Minimum wages for economic sectors

Salarios-mínimos-sectoriales-para-el-2022
The Ministry of Labor through Ministerial Agreement MDT-2021-277, published in the second supplement to Official Register 606 of December 28, 2021, set the minimum wages for each of the 22 economic sectors for 2022.
 
Since January 1st, 2022, the increase of the minimum wages for each economic sector will be of 6,25%, applying “on this occasion” the same percentual increase used to set the statutory minimum wage for 2022 in regard to 2021.
 

Recommended actions

  • Increase the applicable percentage to the salaries of those workers who receive the minimum wages for economic sectors. This shall be updated in the payroll systems.
  • Communicate to the workers the salary modification.
  • Take into account the new the minimum wages for economic sectors when hiring employees.
  • Modify in the Social Security online system (IESS), the minimum sectorial wages of the corresponding workers.
  • Modify in the Ministry of Labor online system (SUT), the minimum sectorial wages of the corresponding workers.


Attached the Ministerial Agreement MDT-2021-277

Edmundo Ramos

Specialist in Labor Law
Edmundo Ramos, partner at CorralRosales
eramos@corralrosales.com
+593 2 2544144

Marta Villagómez

Specialist in Labor Law
Marta Villagómez, associate at  CorralRosales
mvillagomez@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused as a consequence of acting or not acting on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

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Taxable base for customs duties

Base-imponible-de-los-tributos-al-comercio-exterior - CorralRosales

The Law for Economic Development and Fiscal Sustainability After the COVID-19 Pandemic, enacted in the Official Gazette 587, Third Supplement, of November 29, 2021, introduced several amendments to the Code of Production, Commerce, and Investments (COPCI).
 
Regarding customs matters, the law provided for the exclusion of freight from the taxable base for the calculation of customs duties. Through Bulletin 96 issued on December 23, 2021, the Customs Authority (SENAE) stated the following:

  • For calculating the taxable base for customs duties (Advalorem tariff), the freight must be excluded from the customs value of the merchandise.
  • For calculating the taxable base of the remaining taxes on foreign trade (FODINFA, Value added tax and excise tax), freight should not be excluded from the customs value.


The Customs Authority established that, with respect to import customs forms filed from November 29, 2021 until December 23, 2021 that are in the process of nationalization, the form must be amended and the taxable base must be calculated based on the criteria indicated above.
 
With regard to imports made from November 29, 2021 to December 23, 2021 and which merchandise has already been nationalized, we recommend verifying that the taxable base was calculated correctly. If the importer paid less than the amount due, a substitute declaration may be filed; and, if the importer has paid more than the amount due, a reimbursement claim may be filed.

Andrea Moya - CorralRosales - Lawyer Ecuador

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

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

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Settlement regarding tax matters

Transacción en materia tributaria - CorralRosales
The Law for Economic Development and Fiscal Sustainability After the Pandemic COVID-19, enacted in the Official Gazette 587, Third Supplement, on November 29, 2021, amended the Tax Code and, among others, the Internal Tax Regime Law.
 
On December 29, the President of the Republic issued the corresponding regulations. CorralRosales will summarize the most important changes introduced by the indicated regulations in several bulletins. The following analyzes the main elements of the SETTLEMENT in tax matters introduced by the law and regulations mentioned above.

  1. What can be settled?

It is possible to mediate and settle: (i) the assessment of the tax liability (including the assessment of disputed factual aspects), its interest, surcharges, and fines; (ii) the term for paying the tax liability, and (iii) the precautionary measures issued against the taxpayer within a coercive collection process.

  1. What cannot be settled?

It is not possible to settle: (i) the general scope of undetermined legal concepts in dispute; (ii) the annulment of regulations, ordinances, resolutions, and circulars of a general nature issued by the Tax Administration, and (iii) tax obligations which have not been declared by the taxpayer prior to the assessment process.

  1. Who may settle?

The transaction must be entered into between the highest authority of the Tax Authority, or its delegate, and the taxpayer. 
If two or more taxpayers enter into the settlement, all of them will be jointly and severally liable for the obligation contained in the settlement agreement.

  1. Is the settlement subject to challenge?

The settlement entered into by the taxpayer and the competent authority is final, binding and cannot be challenged in administrative or judicial proceedings. It can only be declared void if the transaction was made with respect to issues that cannot be settled.

