Living wage 2020

On March 18th, the Labor Ministry -by Ministerial Agreement MDT-2021-087- set the living wage for 2020 on US$447,41 monthly and stablished the payment procedure.

On those cases, that living wage compensation is applicable, employer shall pay it to employees no later than March 31st, 2021.

For living wage payment, “profit” shall be understood as the value declared by the employer as accounting profit deducting: (i) employees profit  sharing, (ii) tax  or advance payment fixed for the fiscal year declared, and (iii) statutory reserve.

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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.


Amendments to the rules for applying advance pricing agreements for operations carried out between related parties

Regulation NAC-DGERCGC21-00000013 issued on March 11, 2021 by the General Director of the Internal Revenue Service and published in the Fourth Supplement to the Official Registry 409 of March 12, 2021, amended the following regulations:
  • NAC-DGERCGC14-00001048, which establishes the content, procedure and other matters related to the filing and resolution of the advance pricing agreements for increasing the limit of deductibility (20%) of royalties, technical, administrative, and consulting services paid to related parties, and.
  • NAC-DGERCGC15-00000571, which establishes the rules for the applying the advance pricing agreements.

The following is a summary of the changes introduced in each Regulation:

Regulation NAC-DGERCGC14-00001048

Information to be included of the parties and the transactions subject to consultation:

a. Names and surnames, company name, tax identification number, country of tax residence and income tax rate of the taxpayer and the parties with whom the operations covered by the consultation are carried out,

b. Detailed description of the operations, including among other elements, their nature, characteristics, amount in US dollars of the last three fiscal years, and the effect on the taxpayer’s income,

c. If the transaction is a service, documentation must be submitted to identify its invoicing, periodicity, and form of payment. In the case of royalties, in addition to the above, the intangible asset, its owner, administrator (if applicable), the method of valuation of the intangible asset and its calculation must be fully identified,

d. Comparability analysis according to the terms described in the tax legislation, including the following elements: i) characteristics of the operations; ii) analysis of the functions or activities performed, including the assets used and risks assumed; iii) contractual terms; iv) economic or market circumstances, and v) business strategies, both of the taxpayer and its related parties involved in the operations subject to consultation,

e. Details of the search performed in the respective databases to obtain the comparable to be used. The date on which the search was performed attaching the screenshots of the filters applied in the databases, the selection and discarding matrix of the comparable. The reasons for the selecting the proposed method, in the terms contemplated for the Integral Transfer Pricing Report,

f. Copies of existing contracts, agreements or arrangements entered into by the taxpayer with related or unrelated parties, which affect, directly or indirectly, the operations covered by the valuation consultation. If applicable, copies of the cost sharing agreements, including the cost sharing criteria,

g. Audited balance sheet and income statement of the taxpayer for the last tax year as of the date of filing the consultation, including the notes to the financial statements. If the taxpayer is not required to have audited financial statements, the balance sheet, income statement and accounting books at the highest level of detail,

h. Audited balance sheet and income statement of the taxpayer’s related parties subject to the analysis, including the notes to the financial statements. If the taxpayer’s related parties are not required to have audited financial statements, the balance sheet, income statement and accounting books at the highest level of detail,

i. Balance sheet and income statement of the companies proposed as comparable for the last fiscal year. This requirement is not applicable if the taxpayer proposes the Comparable Uncontrolled Price (CUP) Method, and

j. Any other relevant information, data, or documentation that the applicant considers necessary to support the methodological proposal for valuation of related party transactions.

Application report:

In the application report the taxpayer must include the following information:

a. The working papers in Excel including: the indicator (or price) of the taxpayer, the indicators (or prices) of the comparable, comparability adjustments, interquartile range, among others, depending on the methodology.

b. Description and reasoning of any particular fact or circumstance of the fiscal year analyzed that affected the valuation of the prices or financial margins of the analyzed party.

c. The taxpayer may not file a new report when the tax authority has initiated an assessment procedure.

Regulation NAC-DGERCGC15-00000571

Deadline for submitting the request:

The request may be filed until the last working day of February of the tax period in which the application of a higher limit of deductibility is intended. For fiscal year 2021, the request may be filed until the last business day of March.

Report of transfer pricing adjustments:

In the event that, upon application of the methodology approved, there is a transfer pricing adjustment, the taxpayer must report such on the income tax form.

Substitute tax returns:

If the increase of the deductibility limit is approved, the taxpayer is able to file substitute tax returns regarding the years which income tax returns was filed prior to the notification of the response to the request. The substitute tax return must be filed within 60 days after the notification of the response.

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Ecuador´s Preliminary draft of the Data Protection Law – IAPP



DATE: 18-03-2021


-Rafael Serrano


For the first time in history, Ecuador will have a Data Protection Law that will follow the European normative standard. Our associate Rafael Serrano, a collaborator for the IAPP blog, writes about it.

Despite never having had a specific law, data protection in Ecuador is restricted and limited by the various laws that include this particular legislation, such as the Telecommunications Law, the Electronic Commerce Law, the Criminal Law, and the Financial and monetary law.

After two significant circumstances in the country, the government determined it essential for the country to have its own law.  It would protect Ecuadorian citizens’ data, allowing the authorities to take action if it was not complied with. One of the revealing events was a data breach that affected practically the entire population. The other one corresponds to the evolution of the Data Protection Law in other countries. This limits Ecuador when it comes to transferring data internationally.

The current bill, which is currently being debated in Congress, contains 76 articles and 12 chapters focused on the following aspects:

Extraterritorial scope

Processors and controllers who offer services and goods to Ecuadorian residents but as long as they are located outside of our country.

Data protection principles

As published by Serrano, “the bill recognizes many of the data protection principles accepted throughout the world, such as limitation of purpose, transparency, confidentiality, limited retention, responsibility and accuracy of data, guidelines established and obligations for data processors and controllers.”

Lawful basis for the processing of personal data

With this draft Law, there will be contractual and pre-contractual obligations, the protection of vital interests, the processing of data from public databases, and the exercise of tasks carried out in the public interest or exercise of public powers.

New data subjects rights

The law will include the right to information, access, rectification, deletion, cancellation, the right to object, not be subject to a decision based on automatic processing, portability, and the right to be forgotten. Some exceptions will also be recognized.

Special categories of data

It will be necessary to give explicit consent to process data that is categorized as special. That is sensitive data, those related to health, financial, and minors’ data.

Security measures

Processors and controllers must implement various security measures and adopt technical measures that will depend on the volume and type of the data processed.


There must be a data protection officer as the data controller. All authorities must have a DPO; the rest of the companies will depend on the purpose, scope, and data they process.

International data transfer

The transfer of data to other countries and territories will be allowed, provided that their security is guaranteed.


“The bill creates the Data Protection Superintendency as the new DPA. The Superintendency is an autonomous institution. The Superintendent will be appointed following the procedure established in the Constitution”, indicates Serrano.

Sanctions and liabilities

The new Law, according to its project, will establish infractions if what is indicated in it is not fulfilled. “The data processor and controller can be penalized between 3% and 17% of their annual income from the previous year,” he concludes.

If you want to see the article, click here.

Reform to General Guidelines for Internships


Labor Ministry through Ministerial Agreement MDT-2021-042, reformed the “General Guidelines for Internships”.

The Agreement establishes that students under a dual training modality may be considered for the mandatory percentage of interns.

Students under dual training are those whose professional training process occurs in educational environments and production or real services environments.

According to the Internship Law, for every 100 regular employees, employers are ordered to hire interns in a number equal to 4% of their employees who hold a professional degree. Consequently, the obligation to hire interns is subject to 2 conditions: (i) company has 100 or more employees; and (ii) at least 4% of such employees hold a professional degree.

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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.


Enforceability and validity of shareholder agreements


Shareholders’ agreements are defined as those agreements entered into by some or all of the shareholders of a company in order to complete, define or modify their internal relations and the application of the rules stipulated in the bylaws. By means of these agreements the shareholders can regulate a great diversity of matters, without contravening the corporate bylaws, but determining their application to specific cases within the life of the company.

