Aula Magna – Termination of employment contract due to work harassment

workplace-harassment-aula-magna-edmundo-ramos-lawyers-ecuador

DETAILS

DATE: 08-05-2020

CORRALROSALES IN THE NEWS: 

-Edmundo Ramos

MEDIO: Aula Magna

In November 2017, the concept of “workplace harassment” was incorporated into the Labor Code as a cause for “Visto Bueno” (termination with fair cause) for employer and the worker.

The Labor Code defines workplace harassment as “all behavior that violates the dignity of the person, repeatedly and potentially harmful, committed in the workplace or at any time against one of the parties in the employment relationship or among workers, which may result in the person affected being impaired, mistreated, humiliated, or that threatens or damages their employment situation. ”

Two elements of the definition stand out: (i) the law aims to regulate this type of action even outside the company’s facilities and outside working hours; and, (ii) regarding events that occur between workers, without necessarily one of them being the employer’s representative.

The law reform is inconsistent, since it forces employer to take responsibility for events beyond his control and outside his scope, allowing the employment relationship to be terminated – prior authorities approval´s – due to interpersonal relationships between workers that could happened in their free time.

Based on this, below an analysis of a “Visto Bueno” process when it is requested by the employer against a workers.

Article 172.8 of the Labor Code transcribed below includes workplace harassment among the grounds for the employer to terminate the employment contract, prior approval of “Visto Bueno”:

“For committing workplace harassment, either individually or in coordination with other individuals, towards a colleague, the employer or towards a subordinate in the company.

Prior to the request for approval of “Visto Bueno”, a conciliation chaired by the competent authority will be opened, in which besides the interested party, the representatives of the workers and the employer or whoever represents him will be heard.”

According to this, workplace harassment can occur: (i) when one or more workers harass the employer or workers who represent the employer (e.g. managers, chief, directors, etc.); or, (ii) when one or more workers harass any of their coworkers.

In the first scenario, the employer knows the harassment event directly, since it is the victim of the harassment. In the second scenario, the harassment occurs without the employer necessarily being aware of the event or only knowing about it when the harassed worker (s) communicates it, either directly to the employer or by filing a complaint to the labor authority (Ministry of Labor).

According to the transcribed article, the approval process could only be initiated, prior a conciliation proceeding between the parties, which implies that it will only be possible to initiate the “Visto Bueno” proceeding when it has not been possible for the parties to reach a conciliation or that the harassment persists despite the conciliation.

Consequently, the “Visto Bueno” could only be filed once the conciliation proceeding is finished, either in the workplace itself or before the labor authority (prior employee´s complaint).

In any “Visto Bueno” proceeding, the employer has a period of 30 days, from the moment the harassment event occurred, until the worker is legally notified with the “Visto Bueno” request, except for those violations considered as a “lack of probity” (honesty), in which case that period begins when the employer becomes aware of the workplace harassment event.

The foregoing implies that the employer has approximately 22 days to initiate a “Visto Bueno” proceeding, considering that notice to worker takes approximately 5 business days from the day the request is filed.

Additionally, as the law requires prior conciliation before filing the “Visto Bueno” request, it is very likely that this will take more than 30 days between the harassment event and the notification of the request, in which case the action would have expired.

In conclusion, the chances of obtaining a “Visto Bueno” against a worker for workplace harassment are very low. For the termination of an employment contract due to workplace harassment to be applicable in practice, a legal reform or a National Court ruling with mandatory effect will be necessary. It must determine that the 30 days to filed the “Visto Bueno” request should begin when the employer becomes aware of the workplace harassment event.

If you want to read this article in Spanish, click here

LexLatin – BASIC ASPECTS OF CANNABIS IN ECUADOR: CONSIDERATIONS FROM AN INTELLECTUAL PROPERTY AND REGULATORY PERSPECTIVE

cannabis-francisco-gallegos-lexlatin-lawyers-ecuador-Corporate-Intellectual-Property

DETAILS

DATE: 19-05-2020

CORRALROSALES IN THE NEWS: 

-Francisco Gallegos

MEDIA: LexLatin

In Ecuador, the use of cannabis is punishable, except in the case of personal consumption of quantities less than those established by the relevant law. At the end of last year, non-psychoactive and hemp cannabis were excluded from substances classed as subject to control, as will be explained further on, decriminalizing their use for medical or therapeutic ends (the exclusion thereby not extending to cannabis for recreational use).

