Yearly Archives: 2024

Through Executive Decree No. 487 issued on December 19, 2024, the President of the Republic of Ecuador amended the Regulations for the Application of the Internal Tax Regime Law and revised the rules governing the Single Income Tax for Sports Betting Operators. Below is a summary of the key points:

 

1. License to Operate

 

Both resident and non-resident operators in Ecuador must obtain a License to Operate Sports Betting (LOPD). This license will be granted by the Ministry of Sports, which must issue the regulations and conditions for obtaining it within three months.

 

The LOPD will be valid for five years. However, operators must pay an annual fee equivalent to 655 unified basic salaries (USD 307,850 for the year 2025).

 

1. Tax Modifications

 

• All entities engaging in sports betting activities will be subject to this tax, even if they are established as non-profit organizations, with the exception of the Guayaquil Charity Board (Junta de Beneficencia de Guayaquil) and the Fe y Alegría Foundation.

 

• The definition of “prize” has been modified for the purposes of calculating the withholding tax applicable to players and the taxable base for the operator’s tax. A player will be considered to have received a prize if, within a monthly period, the amount received from correct predictions exceeds the amount wagered.

 

• Bonuses freely available to the player will also be included in the amount received from correct predictions.

 

• The invoice and monthly withholding certificate for each player must be issued by the fifth business day of the following month.

 

• Operators have three months to adjust their systems and implement the necessary mechanisms to comply with these obligations.

Andrea Moya, Socia en CorralRosales
amoya@corralrosales.com
+593 2 2544144

The President of the Republic, by means of Executive Decrees No. 474 and 482 issued on December 6th and December 13th, 2024, respectively, ordered the mandatory and non-recoverable suspension of the working day of January 2nd and 3rd, 2025, for both the public and private sectors. With this decision, the New Year holiday will be extended from the 1st to the 5th of that month.

In our opinion, if the employer requires employees to work on these days and the employees give their consent, the work may be performed, provided that a 100% overtime surcharge is paid, as these are considered mandatory rest days.

 

Edmundo Ramos, Partner at CorralRosales
eramos@corralrosales.com
+593 2 2544144

 

María Victoria Beltrán, Senior Associate at CorralRosales
mbeltran@corralrosales.com
+593 2 2544144

 

By Resolution NAC-DGERCGC24-00000040, the Internal Revenue Service (SRI) has established the conditions for applying the additional deductions set forth in subparagraphs 9.1, 9.2, and 9.3 of Article 10 of the Internal Tax Regime Law (LRTI).

A. Net Increase in Job Positions: To determine the jobs net increase, subtract from the total number of employees under a labor relationship as of December 31 of the year the deduction applies, the number of employees as of December 31 of the prior year.

For calculating the net increase in young workers, subtract from the number of young workers as of December 31 of the year the deduction applies, the number of young workers as of December 31 of the prior year.

B. Amounts Applicable for the Benefit: The additional deduction is calculated exclusively over salaries and wages subject to social security contributions, as determined by law. It does not include social benefits or other compensation not subject to social security contributions, nor the employer’s social security contributions.

C. Duration of the Benefit: The employer may apply the additional deduction for up to 12 months from the start of the employment relationship. This period does not apply to the benefit for contracting women, which timeframe is determined in the LRTI and its regulations.

If the new worker’s employment ends before December 31 of the fiscal year, the benefit may continue if the position is filled the following month.

D. Additional Deduction Percentages: The additional deduction percentages are as follows:

Worker

Additional Deduction (%)

• Individuals aged 18 to 29 years.
• Individuals required to pay alimony
• Individuals previously detained without a final guilty verdict

50%

• Individuals aged 18 to 29, who are graduates or have completed studies at public universities, technical or technological institutes, pedagogical or arts institutes, conservatories, or public or municipal institutes.
• Individuals of any age, provided the employer’s primary economic activity is in construction or agriculture.
• Individuals who have served a prison sentence exceeding one year, as well as their spouses or partners in a legally recognized union.

