IMPACT OF THE CFC REGIME IN ECUADOR: FOREIGN INVESTMENT, TAX EVASION AND CAPITAL TRANSFER

Abstract

In Ecuador, the Controlled Foreign Companies (CFC) regime aims to prevent and avoid tax evasion and the transfer of profits to jurisdictions with low taxation, under international instruments such as the OECD BEPS Plan. However, its implementation faces several risks for foreign investment and taxpayers' tax planning. This paper analyzes the CFC regime, its application in Ecuador, comparing it with regulations in several countries such as the United States, the United Kingdom and Chile, to identify opportunities for improvement. In addition, it analyzes several aspects such as the criteria for effective taxation, the attribution of passive income and the declaration mechanisms. It concludes that it is necessary to adjust the effective tax threshold, make the imputation of income more flexible and strengthen international cooperation to avoid tax distortions. In addition, it recommends the modernization of audit processes and the implementation of tax incentives to not discourage investment and encourage voluntary compliance.