Among the permitted uses are the possession of products that contain or are derived from cannabis for therapeutic, palliative or medicinal use, or whose use has medicinal objectives. In the same way, the law provides for the investigation, production, cultivation, distribution and sale of the substance, provided that the relevant government permits and approval are obtained and in accordance with the relevant requirements.

The reform will enter into force from June 21, 2020 and has as its overriding aim the elimination of punishments, excluding from control the possession of products for medicinal or therapeutic use that contain a non-psychoactive active ingredient or hemp (CBD), understood as the cannabis plant or any part thereof whose dry weight delta-9-tetrahydrocannabinol (THC) content is less than 1%, provided that there is a diagnosis of suffering from an illness or pain that merits its use. In relation to THC, the ingredient in marijuana that produces the psychotropic effect, this continues to be a controlled substance, if not found within the aforementioned parameters.

From a regulatory point of view, the National Agrarian Authority must issue the regulations relating to the importation, cultivation, planting, harvesting, selling, industrialisation and even exportation of non-psychoactive cannabis or hemp, within 120 days of the law entering into force. The regulation and control of the planting, cultivation and harvest will be the responsibility of the National Health Authority. To date there is no specific detail as to the relevant powers.

At this moment in time, according to the relevant decisions handed down by the Andean Community on the matter, the only CBD products eligible for marketing authorizations are cosmetic products for topical use, provided that they are contained within the international lists of ingredients that may be used within cosmetics and complying with the corresponding restrictions and conditions of use. Human consumption goods are not permitted. One must await the issuance of regulations from the competent authorities.

Moreover, it will be necessary to consider the final text of the Health Law that will also contain provisions as to the regulation of medical and therapeutic use cannabis and its derivatives. The draft law is currently awaiting its second reading.

From an intellectual property perspective, it is worth remembering that the relevant law does not specifically consider use of the word cannabis in the registration of a trademark; however, it is very important to keep in mind that Article 134 of Decision 486 of the Andean Community in its final section provides that the nature of the good or service to which a mark relates, will in no circumstances be an obstacle to registration.

This might mean that granting or refusal of an application for a trademark that includes the term “cannabis”, any derivative of or expression that refers to cannabis in the mark itself or within its coverage comes down simply to the individual criteria of the responsible IP Office examiner, given that, being a restricted product, it could lead to objections. To date there are differing opinions, without any clear position on the matter. In any event, the number of accepted cannabis trademark applications is much higher than those which have received official objections or oppositions from third parties.

Nevertheless, there are both cases of granted cannabis trademark applications, as well as applications which have received official objections. Therefore, it is very important to take care with the wording of the applied-for goods or services, with the aim of reducing the possibility of receiving an official objection. In the same way, it will be very important to consider the mark’s word elements as well as the elements making up the graphical part of the label, keeping in mind the absolute grounds for refusal as provided for by Article 135 section p) of Decision 486, corresponding to Article 360 section 18 of the Knowledge, Creativity and Innovation Law, also known as the Ingenuity Law, which provides for the refusal of marks contrary to law, morals, public order or decency.

At the start of this year, the Ecuadorian IP Office or SENADI as it is known locally according to its Spanish acronym, had processed a limited number of trademark applications and even fewer patent applications. It is reckoned, since there are no exact official figures, that a high proportion of such trademark applications have been accepted, in contrast with the patent applications whose application process is significantly longer.

It is important to point out that various associations of producers of hemp and its derivatives have been formed, as well as groups that lobby for the therapeutic use of cannabis in Ecuador, even some that have the support of the Public Defender’s Office, as an alternative means for those that suffer from catastrophic or chronic illnesses, such as palliative care against pain, epilepsy and other oncological or brain impairment problems.

CorralRosales has actively participated in various international forums about the different opportunities and challenges brought about by the use of cannabis for therapeutic and medicinal aims. The firm has also provided legal and regulatory advice for what is a nascent industry in Latin America.

