Monthly Archives: March 2024

CorralRosales > 2024 > March

Amendments to the Law of the National Public Procurement System Regulations

Categories Bulletin Posted on Author admin Tags Ecuador

Through Executive Decree 206 of March 21, 2024 (“Presidential Decree”), published in the Third Supplement of the Official Registry 524 of March 22, 2024, the President amended the Law of the National Public Procurement System Regulations (“Regulations”).

The key amendments to the Regulations are summarized below:

  1. It regulates infrastructure projects contracted under engineering, procurement, and construction mechanisms.
  2. A confidential and special regime will be applied for the procurement of works, goods, and services for (i) national defense and external security of the State; (ii) public order, internal protection, citizen security, and internal security of the State; and (iii) social rehabilitation.
  3. Government providers must adopt compliance management systems for anti-bribery, anti-money laundering, anti-corruption, and others needed to control their resources.
  4. If the bidder is required to make submit to the Financial Analysis Unit (“UAFE”) by law, they cannot participate in any public procurement procedures until obtaining the UAFE Compliance Certificate.
  5. In procurement procedures which require the bidder to be registered and enabled in the Unique Suppliers Registry, contracting entities will verify the registration only at the opening of bids and at the contract signing date.
  6. When bidders are entities or consortium, contracting entities will verify their partners, shareholders, or participants eligibility according to article 250 of the Regulations at the opening of the bids and at the contract signing date.
  7. An individual will be considered the beneficiary owner when: (i) he owns or controls a company through a chain of ownership or any other means; (ii) on whose behalf a transaction is conducted; and/or (iii) who exercises effective control over an entity, national or foreign, or other legal structure. Rules for determining beneficial ownership are specified.
  8. The date of electronically signed contracts will be the date of the last electronic signature. For reception reports, the date stated in the document will apply, regardless of the electronic signature date.
  9. Contractors must submit monthly account statements reflecting the movements of the account designated to receive payments derived from the contract to the contract administrator.
  10. Disputes arising during the execution of a contract can be resolved through a Dispute Resolution Board.
  11. Appeals against administrative acts issued during contract execution shall be subject to the provisions of the Administrative Code.
  12. Establishment of an administrative body within the National Public Procurement Service (“SERCOP”) responsible for reporting unusual and unjustified operations and transactions to the UAFE.
  13. By April 30, 2024, SERCOP and the Ministry of Public Health must prepare a proposal to facilitate the acquisition of medicines and strategic health goods.
  14. By May 7, 2024, the Central Bank of Ecuador, the Tax Authority, and the Ministry of Economy must issue the necessary regulations to implement the Tenth General Provision of the Law of the National Public Procurement System, requiring payments received by contractors and subcontractors to be made public through an information portal or website.
  15. Procurement procedures in the preparatory or pre-contractual phase shall conclude by the regulations with which they commenced.
  16. Contracts entered into before March 22, 2024, will be subject to the regulations in force at the time of signing, without prejudice to the parties agreeing to apply any of the reforms provided for in the Decree.
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.

 

CORRALROSALES

VAT tax rate increase

Categories Bulletin Posted on Author admin Tags Ecuador, Tax
Through Executive Decree 198 issued on March 15, 2024, the President of the Republic modified the Value Added Tax rate to 15% for the year 2024. The new tax rate will apply starting from April 1, 2024.

amoya@corralrosales.com
+593 2 2544144

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.

 

CORRALROSALES

Law to adress the internal armed conflict

Categories Bulletin Posted on Author admin Tags Ecuador, Tax
The Law to Address the Internal Armed Conflict, Social and Economic Crisis was enacted by Official Registry Supplement No. 516 of March 12, 2024. Below, we summarize the main topics:


1. Temporary Security Contribution
 
Entities that had taxable income during the fiscal year 2022 will be required to pay a contribution in the fiscal years 2024 and 2025. The contribution will be equivalent to 3.25% of the taxable base of the income tax for the fiscal year 2022.

Micro, small businesses, banks, and savings and credit cooperatives will not be subject to pay this contribution.

2. Temporary Contribution to Profits of Banks and Savings and Credit Cooperatives.
 
Banks and savings and credit cooperatives that had taxable income during the fiscal year 2023 will be required to pay the contribution in the fiscal year 2024. The contribution rate will be applied on the taxable base of the income tax for the fiscal year 2023, according to the following chart:

Group Taxable Profit Tax Rate 1 Less than US$5,000,000.00 5% 2 Greater than US$5,000,000,00 up to US$10,000,000.00 10% 3 Greater than US$10.000.000,00 up to US$50,000,000.00 15% 4 Greater than US$50,000,000.00 up to US$100,000,000.00 20% 5 Greater than US$100,000,000.00 25%
3. Value Added Tax (VAT).
 
The following reforms are made:
 
a. It is established that the VAT rate will be 13%.
b. The President of the Republic may increase the rate to 15%.
c. Local transfers of construction materials will be subject to a 5% VAT rate.

The reforms to the VAT rate will come into effect from April 1, 2024.

4. Outflow Tax (ISD)
 
It is established that the ISD rate will be 5%. The President of the Republic can reduce the ISD tax rate.
 
The reforms to the ISD rate will come into effect from April 1, 2024.

amoya@corralrosales.com
+593 2 2544144

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.

 

CORRALROSALES

Ministerial Accord No. MEM-MEM-2024-0002-AM

Categories Bulletin Posted on Author admin Tags Ecuador, Energy, Mining

On March 6th, the Ministry of Energy and Mines issued the Manual for the Operationalization of Free and Informed Prior Consultation (hereinafter “Manual“), recognized in Article 57, paragraph 7 of the Constitution of the Republic of Ecuador (hereinafter “Constitution“). The purpose of the Manual is to develop the constitutional standards for the operationalization of consultation. These standards have been established by the Constitutional Court and international treaties.

The Constitution recognizes the collective right of communes, communities, peoples, and nationalities (hereinafter “consulted subjects“) to free, prior, and informed consultation.  The manual provides that such consultation is mandatory prior to the issuance of administrative measures on plans and programs for prospecting, exploration, exploitation, and commercialization of non-renewable resources that are in the territories of the consulted subjects and may affect them environmentally or culturally.

The results of the prior, free, and informed consultation shall be of a non-binding nature. As a consequence, in cases where the State chooses to implement a project even without the consent of the consulted parties, it must: i) give reasons why it has not been possible to adapt the project in accordance with the observations of the consulted parties; ii) establish the reasons that justify the continuity of the project; and, iii) the measures that minimize the possible impact and maximize the benefits for the consulted parties.

The main aspects of the Manual are detailed below:

I.       Scope of application

Free, prior, and informed consultation shall be carried out prior to the administrative measure issued for prospecting, exploration, exploitation and commercialization plans for mineral resources and mining concessions on indigenous lands. It shall be carried out by the Sector Ministry (hereinafter “consulting subject“).

II.    Principles

Free, prior, and informed consultation shall be governed by the principles of obligatory nature and timeliness; flexibility; good faith; interculturality and plurinationality; systematicity and formality; publicity and information; reasonable time; and ample and necessary information.

III.    Stages of the mining concession

•    Exploration
•    Exploitation

Prior consultation is mandatory before each stage. In small-scale mining, the two stages can be carried out simultaneously and prior consultation is adapted to this reality.

IIII.    Phases of free, prior, and informed consultation

The free, prior, and informed consultation has four phases: i) preparation; ii) public call and registration; iii) registration, information, and execution of the consultation; and iv) analysis of results and closure of the consultation.

a. Preparation phase

The consulting subject will issue an administrative act identifying the consulted subjects of the lands and territories where the mining project will be developed, after requesting information from the Ministry of Agriculture and Livestock.   Once the consulted subjects have been identified, the consulting subject will establish a schedule identifying:

•    The administrative measure on the prospecting, exploration, exploitation, or commercialization program to be consulted.
•    The consultation procedure; and,
•    The phases of the consultation.

b. Public call and registration phase

The consulting subject shall inform via the media of the initiation of the free, prior and informed consultation procedure. And, in turn, shall open information centers for the consultation.

c. Registration, information, and execution of the consultation phase

The information centers will carry out the registration process for the dialogue between the consulting subject and the consulted. The centers will guarantee access to information to make known to the consulted subjects the scope of administrative measures on plans and programs for prospecting, exploration, exploitation, and commercialization of mineral resources.

d. Phase of analysis of results and closure of the consultation.

Within a maximum term of 20 days, the consulting subject shall compile the results of the free, prior, and informed consultation. Lack of attendance or actions that seek to impede or delay the completion of the consultation shall not vitiate it nor shall it be interpreted as motivated opposition.

Once all the information has been compiled, a dialogue table will be set up where the results of the consultation and the observations of the consulted subjects regarding the administrative measure to be issued will be discussed. After the dialogue table is concluded, the consulting subject will prepare a final report containing all the information discussed, especially the consensuses and dissensus reached by the parties. With the results of the consultation, the administrative measure will be issued, and the schedule will be defined with the commitments and benefits agreed with the consulted parties. Once the prior consultation process has been carried out, the consulting party will maintain channels of communication and participation with the consulted parties throughout the project execution process.

 

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.

 

CORRALROSALES

Income Tax Withholding percentages

Categories Bulletin Posted on Author admin Tags Ecuador

Resolution NAC-DGERCGC24-00000008 issued by the Tax Authority and published in the Supplement of the Official Gazette No. 508 on February 29, 2024, updated the income tax withholding percentages. Below, we detail the main changes:

1. 0% Withholding

Applies to the acquisition of goods and services provided by taxpayers subject to the RIMPE Regime (Popular Business), if a preprinted voucher has been issued.

2. 1% Withholding rate

The 1% withholding rate applies to the following additional concepts:

a.    The acquisition of goods and services by taxpayers subject to the RIMPE Regime (Entrepreneur).

b.    Payments made to insurance and reinsurance companies over the total value of the premiums.

3. 1.75% Withholding rate

The 1.75% withholding rate applies to the following concepts:

a. Payments for the construction of real estate, urbanizations, or similar activities.

b. Acquisition from marketers (non-producers) of agricultural, poultry, livestock, beekeeping, rabbit farming, aquaculture, forestry, and meat products in natural state.

4. 2% Withholding rate

The 2% withholding rate applies to the following additional concepts:

a. Reception of non-returnable PET plastic bottles when a single collector (individual) receives an amount higher than the basic fraction subject to 0% income tax rate. In the case of companies, the withholding applies to any amount.

b. Payments to commercial leasing companies over the lease installments and the purchase option.

c. Payments for interest and commissions for credit sales. To establish the taxable base, these payments will be added to the value of the goods.

d. The issuance of purchase settlements for goods and services in transactions with individuals who have their TAX ID suspended.

4. 2.75% Withholding rate

The 2.75% withholding rate applies to payments for invoices issued by media and advertising agencies.

5. 3% Withholding rate

The 3% withholding applies to the following concepts:

a. Professional services provided by corporations.

b. Commissions paid to corporations, whether national or foreign residents in Ecuador, and permanent establishments domiciled in the country.

6. 8% Withholding rate

The 8% withholding rate applies exclusively to the following concepts:

a. Payments to athletes, coaches, referees, and members of the technical staff.

b. Activities carried out by national or foreign artists residing in Ecuador.

7. 10% Withholding rate

The 10% withholding rate applies to the following additional concepts:

a. Fees, commissions, and other payments made to individuals providing services where intellect prevails over manual labor, regardless of whether the service provider holds a professional title.

b. Fees, commissions, royalties, and other payments made to individuals and corporations with tax residence in Ecuador for activities related to the use of their image, including artists, athletes, coaches, referees, members of the technical staff, and “influencers”.

c. Fees and other payments made to individuals with tax residence in Ecuador providing teaching services.

d. Payments made to notaries for activities inherent to their position.

e. Fees, royalties or any other payment made to individuals and corporations related to the ownership, use, enjoyment, or exploitation of intellectual property rights.

f. Lease of real estate under any contractual modality.

Withholding certificates that must be made between March 1 and March 15, 2024, can be issued until March 30, 2024.

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.

 

CORRALROSALES

International Women’s Day: Interview with Maria Cecilia Romoleroux

Categories Media Posted on Author admin Tags CorralRosales, Ecuador

DETAILS

DATE: 8-03-2024

PROFESSIONALS INVOLVED IN THE ARTICLE:

–Maria Cecilia Romoleroux

MEDIA:

– Gericó Associates

In the framework of International Women’s Day, our partner Maria Cecilia Romoleroux was interviewed by Gericó Associates about the current situation of gender equality in the legal sector. Below, we share some of her most outstanding reflections:

  1. Progress and challenges in diversity: Romoleroux noted that Ecuador has seen significant improvements in terms of diversity in the legal sector, with a notable decrease in the gender gap. However, she stressed the need to continue working on education so that the role of women is recognized not only as mothers and partners, but also as professionals capable of facing any challenge. She added that as long as women do not understand their role and obligations to the community, changes will be difficult.
  2. Priority on gender equality policies: Regarding gender equality policies in law firms, Romoleroux emphasized that they should be a priority for all law firms. She stressed the importance of establishing policies based on meritocracy, with clear rules and strong support to ensure their effectiveness.
  3. Overcoming barriers in the partnership: Given the worrying reality that reveals a remarkably low representation of women in partnership roles, as evidenced by the case of Spain, where only 21% of partnerships in law firms are held by women, Romoleroux addressed this gender disparity, noting that correcting these figures will require women to become aware of their capacity to lead and accept the challenge of overcoming existing barriers. She acknowledged that while it may be more difficult for women to rise to leadership positions due to the multiple roles they play, it is critical that they rise to the challenge.
  4. Boosting equality in the future: The implementation of measures to support and recognize female talent is a priority to promote diversity in the legal sector in the coming years, according to Romoleroux.
  5. Inspiration in pioneering women: Finally, our partner shared that her professional career has been inspired by all those women who, throughout history, have defied the established rules to achieve their goals.

The interview with Maria Cecilia Romoleroux provides insight into the challenges and opportunities faced by the legal sector in terms of gender equality, as well as the way forward to achieve greater inclusion and diversity in the profession.

Read the full story here.