Monthly Archives: June 2022

Through Executive Decree No. 451, issued on June 9, 2022, the Regulations to the Public Procurement Law were amended. The amendment covers the provisions applicable to the acquisition of medicines and strategic health goods for outpatient care (“Products“) by the Public Health Network (“PHN“) to private pharmacies qualified by the national health authority (“Pharmacies“). 
 
The main aspects of this amendment are:

1. The prices of the Products, which the PHN shall pay to the Pharmacies, shall be those provided in the electronic catalog. In addition, the PHN shall pay each Pharmacy an additional amount for “operating costs” to be analyzed and fixed by the National Health Authority (“NHA“).
2. If one of the Products is not in the electronic catalog, the price will be the one fixed within the referential budget for the Corporate Reverse Auction of the respective Product (“CRA“). Said price shall be applied until 90 days after the signing of the Framework Agreement resulting from the CRA, after which the provisions mentioned in point 1 shall apply.
3. Until the NHA fixes the “operating costs“, the PHN shall pay each Pharmacy 5% of the total value of the Products it has dispensed under the adhesion contracts entered into or to be entered into with PHN.
4. The “operating costs” fixed by the NHA shall only apply to the adhesion contracts entered into from such fixation. The previous contracts shall be subject to the provisions mentioned in point 3 until their expiration, and if they are renewed, the amount fixed by the NHA shall apply to such renewal.

Executive Decree No. 451 entered into force on June 14, 2022.

Specialist in Corporate and Public Contracting Law
Mario Fernández, associate at CorralRosales
mfernandez@corralrosales.com
+593 2 2544144

As of fiscal year 2022, any taxes paid abroad by individuals or corporations with tax residence in Ecuador over income obtained abroad may be used as a tax credit for the payment of income tax incurred in Ecuador. Previously this income was considered exempt. Through Regulation NAC-DGERCGC22-00000026 the Internal Revenue Service issued the rules and limits for the application of this amendment.

1. Requirements

Taxpayers with tax residence in Ecuador who receive income abroad, which is taxable in Ecuador, may use the tax paid abroad as tax credit for the payment of income tax in Ecuador, in accordance with the following:

1. The tax to be considered as tax credit will be the tax effectively paid or withheld abroad, provided that it may not be used as tax credit or reimbursed abroad.
2. The tax credit may only be used when the tax paid abroad is income tax or any equivalent direct taxes.
3. If the tax paid abroad has been paid in a currency other than US dollars, the value must be converted to US dollars according to the exchange rate reported by the Central Bank of Ecuador.
4. The recognition and quantification of the income obtained abroad will correspond to the gross value, i.e., the value of the income before subtracting the tax paid abroad.
5. If the foreign income is not taxed in Ecuador or is considered exempted, the tax paid abroad cannot be used as tax credit.
6. The necessary evidence must be available to prove the payment of the tax abroad, for example, a certificate issued by the competent tax authority, duly legalized and translated into Spanish.

1. The part of the tax paid abroad that exceeds the limit to be used as tax credit is not subject to refund, compensation or any other form of recovery and cannot be used in another tax period.

1. Limits

The value to be used as tax credit for the payment of income tax shall be limited to the lower between:

1. The tax effectively paid abroad; and,
2. The value obtained by multiplying the effective income tax rate applicable to the taxpayer for that period, by the difference of the income obtained abroad minus the total expenses attributable to such income.

The effective rate is equal to the percentage obtained by dividing the total income tax incurred by the total taxable income.

1. Double tax treaties

If the rules of a double tax treaty apply, the following must be taken into consideration:

1. If the mechanism to avoid double taxation in the treaty is not the ordinary imputation method, the provisions of the regulation do not apply.
2. If the mechanism to avoid double taxation in the treaty is the ordinary imputation method, the provisions of the regulation apply.
3. If the mechanism for avoiding double taxation in the treaty is the ordinary imputation method with specific rules, the specific rules shall be applied first and then the rules of the regulation, insofar as it does not contradict the treaty.

Specialist in Tax
Andrea Moya, partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144