If you want to read this article (in spanish), click here

Idealex – COVID-19 and international trade

international-trade-covid-19-andrea-moya-idealex

DETAILS

DATE: 15-05-2020

CORRALROSALES IN THE NEWS: 

-Andrea Moya

MEDIA: Idealex

The world is facing a health, human and economic crisis without precedent. The measures taken to reduce the effects of the pandemic, such as isolations and social distancing, have direct impacts on the supply and demand. The suspension of commercial and productive activities generates a global recession and higher unemployment.

In 2019, the global economy recorded its worst performance since 2009, with a grow rate of 2.5% and with global GDP grow projections for 2020 revised downwards. In 2019, the volume of world trade goods fell by 0.4% against 2018 and it is projected that in 2020 it would contract even more. COVID-19 appeared in this scenario.

According to the Economic Commission for Latin America and the Caribbean (ECLAC), COVID-19 is affecting the region for the following reasons:

  1. The decline in the economic activity of the region’s main trading partners.
  2. The drop in commodity prices.
  3. The interruption of global value chains.
  4. Lower demand for tourism services.
  5. Greater risk aversion and worsening global financial conditions.

According with ECLAC, the value of Latin America and the Caribbean exports will fall at least 10.7% by 2020 due to lower prices by 8.2% and volume in 2.5%.

table-international-trade-andrea-moya-01

In the case of Ecuador, given that its main commercial partners China and the United States are the countries with the most infections, it is foreseeable that the value of non-oil exports reduces. This fact added to the fall of the oil prices will generate a significant fall on the value of Ecuadorian exports.

Under these circumstances, the country’s trade policy must facilitate a prompt answer to this crisis. The reduction of non-tariff barriers to import and exports, especial procedures for the release and clearance of goods, simplified mechanisms for the reimbursement of taxes and payment facilities for taxes on foreign trade are measures that would allow companies to overcome the challenges derived from the pandemic.

The Ecuadorian Customs Authority has made and efficient work in order to facilitate foreign trade operations during the state of emergency, it has maintained its services in all customs districts through electronic channels, it has implements specific procedures for the inspection of goods and it has suspended the terms applicable for the abandonment of good through the duration of the emergency.

However, the following measures are needed urgently:

  1. The Law for Simplification and Tax Progressivity issued on December 31, 2019 amended the Production, Commerce and Investment Code adding article 157.1. This article establishes a simplified procedure for reimbursing any taxes applicable to foreign trade (drawback). The amount of the reimbursement is equal to a percentage of the FOB value of the export and must be done automatically after the export customs forms are definitive. This process must be put into place in an effective and immediate manner.
  2. The Law for Tax Equity establishes that the foreign exchange tax (ISD) paid on the import of raw materials, capital goods and other goods to be incorporated in production processes may be regarded as tax credit for the payment of the importer’s income tax within the following five years. The importer is able to request a reimbursement of the foreign exchange tax that has not been credited against its income tax. However, the reimbursement request procedure is slow and bureaucratic. It is necessary to adopt simplified reimbursement processes that are effective and resolved on a timely manner.
  3. Article 116 of the Production, Commerce and Investment Code establishes that the importers are able to request payment facilities on foreign trade taxes derived from the import of capital goods. This benefit must by applicable to the payment of foreign trade taxes on the import of raw material and similar goods.
  4. The third general provision of the Law for the Development of Production, Investment Attraction, Employment Generation and Fiscal Stability establishes that the investment incentives included in such law will be applicable for 24 months, this deadline expires in August 21, 2020. The President is able to extend this deadline for 24 additional months. It is importer to extend this deadline in order to stimulate local and foreign investment which may generate employment. It is also important to simplify the processes needed to access certain benefits such as the exemption of tariffs and foreign exchange tax on the import of raw material and capital goods needed for the development of investment projects.

These measures will contribute to protect the cash flow of the taxpayers which is a fundamental issue in order to keep companies’ operating and avoid, to the extent possible, its closure and the subsequent loss of jobs and default with its creditors.

