New deadlines for filing the personal expenses annex

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Regulation NAC-DGERCGC21-00000009 issued on February 4, 2021 and published in the third supplement to the Official Registry 386 of February 5, 2021, the General Director of the Internal Revenue Service established that the personal expenses annex of the fiscal year 2020 may be filed, for this time, until the following dates:

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Special labor regime for private higher education institutions academic staff

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The Labor Ministry by Ministerial Agreement MDT-2020-286 regulated the special labor agreement for private Higher Education Institutions academic staff:

– Scope: Mandatory implementation to hire academic staff on private Higher Education Institutions.

– Term for Regular Staff:  Up to 1 year (continuous or discontinuously) renewable up to 2 years. A 90-day trial period may be agreed.

– Term for Non-Regular Staff: Up to 1 year (continuous or discontinuously). The agreement may be renewed as many times as necessary. A 90-day trial period may be agreed.

– Weekly working day: Up to 40 hours per week, that may be distributed in no more than 6 days a week. A noninterrupted rest of 24 hours per week is guaranteed.

– Special leave regime: The Higher Education Institutions may grant, at the employee´s request, a special leave with or without payment.

If the leave is without payment, the employee is not entitled to labor and social benefits. The employment relationship is suspended; therefore, no seniority will be generated during it.

– Termination of the agreement: The employment relationship ends once the term has concluded, without any other formality.

– Termination for cause: Under Labor Code provisions to terminate an employment relationship with cause, prior Labor Ministry authorization (“Visto Bueno”), the following definitions shall be included:

  • Indiscipline: Breach of terms to return in cases of licenses or mobility.
  • Ineptitude: If employee obtains results below the minimum for 2 consecutive times or 3 times throughout his/her career. The term for request the Labor Ministry authorization will run from the date on the employer’s decision to separate the employee.

– SUT´s registration: Within a period of 15 days upon its execution.

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Amendments to the tax regime for small businesses

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Executive Decree 1240 issued on February 3, 2021 by the President of the Republic amended the Internal Tax Regime Regulations regarding the Tax Regime for Small Businesses.

It establishes that, in order to calculate the income tax, taxpayers subject to such regime must apply a 2% rate over the net sales derived from the business activity subject to this regime and subtract: (i) the income tax withholdings made in the same period with respect to the activities subject to the regime; and, (ii) the income tax credit.

It is also stated that taxpayers subject to the regime, that in the fiscal year 2020 did not obtain any profit (calculated before paying the income tax) from the economic activities subject to the regime, may:

1. Pay the applicable income tax for the fiscal year 2020 until November 2021; and,
2. Pay the applicable income tax for the fiscal year 2021 until March 2022.

Those taxpayers who have paid the tax with interest and penalties will not be entitled to request a reimbursement.

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Foreign shareholders information

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Regulation NAC-DGERCGC21-00000005 issued on January 21, 2021 by the General Director of the Internal Revenue Service establishes the transitory regime applicable in 2021 for filing information of foreign shareholders.

Prior to the enactment of the Law of Modernization of the Companies Law, on December 10, 2020, limited liability companies and corporations were required to submit to the Superintendence of Companies, in the month of January of each year, the list of foreign shareholders.

The aforementioned Modernization Law established that this information had to be filed before the Internal Revenue Service, in accordance with the terms and conditions established for such purpose.

However, Regulation NAC-DGERCGC21-00000005 issued by the Internal Revenue Service establishes that, for this one time only, companies must file this information through the web portal of the Superintendence of Companies (www.supercias.gob.ec) until January 31, 2021.

Compliance with this obligation does not exempt taxpayers from filing the Shareholders’ Annex (APS).