  1. When does the transaction proceed?

A settlement may be reached: (i) during the assessment process; (ii) during an administrative claim; (iii) during an extraordinary administrative appeal; (iv) during the execution of the coercive collection process, and (v) during a judicial process.
 
In the case of final or enforceable assessment procedures, which have not been challenged or over which an extraordinary administrative appeal is pending, it will only be possible to negotiate with respect to payment facilities and deadlines, as well as the application of precautionary measures.

  1. What is the process to reach a settlement?

The taxpayer must submit its request to any mediation center or to any qualified mediator. The center or mediator must notify the Tax Authority, which will have a term of 30 business days to accept or reject the mediation process. 
If the Tax Authority accepts to initiate the settlement procedure, it shall perform a technical cost-benefit analysis prior to the execution of the agreement.


Once the Tax Authority has been notified with the request for mediation, the statute of limitation for assessing and collecting the tax obligation, and for issuing a resolution within administrative claims procedures, will be suspended. If no settlement is reached or the mediation process is not accepted, the statute of limitations period will be resumed.
In the case of assessments for which the term to challenge them in administrative or judicial proceedings has not expired, the notification of the request for mediation will suspend such terms. If no settlement is reached or the mediation process is not accepted, the term to challenge will be resumed.

The costs derived from the mediation process and its execution shall be borne by the applicant.

  1. What is the process to reach a settlement within a judicial procedure?

The settlement will take place during the preliminary or single hearing, as applicable. For this purpose, the judge may order that the dispute be referred to a mediation center. 
If the parties settle the total amount of the obligation, the judicial process will be concluded. If the settlement is partial, the judge will continue the judicial process on the matter in respect of which the dispute remains. 
If the judicial proceeding has already concluded and the judgement is being enforced, the parties may only settle on how to comply with the tax obligation, payment facilities and precautionary measures.

  1. Transitory Regime

Taxpayers who are being subject to assessment procedures or who have initiated judicial or administrative claims against the assessment may benefit from the settlement process subject to the following rules. Those who file the request for mediation:

  1. Until January 29, will be entitled to a reduction of 100% of the interest and surcharges applicable to the tax that the taxpayer agrees to pay in the settlement.
  2. Until February 29, will be entitled to a reduction of 75% of the interest and surcharges applicable to the tax that the taxpayer agrees to pay in the settlement.
  3. Until May 29, will be entitled to a reduction of 50% of the interest and surcharges applicable to the tax that the taxpayer agrees to pay in the settlement.

The reduction will only apply if the taxpayer agrees to pay immediately at least 25% of the principal. This payment must be made prior to the execution of the settlement.

Andrea Moya - CorralRosales - Lawyer Ecuador

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

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

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Progressive reduction of the outflow tax rate (ISD)

Progressive reduction of the outflow tax rate (ISD) - CorralRosales - Lawyers Ecuador

On December 22, 2021, the President issued the Executive Decree 298 by which a progressive reduction of the outflow tax rate was ordered until reaching 4%, according to the following schedule: 

–    As of January 1, 2022, the tax rate will be 4.75%.
–    As of April 1, 2022, the tax rate will be 4.50%.
–    Beginning July 1, 2022, the tax rate will be 4.25%.
–    As from October 1, 2022, the tax rate will be 4%.

Withholding agents must make the necessary adjustments in their operating systems to comply with the rate reduction ordered in the Decree.

Andrea Moya - CorralRosales - Lawyer Ecuador

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

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Industrial property and copyright in Ibero-America: trends for the third decade of the 21st century

Industrial property and copyright in Ibero-America: trends for the third decade of the 21st century - CorralRosales - Lawyers Ecuador

DETAILS

DATE: 20-12-2021

CORRALROSALES IN THE NEWS:

-Eduardo Ríos

-Miguel Maigualema

MEDIA:

– ASIPI

– AEPI

– Universidad del Rosario

– Colegio de Abogados Rosaristas

– Universidad Hemisferios

– Tribunal de Justicia de la Comunidad Andina

– UIDE

CorralRosales Associates and specialists in Intellectual Property Eduardo Ríos and Miguel Maigualema participated in the writing of “Industrial Property and Copyright in Ibero-America”, which has been published by the Hemisferios University, Andean Community Court of Justice, International University of Ecuador, Rosario Bar Association, Rosario University, Ecuadorian Intellectual Property Association (AEPI) and ASIPI.

