizes paid during that same month. It is unreasonable that, if the source of income is Ecuadorian,
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