75%

E. Individual Requirements: Workers must meet the following conditions:

1. Youth Employment: Workers must be aged between 18 and 28 years. The benefit applies until the worker turns 29.
2. Graduates from Public Educational Institutions: This must be verified with corresponding degrees, certificates, or records.
3. Alimony Payers: This must be proven by a court decision or settlement agreement.
4. Formerly Detained Individuals: The position must be held by someone who served over one year in prison, is in semi-open conditions, or had measures that substituted detention. Verification must come from documents issued by the National Service for Comprehensive Attention to Persons Deprived of Liberty (SNAI).

F. Document Retention: Employers must retain supporting documents for seven years.

G. Construction and Agriculture Sectors: For the construction sector, the employer must register a principal activity under Section F “Construction” of the International Standard Industrial Classification (ISIC).

For agriculture, the employer must register any of the following principal activities under ISIC:

– A011: Growing non-perennial crops

– A012: Growing perennial crops

– A013: Propagation of plants

– A015: Mixed farming of crops and livestock

If additional activities are performed, the employer must differentiate payrolls by activity and calculate the net increase in employment only for workers engaged in construction or agriculture. If differentiation is not possible, the benefit will apply proportionally to income.

H. Benefit Restrictions: The benefit is not applicable if new employees were previously employed by the same employer, their relatives up to the fourth degree of consanguinity or second degree of affinity, shareholders, legal representatives, or related parties, within the 3 fiscal years preceding their hiring.

I. Compliance Obligations: To access the benefit, employers must be up to date with obligations to the Internal Revenue Service, Ecuadorian Social Security Institute (IESS), and the Ministry of Labor as of the date of submission of the income tax return.

 

Andrea Moya, Partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

Organic Law for Financial Relief and Economic Strengthening of Generations in Ecuador was published in Official Gazette No. 699, Fifth Supplement, on December 9, 2024.

Below is a summary of the most relevant provisions:

1. Tax credit for employers:

Employers who did not terminate their workers during October, November, and December 2024 and who maintain them under the same or better working conditions may claim a percentage of the employer’s contribution to social security paid during this quarter as a tax credit for 2024 income tax. The percentage will be calculated according to the following chart:

Type of institution Benefit Large companies with gross income in 2023 higher than in 2022.

Medium-sized banks with gross income higher from October 2023 to October 2024. 5% Large companies with gross income in 2023 similar to 2022.

Medium-sized banks with lower gross income from October 2023 to October 2024. 10% Large companies with gross income in 2023 lower than in 2022.

Small banks with higher gross income from October 2023 to October 2024 15% Medium-sized companies with gross income in 2023 higher than in 2022.

Small banks with lower gross income from October 2023 to October 2024 20% Medium-sized companies with gross income in 2023 similar to 2022

All other financial institutions. 25% Medium-sized companies with gross income in 2023 lower than in 2022 30% Small and microenterprises with gross income in 2023 higher than in 2022 35% Small and microenterprises with gross income in 2023 similar to 2022 40% Small and microenterprises with gross income in 2023 lower than in 2022 45%

Large banks are not eligible for this benefit. The credit amount cannot exceed the tax liability for the 2024 fiscal year.

1. Exceptional payment plan:

The Internal Revenue Service (SRI) may accept payment plans of up to 12 installments for withheld or collected taxes outstanding as of October 31, 2024. Applications must be submitted by February 7, 2025.

1. Extinction of Tax Obligations:

The SRI Director General and, optionally, sectional tax administrations will declare extinguished any tax obligations with a total value (including tax, interest, and penalties) that does not exceed $460 per taxpayer. This applies if the obligation has been outstanding for at least one year and the tax administration has initiated collection proceedings.

1. Income Tax Waiver:

Income tax payments for the 2022 and 2023 fiscal years are waived for taxpayers under the RIMPE-Popular Business Regime.

1. Income from occasional property sale:

Income from the occasional sale of real estate by individuals or entities will be considered exempt from income tax, provided it does not exceed two property sales per year.

1. Social security:

• The Ecuadorian Institute of Social Security (IESS) will not initiate collection proceedings until February 28, 2025. Ongoing processes will also be suspended until that date.
• Social security contributions corresponding to November and December 2024 will not generate employer liability if paid within 90 days of becoming overdue and upon the employer’s request.