They wrote a complete chapter on “Legal Responses to Intellectual Property Rights Infringements in Ecuador”. Throughout the chapter, Ríos and Maigualema make a short introduction and then write, in detail, on the following topics:

  1. The existence of the Law
  2. The infringement action in the Andean Community
  3. Types of measures to face the improper use of Trademark Rights
  4. Amicable approach on Intellectual Property matters
  5. Mediation, as a dispute resolution mechanism in Intellectual Property matters
  6. Administrative action for violation of Intellectual Property Rights
  7. Civil actions for infringement of Intellectual Property Rights
  8. Criminal classification in the field of Intellectual Property
  9. Conclusion

Our experts want to take this opportunity to explain simply and directly the elements and circumstances that a holder of Intellectual Property Rights and their advisers must know and consider to face their improper use. Thus, they will be able to determine the actions to be followed and that the Law allows “identifying the conditions of the offenders”, as indicated in their introduction.

If you want to read the complete chapter, click here.

Statutory minimum wage 2022

Salario básico unificado 2022 - CorralRosales - Abogados Ecuador

On December 13th, 2021, the President of the Republic of Ecuador, through Presidential Decree 286, ordered the Minister of Employment to submit to the consideration of the National Employment and Wages Council, the setting of the statutory minimum wage for 2022 on US$425 per month.

The aforementioned implies that, if the National Employment and Wages Council does not reach an agreement to fix the 2022 statutory minimum wage, the Minister of Employment shall fix it at US$425 per month, through a ministerial order to be issued by December 22nd.

Edmundo Ramos

Specialist in Labor Law
Edmundo Ramos, partner at CorralRosales
eramos@corralrosales.com
+593 2 2544144

Marta Villagómez

Specialist in Labor Law
Marta Villagómez, associate at  CorralRosales
mvillagomez@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not responsible for any loss or damage caused as a consequence of acting or not acting on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Amendments regarding income Tax, VAT, Excise Taxand Outflow Tax – Law for economic development and fiscal sustainability after the COVID-19 pandemic

Amendments regarding income Tax, VAT, Excise Taxand Outflow Tax - CorralRosales - Abogados Ecuador

Below, we analyze the most important reforms regarding income tax, VAT, ICE and ISD introduced by the Law for Economic Development and Fiscal Sustainability After the COVID-19 Pandemic, published in the Official Registry 587, on November 29, 2021:

  1. Income Tax

Deductions: The following deductions are incorporated:

  • Additional deduction of 100% for the depreciation and amortization of machinery, equipment, and sustainable construction technologies.
  • Additional deduction of 150% on advertising, promotion and sponsorship expenses incurred in favor of athletes qualified by the Sports Ministry.
  • Additional deduction of 150% on sponsorships made schools, high schools, or non-profit entities which activity is focused on the eradication of child malnutrition and care of pregnant mothers.
  • Additional deduction of 150% on expenses for organization and sponsoring of artistic, cultural events or cinematographic work.
  • Additional deduction of 150% on expenses for contributing to the promotion of arts, cinema, and innovation in culture.
  • Additional deduction of 100% on donations, investments and/or sponsorships of programs for protection and conservation of the environment, bio-enterprises, environmental restoration duly qualified by the environmental authority, provided that the deduction does not exceed 10% of the annual income.

The following deductions are removed:

  • Additional deduction for net increase of the employment.
  • Additional deduction for payments to senior citizens and returned migrants over 40 years of age.
  • Deduction for the provision for wrongful dismissal and employer retirement pensions.
  • Additional deductions for micro, small and medium-sized enterprises.

Payments abroad: Double taxation treaties are automatically applied regardless of the value of the payment made to the supplier. This reform applies from November 30, 2021.
 
Income obtained abroad: Those who receive income abroad that was subject to income tax in the country of origin may use as tax credit the tax paid abroad. This income is no longer considered exempt.
 
