Yearly Archives: 2021

CorralRosales > 2021

Income tax payment for taxpayers subject to the microenterprises regime

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Regulation NAC-DGERCGC21-00000002 issued on January 6, 2021 by the General Director of the Internal Revenue Service and
published in the Official Registry 366 on January 8, 2021, approved the tax form 125 for the semi-annual payment of income tax for taxpayers subject to the microenterprises tax regime.

The tax form 125 and its instructions were published on January 14, 2021 on the IRS website at the link:
https://www.sri.gob.ec/web/guest/formularios-e-instructivos 

Taxpayers subject to the tax regime for micro enterprises must file an income tax return each semester basis, even if: (i) they are subject to file a monthly value-added tax return; or, (ii) they have not obtained income related to the regime.

During January 2021 and only for this occasion, taxpayers who belong to this regime are required to declare and pay the income tax of the first and second semester of 2020 accumulated.

In order to liquidate the tax, the taxable base is equal to the net sales from the business activity subject to this regime and the rate is equal to 2%. Any income tax withholdings may be reduced if applied during the same fiscal year and if related to the activities subject to the regime.

The tax form must be filed in the months of January and July each year depending on the ninth digit of the tax ID. Taxpayers whose ninth digit o is 1, 2 or 3 may -only for this occasion- file the tax return and pay the income tax applicable to the first and second semester of the 2020 on different days, according to the following calendar:

Taxpayers subject to the microenterprises tax regime that have also been qualified by the IRS as special taxpayers may – only for this occasion- file the tax return and make the payment of the income tax applicable to the first and second half of 2020, until January 19, 2021.

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DISCLAIMER: The preceding text has been prepared for general information purposes only. 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 given situation requires the specific opinion and view of the firm in Quito / Guayaquil, Ecuador.

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New regulations for travelers entering Ecuador

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In accordance with the ruling issued by the Constitutional Court declaring the unconstitutionality of the executive decree that established the state of emergency throughout the national territory, the Tax and Customs Authorities have lifted the suspension of terms and conditions, as established below:
1. The Internal Revenue Service, through Regulation NAC-DGERCGC21-00000001 issued on January 3, 2021, repealed the Regulation NAC-DGERCGC20-00000081 issued on December 23, 2020, by which the terms and deadlines of all administrative processes and the statute of limitations for collecting debts were suspended until January 17, 2021.
2. The National Customs Service of Ecuador, through Regulation SENAE-SENAE-2021-0001-RE, issued on January 3, 2021, canceled the suspension of terms and deadlines of all tax administrative processes and the statute of limitations for collecting debts until January 20, 2021, ordered by Regulation SENAE-SENAE-2020-0062-RE, issued on December 22, 2020.
3. Although when this bulletin was prepared, these regulations have not been published in the Official Gazette, the authorities of the Tax and Customs Authorities have established that the terms counted in calendar days will run as of January 3 and the terms counted in working days will run as of January 4, 2021.

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DISCLAIMER: The preceding text has been prepared for general information purposes only. 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 given situation requires the specific opinion and view of the firm in Quito / Guayaquil, Ecuador.

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Special consumptions tax (ICE) – Tariffs applicable in 2021

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The General Director of the Internal Revenue Service issued three regulations on December 23, 2020, which were published in the Second Supplement of the Official Registry 359 on December 29, 2020, which are:

1. Regulation NAC-DGERCGC19-00000078 establishes the Special Consumption Tax (ICE) specific tariffs applicable in 2021:

Compared to the tariffs applicable in 2020, the tariffs for cigarettes and soft drinks remain the same, the tariff for plastic bags increases -established by law- and the remaining tariffs are slightly reduced compared to 2020.
2. Regulation NAC-DGERCGC19-00000079 adjusted the manufacturer’s and ex-customs’ sales price value by US$4.29 per liter for applying the Ad Valorem tariff on alcoholic drinks, including beer, applicable for fiscal year 2021.
In 2020 the value was US$4.33 per liter.
3. Regulation NAC-DGERCGC19-00000080 established the percentages of increase to be applied over the ex-customs price or the total production costs to determine the referential prices of perfumes and toilet waters marketed through direct sale (the manufacturer or importer sells to final consumers directly and not through commercial establishments), for fiscal year 2021, according to the percentages detailed in the following table:

The values detailed in the table are the same as those established for the year 2020.
For calculating the tax, the total production costs of the nationally manufactured goods must include raw materials, direct labor, and indirect manufacturing expenses.
Any royalty payments calculated on the basis of volume, value or amount of sales will be considered part of the total production costs for calculating the tax. However, if the royalties do not exceed 5% of the sales, they should not be considered as part of the taxable base.