This crisis has worsened the country’s fragile economy, particularly for the fiscal imbalance that has been occurring for several years, and the lack of contingency funds to be injected in an economic recession. The alternative is not the “deglobalization”, but an international cooperation policy that allows each country to develop its best capacities. Ecuador urgently requires structural changes in the labor and tax areas, along with a clear foreign trade policy.

If you want to read this article in Spanish, click here


Table’s source: Special Report COVID-19 issued by the Economic Commission for Latin America and the Caribbean (ECLAC) – https://repositorio.cepal.org/bitstream/handle/11362/45351/1/S2000263_en.pdf

Compliance as a business culture

compliance-business-culture-maria-isabel-torres

Strict compliance with legal and ethical standards is a requirement for all companies today. To that end, each company must develop a culture of prevention through a regulatory compliance program, known as “compliance”. Compliance applies to all actions, relationships and procedures of the company and, therefore, all actions of managers and employees must be subject to this culture.

Keep in mind that not complying with legal obligations, not only could bring economic sanctions to those who act in this way, but could even cause criminal charges not only for the people who committed such acts but also for the companies themselves that are active subjects of the crime as stated in the Comprehensive Organic Penal Code that came into force in 2015.

The adoption of a compliance program is not simple, since it implies changing the culture of a company, not only by its partners, shareholders, managers and workers, but also by customers and suppliers.

Here are some of the key steps to adopt an effective compliance program:

  1. Start at the head of the institution: any change in the culture of a company starts at the top; therefore, the first step is for managers to have precise knowledge of what compliance entails, such as corporate culture and the willingness to adopt it. Therefore, it is up to them to transmit the adoption of the program to all levels, which implies the necessary commitment of everyone to strictly comply with it.
  2. Prevention and analysis: it is necessary to carry out a diagnosis regarding the approach that the program will have, this approach must be adapted to the individual characteristics of each company. For example, an organization that performs public procurement must implement a different compliance plan, compared to a company that mostly sells to the private sector. Once the areas of greatest risk have been identified, the necessary resources will be assigned to make the changes.
  3. Education: education is essential to achieve culture change. It is essential that all or at least the absolute majority of workers understand the scope of compliance. This ensures that any non-compliance that could harm the company is reported on time. Education programs must be continuous (at least every 6 months), personalized for each role, and must provide information on the legal framework for compliance.
  4. Communication: Internal regulations of companies contained in a code of conduct must be clear, affordable, and permanently communicated to their workers. It should include topics such as: corruption, blackmail, bribery, conflicts of interest, tax evasion, money laundering, among others. In addition, it must establish who is responsible for the compliance program and the mechanism through which employees can report or consult a case where a breach could happen.
  5. Relevance: the importance of the program must be determined, and the personnel and resources required for its implementation must be assigned to it. Otherwise it could become “dead letter” without any significance for the company that adopts it.

The additional costs that implementing a compliance program may eventually demand are fully justified if, with its deployment, the company achieves an unblemished reputation for strict compliance with the law and ethics in its business relationships with shareholders, customers and suppliers. This behavior will translate into better positioning in the market and the consequent increase in sales.

María Isabel Torres
Associate at CorralRosales
mtorres@corralrosales.com

Excise tax on plastic bags

plastic-bags-excise-tax

Regulation NAC-DGERCGC20-00000033 issued on May 6, 2020, by the General Director of the Internal Revenue Service established the following rules for the payment of the Excise Tax (ICE) on plastic bags.

Taxable base:

The taxable base of the excise tax is the number of plastic bags delivered by the commercial establishment to the consumer. A plastic bag is defined as one with or without a handle, produced from high- and low-density polypropylene or low-density polyethylene resins.

Tax rate:

The excise tax rate will be the described in the following chart:

Year

ICE specific rate

2020 US$0,04 by plastic bag
2021 US$0,06 by plastic bag
2022 US$0,08 by plastic bag
2023 US$0,10 by plastic bag

Collecting agents:

Commercial establishments which, in order to facilitate the transfer of goods, deliver plastic bags to the purchaser, shall act as a collecting agent of the excise tax.