Individuals’ income tax: The maximum rate applicable to individuals increases from 35% to 37%.
Individuals will not be able to deduct personal expenses to calculate the taxable income. From the year 2022 individuals will be able to credit against the amount of their income tax an amount equivalent to:

If your annual income does not exceed 2.13 income tax fractions, the maximum amount of the credit will be the amount resulting from the application of the following formula:
 
R=L x 20%
 
R= Personal expense reduction.
L= The lesser value between the declared personal expenses of the fiscal period and the value of 7 times the basic food basket.
If your income exceeds 2.13 income tax fractions:
 
R=L x 10%


Inheritance tax: The following individuals are exempted from paying inheritance tax: (i) beneficiaries within the first degree of consanguinity with the deceased; and (ii) the surviving spouse, if there are no children entitled to inheritance.

  1. Single income tax on the sale of shares.

Rate: The progressive tax rate is eliminated and a single tariff of 10% is established.
Exonerations: Transfers made in Ecuadorian stock exchanges are exonerated from payment of the tax provided that:

  1. Their value does not exceed fifty income tax fractions, and
  2. The amount transferred is less than 25% of the subscribed and paid-in capital of the company.
  1. Value Added Tax

The following goods and services are taxed with 0% tariff since December 1, 2021:

  1. Masks, oximeters, alcohol, and antibacterial gel with a concentration higher than 70%.
  2. Sanitary napkins, tampons, menstrual cups, and popular disposable diapers. The term “popular” shall be defined in the regulations.
  3. The importation of fuels derived from hydrocarbons, biofuels, their mixtures, including LPG and natural gas, destined for internal consumption.
  4. The leasing of land for agricultural uses.
  5. Services rendered by tourist lodging establishments to foreign tourists. Foreign tourists are those who legally enter Ecuador, stay in the country for less than 90 days, and do not have temporary or permanent residence in the country.

The following goods and services are taxed with a 12% tariff since December 1, 2021:

  1. LED lamps.
  2. Electric stoves for domestic use and those that operate exclusively by means of electric induction mechanisms, including those with electric ovens.
  3. Domestic pots to be used in induction stoves.
  4. Electric water heating systems for domestic use, including electric showers.
  5. Membership fees charged by social clubs regardless of their value.
  6. The supply of web page domains, servers (hosting), cloud computing (Cloud Computing).
  1. Excise Tax (ICE)

Since December 1, 2021, the following goods and services will no longer be taxed with ICE:

  1. Video games.
  2. Heaters and water heating systems, for domestic use, that work totally or partially by means of gas.
  3. Telephone landline services and plans that commercialize only voice, data and SMS of the advanced mobile service.

Since December 1, 2021, the following goods and services are exempt from payment of ICE:

  1. Hybrid vehicles
  2. Juices with a natural content of more than 50%. The regulation shall define the requirements to apply this exemption.

Since December 1, 2021, the following ICE tariffs will apply:

GROUP III TARIFF TARIFF OF AD VALOREM Description Tariff TV paid services, excluding streaming services
15% Fees, memberships, affiliations, shares and similar fees charged to members and users by social clubs 30% (before 35%) GROUP IV MIXED TARIFF Description Specific tariff Ad Valorem Tariff Cigarettes US$0,16 Not apply Alcohol (other than alcoholic beverages and pharmaceuticals) and alcoholic beverages US$10 per liter of pure alcohol (previously US$7.22 for alcohol and US$7.25 for alcoholic beverages). 75% Industrial beer US$13.08 per liter of pure alcohol (previously the rate was US$9.49, US$10.58 or US$13.02 according to small, medium, and large-scale production). 75% Craft beer and wines of national production US$1.5 per liter of pure alcohol (previously wine was not included in this category) 75%
  1. Outflow tax


The following transactions are exempted from the payment of the Outflow Tax:

  1. Payments made for the sale of shares, or any other asset acquired by companies or persons not residing in Ecuador. Although the wording is not clear, it may be understood that the seller is entitled to the exoneration when he receives the price in Ecuador and transfers it abroad, this should be clarified through regulations.
  2. Transfers made by entities of Auxiliary Services of the Financial System that correspond to the payment and/or return of values collected for the rendering of services of electronic means of payment.
  3. Payments made abroad for the import of capital goods and raw materials made by companies that subscribe investment contracts.