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DISCLAIMER: The preceding text has been prepared for general information purposes only. 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 given situation requires the specific opinion and view of the firm in Quito / Guayaquil, Ecuador.

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Deadlines for tax matters

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In accordance with the ruling issued by the Constitutional Court declaring the unconstitutionality of the executive decree that established the state of emergency throughout the national territory, the Tax and Customs Authorities have lifted the suspension of terms and conditions, as established below:
1. The Internal Revenue Service, through Regulation NAC-DGERCGC21-00000001 issued on January 3, 2021, repealed the Regulation NAC-DGERCGC20-00000081 issued on December 23, 2020, by which the terms and deadlines of all administrative processes and the statute of limitations for collecting debts were suspended until January 17, 2021.
2. The National Customs Service of Ecuador, through Regulation SENAE-SENAE-2021-0001-RE, issued on January 3, 2021, canceled the suspension of terms and deadlines of all tax administrative processes and the statute of limitations for collecting debts until January 20, 2021, ordered by Regulation SENAE-SENAE-2020-0062-RE, issued on December 22, 2020.
3. Although when this bulletin was prepared, these regulations have not been published in the Official Gazette, the authorities of the Tax and Customs Authorities have established that the terms counted in calendar days will run as of January 3 and the terms counted in working days will run as of January 4, 2021.

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Tariffs applicable in 2021 for calculating income tax

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Regulation NAC-DGERCGC19-00000077 issued on December 23, 2020, by the General Director of the Internal Revenue Service establishes the tariffs applicable in the fiscal year 2021 for calculating income tax.

1. Tariffs for calculating and paying income tax applicable to income received by Individuals and Undivided Inheritances in the fiscal year 2021:

2. Tariffs for calculating and paying income tax applicable to patrimonial increase derived from inheritances, legacies, donations, discoveries and any type of act or contract by which the ownership is acquired free of charge of goods and rights in the fiscal year 2021:

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Suspension of deadlines in tax matters

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In accordance with the state of emergency declared by the President, the Tax and Customs Authorities have suspended the following deadlines and terms:

1. Regulation NAC-DGERCGC20-00000074 issued by the Internal Revenue Service established that the terms and deadlines in all administrative processes and the statute of limitations for collecting debts are suspended from December 24, 2020 up to and including January 1, 2021. Later the term of suspension was extended up to and including January 17, 2021, by regulation NAC-DGERCGC20-00000081.

2. Regulation SENAE-SENAE-2020-0062-RE issued by the Customs Authority established that terms and deadlines in all administrative processes and the statute of limitations for collecting debts are suspended from December 22, 2020 up to and including January 20, 2021.

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DISCLAIMER: The preceding text has been prepared for general information purposes only. 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 given situation requires the specific opinion and view of the firm in Quito / Guayaquil, Ecuador.

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Law for the rationalization, reuse and reduction of single use plastics in commerce

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The Law for the Rationalization, Reuse, and Reduction of Single-Use Plastics in Commerce (the “Single-Use Plastics Law”) was published on December 21, 2020. The main topics of the Law are the following:
1. Objective
The purpose of the Single-Use Plastics Law is to regulate the generation of plastic waste, the progressive reduction of single-use plastics through responsible consumption, reuse, recycling, and possible replacement by packaging made from recycled or biodegradable material.
2. Guiding Principles
The environmental principles for the interpretation of the Law are the following:
2.1 Comprehensive responsibility
2.2 Environmental Best Practices
2.3 Sustainable Development
2.4 Polluter pays
2.5 Prevention
2.6 In dubio pro natura
3. Progressive reduction of single-use plastic