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Regulations issued by the superintendency for the control of market power

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Three regulations were issued by the Antitrust Authority (“SCPM”) and published in the Supplement of Official Gazette No. 374.
1. Reform of the Guidelines for Administrative Procedures:
(i) Regulates the process of meetings that precede the mandatory filing for antitrust clearance of economic concentration operations, determining that the meetings will be recorded and do not exempt the applicant from submitting the notification within 8 calendar days after the conclusion of the agreement leading to the economic concentration operation.
(ii) It establishes specific times for analysis by the National Intendancy for Control of Economic Concentrations (in the investigation stage) and in the Resolution Board (in the resolution stage), both in Phase 1 (resolution within 25 business days following the declaration of completeness of the filing) or Phase 2 processes (resolution within 60 business days following the declaration of completeness of the filing).
(iii) Determines the criteria to be considered by the National Intendancy for Control of Economic Concentrations to evaluate the innocuousness of an economic concentration operation and based on this, the determination of a resolution in Phase 1 or Phase 2.
(iv) Regulates information requests and the sanctioning procedure applicable for infractions of the Organic Law for Regulation and Control of Market Power that do not constitute anticompetitive practices (for example: breach of duty to collaborate, non-delivery of information required in the times and form determined by the Antitrust Authority, or failure to comply with corrective measures).
(v) Modifies the disposition and evaluation of corrective measures regime. The most relevant change being that the implementation of corrective measures is not mandatory every time a sanction is imposed, but that these measures will be imposed only when they are deemed necessary to restore the market.
2. Guidelines for the identification and review of regulatory barriers
Regulates the procedure to be applied by the National Competition Advocacy Office for the identification and review of regulations that impose illegitimate or disproportionate restrictions/entry barriers. This procedure, which can only be initiated by the SCPM´s own decision, has a maximum duration of 90 days from the date when the start of the analysis is resolved.
The legal review is composed of two stages: (i) a legality analysis by which the authority´s competence to issue the regulation under review, and (ii) a review of the consistency of said regulation with the existing regulation considering the hierarchy of norms.
If the reviewed regulation passes the legal analysis, the reasonableness and proportionality of the restriction it imposes will be analyzed in the second stage, weighed against the protected legal asset: the public interest. For this analysis, its suitability, necessity, and proportionality in the strict sense must be determined.
If it is determined after these analyses that the reviewed regulation is illegal or that it imposes an unreasonable barrier to entry, the Antitrust Authority will propose to the issuing Authority its elimination or modifications aimed to correct the undesirable effects.
3. Comprehensive modification of the guidelines for the filing fee for review of economic concentration operations
Prior to this modification, the fee to be paid for the analysis of economic concentration operations was determined based on the financial statements of the immediately preceding fiscal year of the entity over which the change of control that gives rise to the economic concentration operation falls. It corresponded to the highest resulting value of the following alternatives:
  • 0.25% of income tax
  • 0.005% of total revenue
  • 0.01% of the asset value
  • 0.05% of equity
With the modification (i) the calculation method is simplified with the determination of a base fee that will be defined on a yearly basis by the SCPM, based on the real costs of the analysis of economic concentration operations and (ii) solves the inconvenience for operations submitted from January to April of each year, period in which there are no audited financial statements, by expanding the possibility of calculating the fee based on the financial statements of the second immediately preceding year.
The simplification of the calculation occurs as follows:
(i) Considers a scale for applying the base fee, which is applied only based on the income of the entity that bears the change of control that gives rise to the economic concentration operation:

(ii) Determines that the rate applicable to the analysis of economic concentration operations notified for information purposes (not mandatory filing) is half the base fee, regardless of the value of the total revenue.

(iii) Allows payment via wire transfer.

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Unified basic salary and minimum wages for economic sectors 2021

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The Ministry of Labor by Ministerial Agreements: MDT-2020-249 of November 30, 2020 and MDT-2020-282 of December 22, 2020, resolved to maintain for 2021, the same values of the unified basic salary (“SBU”) and the minimum wages for economic sectors of the year 2020.

The Authority underpins its decision considering that the registered inflation at the end of 2020 was negative (-0.73%), therefore, an increase in minimum wages for 2021 is not justified.

In this regard, the SBU for 2021 is $400.00.

Current regulations provide that in no case will a SBU be set lower than that of the previous year.

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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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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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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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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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