Andrea Moya - CorralRosales - Lawyer Ecuador

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

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

In view of new Omicrom variant – Guidelines to enter the country by air

Ante nueva variante Omicrom - Lineamientos para ingresar al país por vía aérea - CorralRosales - Abogados Ecuador

To prevent contagion of the new South African variant of Covid-19, we inform you of the protocols established by the epidemiological surveillance unit of the Ecuadorian Ministry of Public Health (MSP) for the entry of travelers arriving by air: 

1.- Travelers shall their health declaration digitally when boarding, by completing it at the following link: https://declaracionsalud-viajero.msp.gob.ec/. Once completed, they must take a screenshot of the form or download the QR code to present it at Immigration upon arrival. 
(In case of lacking electronic means, the form may be presented in paper format and travelers must go to the MSP checkpoint at the airport of entry).

2.- Passengers over the age of 16 must show the vaccination card demonstrating that they completed the vaccination program at least 14 days prior to entry into Ecuador and the negative result of a PCR test performed up to 72 hours prior to boarding. (Airline crew members are exempt from this requirement).


3.- Children between the ages of 2 and 16 must present a negative PCR test performed up to 72 hours prior to boarding.

4.- Passengers who upon arrival in Ecuador have symptoms related to COVID-19 will be evaluated by MSP personnel.  If they are classified as a suspect case, a rapid antigen test will be performed and if positive, they will have to spend 14 days in isolation at home or in any lodging place at the passenger’s expense.


5.- The same requirements will be observed for those wishing to visit the Galapagos Islands, and, additionally, the transit control card issued by the Governing Council of the Special Regime of Galapagos will be requested.

6.- All persons whose point of origin, stopover or transit is South Africa, Namibia, Lesotho, Zimbabwe, Botswana and Eswatini, Mozambique, Egypt, Mozambique, and Egypt are prohibited from entering the Ecuadorian territory. 

These provisions are effective as of December 1, 2021, at 00:00 hours. Those traveling before December 1 who were unable to take the PCR test must justify it, and a qualitative PCR test will be taken upon arrival to Ecuador at their own expense. This will be allowed only on December 1 and 2.

Verónica Olivo - CorralRosales - Derecho Aeronáutico

Aviation Law Specialist

Verónica Olivo, associate at CorralRosales
volivo@corralrosales.com
+593 2 2544144

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Wealth Tax – Law for economic development and fiscal sustainability after the COVID-19 pandemic

Wealth Tax - Law for economic development and fiscal sustainability after the covid-19 pandemic - CorralRosales - Lawyers Ecuador

Below, we analyze the wealth taxes created by the Law for Economic Development and Fiscal Sustainability after the Covid-19 Pandemic, published on the Official Gazette 587, Third Supplement, of November 29, 2021:

1.    Wealth tax for individuals:

Taxpayers: Individuals who, as of January 1, 2021, have an individual net worth equal to or greater than US$1,000,000.00; or, marital partnership, with a net worth equal to or greater than US$2,000,000.00, in accordance with the following: 

–    In the case of individuals with tax residence in Ecuador, the contribution will be calculated over the assets located inside and outside the country. 
–    In the case of non-residents individuals, the contribution will be calculated over the assets located in the country.

Substitute taxpayer: Companies located in Ecuador whose shareholders are non-residents will act as substitute taxpayers.

Taxable base: The net worth is equal to the value of the assets (including rights) minus liabilities that are directly or indirectly owned by the taxpayer through any means, as of January 1, 2021. The following must be considered for the calculation of the net worth:


–    The proportional equity value of the shares held in companies that, in turn, are required to pay the corporate wealth tax, and that have made such payment, must be excluded.


–    The value of properties that preserve primary forests and areas of ecological diversity that have limitations for their exploitation should be excluded. 


–    Accounts payable to related parties should be excluded from the liabilities unless the loans were granted under market conditions and were used for productive purposes.


–    The value of the net worth may be reduced in up to US$200,000.00 if the individual owns a first home and/or unproductive agricultural land. 

Tax rate: The applicable tax rate shall be calculated in accordance with the following chart:

 

Tax Return: The tax return and payment of the wealth tax must be made until March 31, 2022. Payment facilities may be requested for a term of 6 months and without any initial installment. 