The Single-Use Plastics Act provides for the progressive reduction of single-use plastics from the time it comes into effect:
Within 12 months, it is forbidden to:
1) Merchandise and use of single-use plastic bags and containers for food and beverage in national parks, protected areas, beaches
2) Use of single-use plastic bags or wrappers for the delivery of printed advertising, newspapers and magazines
3) Manufacture and import for internal consumption, distribution, delivery, and use of single-use plastic sorbets.
Within 24 months, it is forbidden to:
1) Manufacture and import for internal consumption, distribution, and use of plastic bags that do not contain the minimum percentage of post-consumer recycled material
2) Manufacture and import for internal consumption of bags and single-use articles that include additives that catalyze such materials’ fragmentation into microplastics.
(3) Manufacture and import for domestic consumption, distribution, and use of containers or packaging made of polystyrene, which does not contain the minimum percentage of post-consumer recycled material
Within 36 months, it is forbidden to:
1) Manufacture and import for internal consumption, distribution and use any modality of bags, plastic wrappers of a single whose manufacture does not contain the percentage of recycled raw material
2) Manufacture and import for domestic consumption, distribution and use of plastic plates, cups, and other single-use food and beverage utensils and tableware that are not recyclable or reusable and whose manufacture does not contain the percentage of recycled raw material.
4. Exception for the use of single-use plastics

Plastic bags and packaging that constitute the primary packaging of food in bulk or of animal origin are excluded from the above prohibitions. Also excluded from the standard are single-use bags and packaging related to cleaning, hygiene, health, or medical.
5) Minimum component
All bags, containers, and plastic products that are not mentioned in the prohibitions must comply with minimum characteristics determined by the Ministry of Environment in conjunction with the Ministry of Production and Foreign Trade. These characteristics will contemplate the minimum percentages of post-consumer recycled material. The percentages previously described will be reached progressively and within the deadlines outlined in this Law.
6. Registration
The Ministry of Environment shall create a national public registry of importers and producers of plastic, single-use plastic products. The Registry shall provide statistical information regarding the import, manufacture, distribution and consumption of these products.
7. Labelling
All plastic articles for consumption will have a label printed on their packaging recommending how to reuse and recycle them following the National Technical Standard
8) National Plastic Waste Reduction Plan
The Ministry of the Environment has 90 days to prepare the National Plan for the Reduction of Plastic Waste. This plan will establish the objectives, goals, strategies, and incentives to reduce plastic waste.
9. Infractions and sanctions
Some of the main infractions and sanctions are the following:
It is considered a severe infraction:
a) Recidivism by producers, importers, and marketers in the non-compliance with the prohibitions for reducing single-use plastic products.
It is considered a serious infraction:
b) Non-compliance by producers, importers, and marketers in the reduction of single-use plastic products.
c) The use of single-use plastics in prohibited areas.
The sanction will depend on the offender’s economic capacity according to the Organic Code of the Environment.
It will be a pleasure for Corral Rosales to assist you in adapting and fulfilling the present Law.

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Annual declaration of hazardous waste

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Within the first ten (10) days of the next year, generators of hazardous waste must submit the annual declaration of hazardous waste to prevent and reduce the generation of such waste.
1. About the Hazardous Waste Generator
Article 237 of the Organic Code of the Environment establishes that any hazardous waste generator must obtain an administrative authorization.
The waste generator will be responsible for the environmental management of the waste from its generation to its elimination and final disposal.
The generator will be jointly responsible in case of incidents that produce pollution and environmental damage.
2. About the Annual Hazardous Waste Declaration
Part of the generator of hazardous waste’s obligations is the presentation of the Annual Declaration to prevent, reduce, or minimize the generation of hazardous waste.
The Annual Declaration must be filed within the first ten days of January.
The declaration submitted will be subject to verification by the authority, which may request additional information in this matter.
3. Non-compliance
Non-compliance with the Annual Declaration may result in the cancellation of the registration as a generator of hazardous waste.
Additionally, it may be considered a minor Non-Conformity according to article 500 j) “failure to comply with the obligations established in the administrative authorizations.”
CorralRosales will be happy to assist you in the presentation of the Annual Declaration of Hazardous Waste as well as any questions you may have regarding waste management.