1. Public procurement:

Public sector contracting entities may grant exceptional extensions to contractual deadlines for the delivery of goods or services, provided the contracts were signed during the period of the electricity crisis.

 

Andrea Moya, Partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

Through Executive Decree 468 issued on December 1, 2024, the President of the Republic has reduced the ISD tax rate for importation of goods classified under certain tariff subheadings:

Sectors ISD tax rate from January to March 2025 ISD tax rate from April 2025 Tariff subheadings of the pharmaceutical sector 0% 0% Tariff subheadings of other productive sectors 0% 2,5%

The lists of tariff subheadings subject to these rates will be issued by the Ministry of Economy and Finance.

This measure aims to mitigate the impact of the elimination of the ISD tax credit for income tax purposes.

 

Andrea Moya, Partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

On October 27, 2024, the Electricity Regulation and Control Agency (ARCONEL) issued Resolution No. ARCONEL-010/2024 (the “Resolution”). The Resolution amended and codified Regulation No. ARCONEL-005/24, which includes the “Regulatory Framework for Distributed Generation Systems for Self-Supply by Regulated Electricity Consumers.”

The Resolution was published in Official Gazette No. 689 on November 22, 2024.

Below is a summary of the amendments to the Regulation:

1. Distributors with multiple business units
   • Previous rule: For distributors with multiple business units, the regulated consumer and the distributed generation system for self-supply (“SGDA”) were required to be within the same business unit (e.g., both had to be within CNEL Guayaquil).
   • Current rule: It is now sufficient for the regulated consumer and the SGDA to be within the same service area of the distributor, even if they belong to different business units (e.g., the regulated consumer may be in CNEL Guayaquil, and the SGDA in CNEL Esmeraldas).

    

2. Contract between the SGDA owner and the regulated consumer
   • Previous rule: If the SGDA was owned by a third party, it was mandatory to submit a lease agreement between the owner and the regulated consumer to the distributor before starting SGDA operations.
   • Current rule: Submitting a lease agreement is no longer mandatory. Any “legal document” agreed upon by the parties is sufficient. The prohibition against selling the energy produced by the SGDA to the regulated consumer remains in effect.

    

   Carlos Torres, Senior Associate at CorralRosales
   ctorres@corralrosales.com
   +593 2 2567676

   Mario Fernández, Associate at CorralRosales
   mfernandez@corralrosales.com
   +593 2 2544144 

   © CORRALROSALES 2024
   NOTA: The above text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused by actions taken or not taken based on the information contained in this document. Any specific situation requires the specific opinion and advice of the firm.

   CORRALROSALES

Through Resolution No. BCE-GG-024-2024, published in the Official Gazette No. 678 on November 7, 2024, the Central Bank of Ecuador (“BCE“) complied with the first transitional provision of Resolution No. JPRM-2024-018-M, issued by the Monetary Policy and Regulation Board (“JPRM“) on September 4, 2024, and enacted the Regulation for the Authorization, Oversight, and Supervision of Participants in the Auxiliary Payment Systems (hereinafter, the “BCE Resolution“).

The BCE Resolution repealed Resolution No. BCE-GG-018-2023, issued by the Central Bank on September 29, 2023, which previously governed this matter.

This regulatory update amends the criteria that entities must meet to be qualified by the Central Bank as participants in the Auxiliary Payment Systems (“Participants“).

The BCE Resolution strengthens the qualification process by imposing more rigorous requirements for entities seeking to obtain such status. Notable among the new requirements are:

1. ISO 27001 Certification on Information Security Management Systems or the implementation of policies, processes, procedures, and methodologies for information security aligned with international standards.
2. ISO 22301 Certification for Business Continuity Management or a business continuity plan that adheres to recognized international standards and practices.
3. ISO 31000 Certification on Risk Management or a methodology for managing operational risks.
4. A liquidity risk management methodology, integrating operational and analytical tools for identifying, measuring, controlling, and monitoring such risks.
5. A Corporate Governance Manual tailored to the administrative structure of the Participant.
6. A Customer Service Manual.
7. A Personal Data Protection Policy aligned with the Data Protection Law and its Regulations.
8. Certificate of compliance issued by the Financial and Economic Analysis Unit – UAFE.