All entities and individuals required to keep accounting books who market products at a wholesale or retail level are regarded as commercial establishments, also all franchisers and their franchisees, regardless of the number of establishments.

Exemptions

The following are exempted from paying excise tax:

  1. Plastic bags for industrial, agricultural, agro-industrial and export use, for frozen products.
  2. The plastic bags that contain at least 50% of recycled raw material post consumption.
  3. Plastic bags used as primary packaging. Plastic bags for single use that are in direct contact with food in their natural state and beverages, cleaning and personal hygiene items, chemicals, paints, lubricants, among others, are considered primary packaging.

The following plastic bags have a 50% discount from the excise tax rate:

  1. Biodegradable plastic bags regarded as those that come from natural renewable materials that can be decomposed into natural chemical elements by the action of biological agents, such as the sun, water, bacteria, plants or animals, without human intervention under normal environmental conditions.
  2. Compostable plastic bags regarded as those that come from biodegradable material that, when properly disposed of, are degraded in a shorter time than biodegradable plastic and which purpose is to be converted into fertilizer or compost.

Manufacturers and importers that are eligible for applying these exemptions or reductions must be certified by the Authority. The list of qualified manufacturers and importers will be published periodically on the institutional website of the Internal Revenue Service.

Declaration and payment of the tax:

Collecting agents must submit a monthly tax return with the operations carried out within each month, using the “Excise Tax Declaration Form”, code 3680. Taxpayers subject to the microenterprise regime must file the return every six months.

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CORRALROSALES

The re-domiciliation of ecuadorian companies

re-domiciliation-of-ecuadorian-companies-corporate-milton-carrera

In today´s globalized economy, it is necessary for countries to provide a legal framework that allows companies to conduct their businesses in the jurisdiction that is most convenient to their interests. The re-domiciliation of a company, that is, the transfer of the registered office to a foreign country while maintaining its legal personality and therefore its assets, rights and obligations, allows it to fulfill this purpose.

In Ecuador, no legal rules have been developed that expressly regulate the process of re-domiciliation to a foreign country, so it is necessary to find alternatives that allow its implementation within the rules of the Companies Law.

The domicile of a company is not only a requirement for its constitution, but it grants it a national identity and therefore membership in a legal system. The re-domiciliation of companies is a figure currently recognized by many legislations, precisely in order to allow companies to develop their businesses with wide freedom and without affecting the rights of third parties. In order to facilitate re-domiciliation, it is necessary that the law of the country where the company intends to transfer its domicile accepts it, recognizing its pre-existence and assets acquired in the country of origin. By transferring the registered office to another country, the company adopts the nationality and legal system of the host country. Although the Companies Law does not contain specific rules that govern the re-domiciliation process, it does provide for the change of address without making a distinction whether it is carried out within or outside the country, from which it is concluded that both are allowed and are subject to similar formalities.

Once the re-domiciliation has taken place, the Superintendence of Companies, Securities and Insurance will be responsible for ordering the cancellation of its registration in the Commercial Registry without the company being liquidated, precisely because it maintains its legal personality, assets, rights and obligations, in the receiving country.

The cancellation is the registry operation that has the sole and exclusive purpose of leaving the original registration without effect and make it public.

In conclusion, we consider that under corporate law, the change of address of an Ecuadorian company to another country is valid and legal, assuming that the legislation of the receiving country allows it; therefore, the re-domiciled company will maintain its legal personality, assets, rights and obligations. However, in order to expedite this operation, the re-domiciliation process must be expressly regulated as soon as possible.

Milton Carrera
Senior Associate en CorralRosales
mcarrera@corralrosales.com

Deferral of tax obligations

deferral-of-tax-obligations

By Executive Decree 1030 issued on May 4, 2020, the President of the Republic ordered the following:

  1. The deferral of tax obligations established by Executive Decree 1021 shall be applicable to all small and medium-sized companies, except for those taxpayers whose tax ID (RUC), as of April 1, 2020, had registered any of the following as their main economic activity:
  • Ancillary activities of financial services activities; and/or
  • Financial services activities, except insurance and pension fund activities.

These taxpayers are able to pay the corporate income tax for the fiscal year 2019 and the value added tax (VAT) to be paid in April, May and June 2020 on a deferred basis. Payments will be made in 6 installments during the year 2020 in the following percentages: in each of the first two months, the taxpayers are required to pay 10% of the total value; and, in each of the remaining four months, taxpayers are required to pay 20% of the total value.

  1. The taxpayers subject to the Simplified Tax System (RISE) are able to pay the instalments of March, April and May in accordance with the following calendar:
RISE instalment to
be paid in:

Month of payment

March 2020 June 2020
April 2020 July 2020
May 2020 August 2020

Payments must be made according to the 9th digit of the tax ID (RUC) according to the following schedule:

Ninth digit of the RUC or
identity card

Expiration date

1 10 of the applicable month
2 12 of the applicable month
3 14 of the applicable month
4 16 of the applicable month
5 18 of the applicable month
6 20 of the applicable month
7 22 of the applicable month
8 24 of the applicable month
9 26 of the applicable month
0 28 of the applicable month
  1. The annual motor vehicle ownership tax, which would have been due in the months of March and April, may be paid according to the following schedule:
Expiration in the month of:

Payment of the tax:

March 2020 Until June 2020
April 2020 Until July 2020
  1. Those taxpayers who lay-off employees without cause during the state of emergency are not able to apply the benefits established by Executive Decrees 1021 and 1030.

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Latin Lawyer – Ecuador adopts expedited merger protocol amid covid-19 woes

accelerated-merger-protocol-xavier-rosales-latin-lawyer

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DATE: 29-04-2020

CORRALROSALES IN THE NEWS

-Xavier Rosales

MEDIA: Latin Lawyer

The prestigious international publication “Latin Lawyer” has published an article on the new accelerated merger protocol approved by the Ecuadorian antitrust authority as a measure to fight against the effects of Covid-19 in the country. To deal with this issue, the entity had the expert opinion of our Partner Xavier Rosales.

“It was something that had been expected for a long time, and it is positive for the development of companies,” says our Partner in the text, who believes that the head of the antitrust authority, Danilo Sylva Pazmiño, has a more open approach than previous ones, which facilitates the authorization process for non-problematic transactions.

As explained in the text, the Superintendency of Control of Market Power (SCPM) approved on April 20th a draft resolution that creates expedited reviews for certain transactions that require notification prior to the merger. According to local professionals, COVID-19 has caused widespread delays in the agency’s ability to examine and investigate certain transactions.

This new protocol will ensure that an agreement can be approved within 40 days. The authority will have 15 days to send its conclusions to its decision-making body that will have 25 days to issue a final decision. Previously, the authority had 50 days to send its conclusions to the First Instance Resolution Commission (CRPI), and the decision-making body 60 to issue a decision – with the possibility of requesting another 60 days if the merger is very complex.

This accelerated merger system will be available for holding companies that do not directly or indirectly do business in Ecuador, companies merging with a combined market share of less than 30% in all relevant markets, and dealings with companies in bankruptcy that have a credible defense.

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Gestión Digital – COVID-19 and the limits of antitrust law

antitrust-ana-samudio.gestion-digital

DETAILS

DATE: 28-04-2020

CORRALROSALES IN THE NEWS: 

-Ana Samudio

The main objective of antitrust law is to ensure the existence of an equal playing field so that competitors have the same opportunity to offer goods and services to consumers in every relevant market. This initial budget necessarily implies the ban of agreements between competitors – any express or implicit agreement that reduces uncertainty about the behavior of a competitor – and the abuse of market power.

Within the framework of necessary and urgent measures to confront the world health crisis derived from the COVID-19 pandemic, several competition authorities have seen the need to relax – and even suspend – the sanctioning regime applicable to agreements between competitors, allowing exceptionally that these take place when temporary cooperation is necessary to guarantee the fair provision of essential goods and services during the crisis.

The first such announcement was from the Norwegian competition authority, which allowed, over a three-month period, coordination of itineraries between two local airlines to ensure the availability of the service. This announcement was quickly followed by regulators in Germany, England and the Netherlands, who relaxed the control regime for agreements between competitors aimed at guaranteeing the provision of goods and services; allowing competitors: (i) the exchange of information regarding availability, (ii) the cooperation necessary to keep the establishments open, (iii) the sharing of logistics of warehouses and transport; and (iv) the assignment / exchange of personnel to meet demand.