There are three types of shareholders’ agreements:  

  1. Relationship agreements: these regulate the reciprocal relationships of the shareholders directly and are therefore characterized by the fact that they have no repercussions whatsoever on the company. Some examples include pre-emption rights, drag or tag along clauses, joint sale rights, lock up obligations, among others.
  2. Attribution agreements: shareholders undertake certain obligations in order to grant advantages to the company. The most common attribution agreements include financing obligations from shareholders, but they may also include non-compete obligations, or similar.
  3. Organizational agreements: these regulate the organization, operation and decision-making within the company, such as, agreements on the management structure, on the dividend policy, on the power of a shareholder to request the dissolution and winding-up of the company if certain conditions are fulfilled, etc. These agreements are usually arranged through vote syndications.

Traditionally, the problem with respect to shareholders’ agreements revolves around two main issues: (i) their enforceability vis-à-vis the company, i.e., whether or not the agreement binds the company; and (ii) the matters that may be regulated by means of these agreements.

  1. The enforceability of shareholders’ agreements

Shareholders’ agreements have a contractual nature, and therefore are law for the parties in accordance with article 1561 of the Civil Code, but, naturally, they do not bind those who do not enter into them. Since the company in general does not enter into the shareholders’ agreement, it is considered as a third party thereof. This derives in its unenforceability against the company, the shareholders who have not entered into it, and its managers, which can significantly complicate its overall enforceability.   

Prior to the entry into force of the Companies Modernization Law, in December 2020, the law expressly provided for this unenforceability by stating that:  

Agreements between shareholders which establish conditions for the negotiation of shares shall be valid. However, such agreements shall not be enforceable against third parties, notwithstanding any civil liabilities that may arise, and in no case may they harm the rights of minority shareholders.”[1]

As a consequence, the company was left outside the scope of such agreements. The most common example is the recordation of a transfer of shares in the company’s Registry of Shares and Shareholders, when the transferability of said shares was limited by a shareholders’ agreement. Since the latter does not bind the company, the recordation is fully valid and the only remedy available to the injured party is to lodge a civil action for damages against the shareholder who breached the agreement.  

In February 2020, with the introduction of the Simplified Stock Corporation (S.A.S.), the regulation of shareholders’ agreements shifted, as their enforceability against the S.A.S. is established, as long as the company is notified of the agreement:

(…) shall be complied with by the company when they have been submitted in the offices where the management of the company operates. Otherwise, despite their validity inter partes, such agreements shall become unenforceable for the simplified stock corporation.[2]

Subsequently, with the Law of Modernization of Companies, the regulation of the S.A.S. regarding shareholders’ agreements was extended to corporations and limited liability companies, so that they are obliged to respect such agreements when they have been notified of them. Thus, going back to the example mentioned above, the legal representative of the company will not be able to record a transfer of shares if it violates a shareholders’ agreement. In this way, the new regulation solves the problem of the unenforceability of these agreements.

      2. Matters regulated by shareholders’ agreements

The Law on Companies, when regulating shareholders’ agreements for S.A.S. (extended to corporations and limited liability companies), includes the following as matters that may be regulated by means of such agreements: 

the purchase or sale of shares, the preference for acquiring them or for increasing the capital stock, the restrictions for transferring them, the exercise of voting rights, the person who is to represent the shares at the meeting and any other lawful matter[3]

In order to establish what is understood by “any other lawful matter” it is necessary to consider not only the general law of obligations and the fundamental principles of private law, but also the mandatory rules contained in the Law on Companies. Consequently, it is not possible to agree, for example, on the transfer of shares by means of a private document, a quorum for attendance at general meetings lower than that established by law or the bylaws, or to regulate procedures for capital stock increase or dissolution and winding-up of the company.

In this regard, the Corporate Governance Standards issued by the Superintendence of Companies (although not binding, it is advisable to follow them to ensure good corporate practice), establish that shareholders’ agreements:

(…) should not bind or limit the exercise of the voting rights of any member of management on the Board of Directors, who shall faithfully fulfill their duty of loyalty and due diligence to the company, over and above private interests.”[4]

Therefore, the fact that the abovementioned article of the Law on Companies follows a numerus apertus system does not mean that all agreements entered into by the shareholders (lawful from the point of view of the law of obligations) are to be considered valid.