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Amendments to the law of companies

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On December 10, 2020, the Law of Modernization to the Law of Companies was published in the third supplement of Official Gazette 347, of which the most relevant aspects are the following:

a) Permitted activities outside the corporate purpose: Companies are allowed to occasionally or in an isolated manner enter into acts or contracts for investment, research or experimentation purposes, or as reasonable contributions of a civic or social nature.

b) Elimination of the opposition process: The process of opposition by third parties to the reduction of capital, change of name, early dissolution and change of domicile is hereby eliminated.

c) Single shareholder: The stock company and the limited liability company may subsist with a single shareholder. For its incorporation, at least two contracting parties must participate. Consequently, the cause for dissolution is hereby eliminated if a second shareholder is not incorporated within six months.

d) Corporate acts that do not require approval:  The voluntary and anticipated dissolution does not require previous authorization of the Superintendence of Companies, Securities and Insurance. Therefore, the direct inscription of the corporate act in the Mercantile Registry is allowed for the beginning of the liquidation, which will be supervised by the control entity.

Neither does the change of name, change of domicile and modification of the corporate term require prior authorization.

e) Indefinite term: Stock and limited liability companies can be set up for an indefinite term.

f) President of the board of directors and legal representative: In the companies in which the bylaws provide for the existence of a board of directors, the legal representative of the company may not be the president or representative of that body.

g) Share premium: When non-shareholders participate in a capital increase, it may be decided the new shares to be issued with a value greater than the nominal value (share premium) to be paid by the new shareholders. The issue premium will be part of the voluntary reserves and will be freely agreed upon by the investor and the company.

h) Voluntary control: Stock companies may or may not have commissaries as a control body.

i) Loss absorbency: When a company registers operational losses and has reserves, these will be automatically called to be wiped out.

j) Cause of dissolution for losses: A company will incur in a cause of dissolution for losses when these represent 60% or more of the assets and this situation is maintained for more than 5 continuous years.

k) Transfer of the registered office abroad: The transfer of the registered office of an Ecuadorian company abroad is allowed if the receiving country allows the maintenance of the legal status of the company.

l) Global assignment of assets and liabilities to liquidate a company: A company may transfer in block all its assets to third parties, shareholders or other parties in exchange for a consideration. The global transfer of assets and liabilities must be approved unanimously by the general meeting of shareholders, granted by public deed and will not require the approval of the Superintendence of Companies, Securities and Insurance.  The global assignment of assets and liabilities will have the effects of the transfer of companies as economic units as provided in the Code of Commerce.  The assigning company will cancel its registration in the Commercial Registry without any additional procedure once the total value received from the global assignment of assets and liabilities has been distributed among its shareholders.  The joint and several obligations that under the Commercial Code are attributable to the person transferring the company will be assumed by the shareholders of the extinct company in proportion to their participation in the share capital.

m) Association or Joint Purse Agreements: The regulations regarding this figure, with some modifications, are excluded from the Law of Companies and are incorporated as reforms to the Code of Commerce.

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Judicial recess

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The Reformatory Organic Law of the Organic Code of the Judicial Function, published in the Supplement to Official Gazette No. 345 of December 8, 2020, regulated the recess and vacation periods of the Judicial Function.

By virtue of this reform, the judiciary servants of Ecuador will enjoy their annual vacations in two fifteen-day periods each:

  1. The first, in the Sierra and Amazon regions from August 1 to 15 and in the Coastal and Island regions from March 17 to 31.
  2. The second, in the entire country, from December 23 to January 6 of the following year.
During these periods, the Judiciary goes into recess, and, therefore, the deadlines and terms within any legal proceedings in progress are suspended.

Please note that general and specialized criminal courts, tribunals and chambers, as well as courts for family, women, children and adolescents will not be subject to these recesses.

During the time of the vacancy, actions for jurisdictional guarantees may be filed, and after a draw these will be heard by those judges who continue working during this time.

Exceptionally, in cases of fortuitous event or force majeure, the Judiciary Council may change the dates of these recesses.

In order to guarantee permanent services to the citizens, the Judiciary Council will coordinate the annual vacations system with the rest of the auxiliary and autonomous bodies of the Judiciary.

The Plenary of the Judiciary Council determined, by Resolution 141- 2020 issued on December 14, 2020,  that the annual vacations for judiciary servants nation-wide and the Judicial Function recess for 2020 will be applied in accordance with the above-mentioned reform. Consequently, there will be a judicial recess from December 23, 2020 to January 6, 2021. Therefore, any the hearings and proceedings that were scheduled within these dates will be rescheduled.

The Director of the Judiciary Council shall issue the resolution corresponding to the vacation system for the administrative servants of the Judiciary, in coordination with its other autonomous and auxiliary bodies.

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