Additionally, the BCE Resolution imposes periodic reporting obligations requiring Participants to submit information in structures established by the Central Bank.

The BCE Resolution mandates that, within a maximum of four (4) months, the BCE will require currently authorized Participants in the Auxiliary Payment Systems to submit the additional documents and requirements specified in the BCE Resolution.

The BCE will also have to update the registry of Participants in the Auxiliary Payment Systems to ensure that services listed for each Participant comply with the provisions of Resolution No. JPRM-2024-018-M.

 

Juan Fernando Riera, Associate at CorralRosales
jriera@corralrosales.com
+593 2 2544144

On November 7, 2024, the National Public Procurement Service (“SERCOP”) issued Resolution No. RE-SERCOP-2024-0145 (the “Resolution”), through which amendments were made to the Secondary Regulations of the National Public Procurement System (“NSSNCP”).

The Resolution was published in Official Registry No. 682 on November 13, 2024, and came into force on the same date.

Below is a summary of the general amendments to the NSSNCP:

1. RUP Suspension. 1.1. The suspension of the Unified Suppliers Register (“RUP”) of a supplier will also apply to its legal representative and major shareholder. 1.2. For associations to consortia, it will extend to their common representative. 1.3. If the legal representative or common representative is an entity, the suspension will also extend to the individual who holds the legal representation of that entity.

1. Financial Ratios. Non-compliance with the financial ratios established by the contracting entity in the bidding documents does not constitute grounds for rejection of the bid.

1. Beneficial Owner. The beneficial owner declaration does not apply to bidders, or their shareholders listed on a stock exchange.

1. Participation Rules. The participation rules regarding technical experience, legal existence, and equity do not apply in reverse auction procedures or in the special regime procedures set forth in numbers 2 and 8 of Article 2 of the National Public Procurement Law (“LOSNCP”).

1. Ecuadorian Added Value. For a bid to be considered national, its Ecuadorian Added Value (“VAE”) must be equal to or exceed the minimum threshold established by the contracting entity. VAE does not apply to engineering, procurement, and construction procedures.

1. Sustainable Public Procurement. 6.1. Sustainable public procurement is established as a strategy to: (i) position contracting entities as responsible consumers; (ii) promote environmental, social, and economic well-being; (iii) ensure the quality of public spending; and (iv) encourage the use of criteria related to environmental, economic, and social responsibility. 6.2. By March 13, 2025, SERCOP is required to issue the “Guidelines for Sustainable Public Procurement.”

1. Bids. Bids must be submitted exclusively through the COMPRASPÚBLICAS portal, except in: (i) emergency procurements; (ii) acquisition of real estate; (iii) leasing of real estate; (iv) inclusive fairs; (v) procurements by specific business activity; and (vi) special regime procedures set forth in numbers 2 and 10 of Article 2 of the LOSNCP.

1. Collusion. In cases of suspected collusion in public procurement, SERCOP will inform the Superintendency of Economic Competition to determine and sanction such acts.

1. UAFE. If the contractor is an entity subject to obligations with the Financial and Economic Analysis Unit (UAFE), it must submit the UAFE Compliance Certificate during the contract execution phase.

1. Validation stage. During the validation stage of bids, contracting entities may request documents that support any information included in the bid that lacks sufficient evidence.

Public procurement procedures initiated before November 13, 2024, will conclude under the rules in force at the time of their call.

By November 13, 2025, SERCOP must update the electronic tools of the COMPRASPÚBLICAS portal to apply the provisions of the LOSNCP, its Regulations, and the NSSNCP.

If you require additional information on reforms related to your industry, please feel free to contact us.

 

Hugo García Larriva, Senior Associate at CorralRosales
hgarcia@corralrosales.com
+593 2 2567676

 

Mario Fernández, Associate at CorralRosales
mfernandez@corralrosales.com
+593 2 2544144