On its part, the European Competition Network (ECN), which groups the European Union’s competition authorities, issued a joint statement determining that, under current circumstances, reasonable cooperation between competitors would not constitute a restriction of competition in the terms of the community regulation and / or creates efficiencies in the production and distribution of goods and services that overweight the restriction that they could generate; and defined channels of attention to resolve doubts that operators may have about the legitimacy / illegitimacy of an intended cooperation, in light of these exceptional circumstances.

Likewise, the authorities in charge of the control and judgment of competition matters in the United States of America -Department of Justice and Federal Trade Commission- have created an expedited procedure -with duration of seven (7) calendar days- for the analysis and authorization of cooperation between competitors. The entire process is carried out online, for which operators interested in cooperating must provide information that demonstrates the relation with the crisis, necessity, and reasonability of the cooperation, under the protection of the crisis unleashed by the pandemic.

In Colombia, an exceptional regulation was created by which the Logistics and Transportation Center, created as an independent entity from the competition authority, has the mission of evaluating and approving agreements between competitors that are intended to generate efficiencies in the logistics and cargo transportation market which would be deemed illegal at any other time.

Along with these measures that make the system applicable to agreements between competitors more flexible, several authorities have stressed the importance of guaranteeing the provision, at fair and competitive prices, of products considered essential to protect the health and life of consumers (such as respirators, masks and disinfectant products), while warning that the operators that abusing their market power to affect this guarantee will merit a swift and hefty sanction. Along these lines, the Superintendence of Control of Market Power in Ecuador has issued two warrants to producers and sellers of these goods, reminding them that, according to the Organic Law of Regulation and Control of Market Power, they cannot take advantage of the emergency to increase their profit margins through unjustified price increases and will remain vigilant and implement the necessary control actions to preserve consumer rights and free competition.

In the first of the warrants, the Superintendent of Control of Market Power stated, that “Any variation in prices must obey the dynamics of the market and the individual and independent decisions of economic agents and not to anti-competitive agreements or union recommendations.” This assertion -which a priori would be contrary to the affirmative actions taken by competition authorities from other jurisdictions that were explained above- applies to the anticompetitive price-fixing agreements and not to the fair temporary cooperation between competitors aimed to benefit the consumers and tends to guarantee the supply  in this delicate estate of emergency, under the exemption to the prohibition provided in article 12 of the Organic Law of Regulation and Control of Market Power, which in the present state of affairs would justify cooperation between competitors when the following conditions are met simultaneously:

  1. Consumers or users be allowed to participate equally in their advantages: The purpose of cooperation would be to guarantee the provision of goods and services during the state of emergency, with which this condition would be fulfilled.
  2. That they do not impose restrictions that are not indispensable for the achievement of those objectives: Any intended cooperation must be strictly limited to measures required to meet the objective.
  3. That they do not grant economic operators the possibility of eliminating competition with respect to a substantial part of the products or services contemplated: The terms of the cooperation must not constitute barriers of entry or permanence of other competitors in the market.

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Income tax – Withholding percentages

withholding-percentages-income-tax

Regulation NAC-DGERCGC20-00000030 issued by the Internal Revenue Service on April 22, 2020, amended Regulation NAC-DGERCGC14-00787 which establishes the income tax withholding percentages.

The following income tax withholding percentages have been modified:

Concept

Previous withholding percentage

Current withholding percentage

Real estate construction activities and similar activities. 1% 1,75%
Insurance and reinsurance services provided by companies legally incorporated in the country and by branchesof foreign entities domiciled in Ecuador. The withholding must be applied over 10% of the invoiced or scheduled premiums. 1% 1,75%
Commercial lease provided by companies legally established in Ecuador. The withholding must be applied over the lease payments and the purchase option. 1% 1,75%
Services provided by media and advertising agencies. 1% 1,75%

 


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DISCLAIMER: The previous text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm.

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