[1] Art. 191 of the former Law on Companies.

[2] Unnumbered article titled “Shareholders’ agreements” of the Law on Companies

[3] Ibid.

[4] Paragraph 6 of the section entitled “SHAREHOLDERS’ RIGHTS AND EQUITABLE TREATMENT” of the Corporate Governance Standards.

Sofía Rosales
Associate at CorralRosales

SENADI ignored the existence of renowned marks through an appeal resolution


The Court of Justice of the Andean Community, a supranational body with competence to ensure compliance with Andean regulations, their uniform application and interpretation in the member countries, in the exercise of its power to interpret Decision 486 of the Andean Community, has repeatedly defined the figure of a renowned trademark or also known as highly renowned. Thus, it has expressly said that: “The notorious trademark regulated in Decision 486, which we can call an Andean notorious trademark, is that which is notorious in any member country of the Andean Community (…). The renowned trademark, for its part, is not regulated in Decision 486, but due to its nature, it receives special protection in all four member countries. “[1] Departing from the interpretation of the Andean Court, the National Service of Intellectual Rights (SENADI), in an appeal resolution, expressly ignored the existence of this figure, arguing that it is not specifically provided for in the Andean regulations.

The renowned trademark, whose special protection has been repeatedly recognized by the Court of Justice of the Andean Community, presupposes its knowledge by not only the specific consumers of the product or service in question, but that this level of knowledge is extended to the general public, even to those who do not consume the products or services protected by the trademark. The special protection on this type of trademarks seeks to prevent third parties’ illicit use of the prestige they possess.

An example of the special protection that the Andean regime grants to highly renowned trademarks is shown in the evidentiary field. Thus, it has been expressly established through numerous preliminary rulings that the renowned trademark does not need to be proven, since it is comparable to what is commonly known as a well-known fact.

Although this special protection is not expressly regulated in Decision 486 of the Andean Community or in the Organic Code of the Social Economy of Knowledge, Creativity and Innovation, as it has been expressly recognized by the Court of Justice of the Andean Community, through preliminary rulings, it forms an integral part of the Andean community law, to which Ecuador is subject to.

In the case at hand, a person applied for the registration of the trademark PIZZAS DEL VALLE[2], to protect the services of bars, cafes, restaurants, catering (international class 43 services). Against this request, a third party, owner of the DEL VALLE trademark, filed an opposition based on the similarities between the signs and the renowned nature of its trademark. In first instance, SENADI just focused on comparing products and services, and concluded that the trademark applied for was registrable. There was no pronouncement on the highly renowned name argued by the opponent.

The opponent filed an appeal in which, among other arguments, he insisted on the absence of a pronouncement on the argument of the highly renowned trademark. On this issue, SENADI pointed out: “As for the appellant’s allegation regarding the highly renowned DEL VALLE trademarks, Community legislation does not recognize the existence of this figure, but only that of notoriety (…)”[3] Within the same decision, it also pointed out that: “this Court denotes the fact that once the file has been reviewed, it has not been verified that the holder has provided sufficient material to verify the veracity of his statements in accordance with the factors stipulated in the regulations, having only limited itself to pointing out that said trademarks are easily recognized by the general consumer.

The aforementioned Resolution is contrary to the Andean regulations and specifically to the binding preliminary rulings of the Court of Justice of the Andean Community regarding the protection of trademarks in the member countries.

This type of decision confirms the need for the intellectual property offices of the member countries to implement permanent updating programs on the development of Andean community law. This would not only avoid damage to users due to an erroneous interpretation of the regulations and lack of application of binding rulings, but it would also raise the level of the decisions issued, so that, in addition to solving a conflict, they become a source of reference, for lawyers and users on intellectual property issues.

[1] Preliminary ruling 07-IP-2020 of May 8, 2020.

[2] Procedure SENADI-2018-61769 of August 29, 2018.

[3] Resolution No. OCDI-2020-1042 of December 23, 2020.

Katherine González H.
Associate at CorralRosales