2.    Corporate Wealth Tax:

Taxpayer: Entities that carry out economic activities and have a net worth equal to or greater than US$5,000,000.00 as of December 31, 2020.

Taxable Base: The taxable base will be equal to the value of the net worth of the entity in the fiscal year 2020 as stated in the income tax return filed for such year.

Tax Rate: The applicable tax rate shall be calculated in accordance with the following chart:

 

Tax return: The tax return and payment of the first wealth tax must be made until March 31, 2022, and of the second until March 31, 2023. Payment facilities may be requested for a term of 6 months and without any initial installment. The law does not establish whether entities that had losses in the fiscal years 2020 and 2021 are excluded from paying the tax.

Sanctions: The following penalties shall apply: 

–    Failure to file the return will be sanctioned with a surcharge equal to 50% of the tax.
–    Inaccurate returns (i.e. those in which the total value of the net worth is concealed) will be sanctioned with a surcharge equal to 20% of the value of the difference.

Andrea Moya - CorralRosales - Lawyer Ecuador

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

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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Law for economic development and fiscal sustainability after the COVID-19 pandemic

Law for economic development and fiscal sustainability after the covid-19 pandemic - CorralRosales - Lawyers Ecuador

Below, we analyze the wealth taxes created by the Law for Economic Development and Fiscal Sustainability after the Covid-19 Pandemic, published on the Official Gazette 587, Third Supplement, of November 29, 2021:

1.    Wealth tax for individuals:

Taxpayers: Individuals who, as of January 1, 2021, have an individual net worth equal to or greater than US$1,000,000.00; or, marital partnership, with a net worth equal to or greater than US$2,000,000.00, in accordance with the following: 

–    In the case of individuals with tax residence in Ecuador, the contribution will be calculated over the assets located inside and outside the country. 
–    In the case of non-residents individuals, the contribution will be calculated over the assets located in the country.

Substitute taxpayer: Companies located in Ecuador whose shareholders are non-residents will act as substitute taxpayers.

Taxable base: The net worth is equal to the value of the assets (including rights) minus liabilities that are directly or indirectly owned by the taxpayer through any means, as of January 1, 2021. The following must be considered for the calculation of the net worth:


–    The proportional equity value of the shares held in companies that, in turn, are required to pay the corporate wealth tax, and that have made such payment, must be excluded.


–    The value of properties that preserve primary forests and areas of ecological diversity that have limitations for their exploitation should be excluded. 


–    Accounts payable to related parties should be excluded from the liabilities unless the loans were granted under market conditions and were used for productive purposes.


–    The value of the net worth may be reduced in up to US$200,000.00 if the individual owns a first home and/or unproductive agricultural land. 

Tax rate: The applicable tax rate shall be calculated in accordance with the following chart:

 

Tax Return: The tax return and payment of the wealth tax must be made until March 31, 2022. Payment facilities may be requested for a term of 6 months and without any initial installment. 

2.    Corporate Wealth Tax:

Taxpayer: Entities that carry out economic activities and have a net worth equal to or greater than US$5,000,000.00 as of December 31, 2020.

Taxable Base: The taxable base will be equal to the value of the net worth of the entity in the fiscal year 2020 as stated in the income tax return filed for such year.

Tax Rate: The applicable tax rate shall be calculated in accordance with the following chart:

 

Tax return: The tax return and payment of the first wealth tax must be made until March 31, 2022, and of the second until March 31, 2023. Payment facilities may be requested for a term of 6 months and without any initial installment. The law does not establish whether entities that had losses in the fiscal years 2020 and 2021 are excluded from paying the tax.

Sanctions: The following penalties shall apply: 

–    Failure to file the return will be sanctioned with a surcharge equal to 50% of the tax.
–    Inaccurate returns (i.e. those in which the total value of the net worth is concealed) will be sanctioned with a surcharge equal to 20% of the value of the difference.

Andrea Moya - CorralRosales - Lawyer Ecuador

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

Would you like to receive our newsletters with information like the one you have just read?
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NOTE: The above text has been prepared for informational purposes. CorralRosales is not liable for any loss or damage incurred as a result of acting or failing to act on the basis of the information contained in this document. Any additional determined situation requires the specific opinion and concept of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES