New deadlines for filing tax returns regarding assets

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By Regulation NAC-DGERCGC22-00000019 issued on May 6, 2022, the Internal Revenue Service extended the deadlines for filing: (i) the equity tax return applicable to individuals, and (ii) the assets and liabilities annex applicable to entities, for the year 2022 according to the following schedule:

Ninth digit of the tax number (RUC) or ID Deadline for submission 1 December 10 2 December 12 3 December 14 4 December 16 5 December 18 6  December 20 7  December 22 8  December 24 9  December 26 0  December 28

For individuals who have a passport and do not have an ID, the deadline for filing will be the one applicable to individuals whose ninth digit of their ID is 0.
 
The taxpayers who are subject to the Temporary Tax Regime for Regularization of Asset Located Abroad, can file the equity tax return or the assets and liabilities annex regarding 2022 and any substitute returns to which they are obliged due to the application of the regime until December 31, 2022.

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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New deadlines for withdrawing medicines from the market and applying new ceiling prices

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Through Resolution No. STFP-04-714-2022, published on May 3, 2022, the Board of Medicines Prices Regulatory Authority provided:

  1. Until November 17, 2022, the medicines whose secondary packaging are marked with selling prices according to Appendix B of Resolution No. 10-2015 issued on August 19, 2015 (hereinafter, “Appendix B”), which was repealed by Resolution No. STFP-07-706-2021 published on November 22, 2021, shall be withdrawn from the market.
  2. By November 18, 2022, the medicines affected by the repeal of Appendix B must be sold at the new ceiling prices.

Mario Fernández - Boletín CorralRosales - Derecho Corporativo - Contratación Pública - Sector Eléctrico - Ecuador

Specialist in Corporate Law
Mario Fernández, senior associate at CorralRosales
mfernandez@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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Extension for the submission of financial statements

Edificio circular blanco más el logo de CorralRosales

By Decision No. SCVS-INPAI-2022-00003228 dated on April 22, 2022, the Superintendent of Companies, Securities and Insurance resolved to extend the deadline for the submission of financial statements and corresponding reports for fiscal year 2021 to May 31, 2022.

Foto cuadrada de Milton Carrera, asociado senior de CorralRosales

Specialist in Corporate Law
Milton Carrera, senior associate at CorralRosales
mcarrera@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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Job security for alternate union leaders

Edificio de cristal con el logo de CorralRosales

In Resolution 02-2022 -published in Official Gazette 40 on April 11, 2022- the National Court of Justice invoked the principles of equality, freedom of association/trade union freedom, and progressive development of rights, issuing a mandatory jurisprudential precedent:
 
The alternate leaders of workers’ associations have the same guarantees as the [workers’ associations’] official leaders, in accordance with Article 187 of the Labor Code” (emphasis added).
 
This means that alternate union leaders enjoy job security that prevents them from being fired by their employers. In the event that they were to be fired, such matter would be considered ineffective dismissal, with the consequences that this entails. Specifically, the employer in question would be obliged to reinstate the individual to their job and pay them any unpaid wages plus a 10% surcharge; or alternatively, pay additional compensation equivalent to 12 months of remuneration to effectively terminate the employment relationship.

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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Payment facilities for the tourism sector due to COVID-19

Edificio de cristal con el logo de CorralRosales
Trough Resolution C.D. 645 -published in the Official Gazette of April 13, 2022- the Board of Directors of the Ecuadorian Social Security Institute (hereinafter, “IESS” or “Social Authority”) issued the “Regulation of Payment Facilities for the Tourism Sector, in application of the Organic Law for Economic Development and Fiscal Sustainability after the COVID-19 Pandemic” (hereinafter, the “Regulation“).
  1. Scope of application

Employers registered in the National Tourism Registry shall be eligible for the benefits contemplated in the Regulation.

  1. Payment facilities

Employers that comply with the requirements and have not paid the obligations hold with the Social Authority during the period between January 2020 and December 2021, may submit to the Social Authority a request to pay the outstanding obligations within a term of up to 48 months. 

IESS will eliminated interest, fines and surcharges that were generated during the aforementioned period, provided that the employer complies on time with the payment of the installments. In case of non-compliance, interest, fines and surcharges will be paid in accordance with applicable regulations.

The debtor may request early payment of the debt to the Portfolio Management Units of  the Social Authority.

  1. Payment default

Breach on the payment agreement will be reflected on the certificate of compliance of the Social Authority.

  1. Documents that must be attached to the request
  • Inscription in the National Registry of Tourism.
  • The updated Single Annual License of Operation, granted by the Municipality in which the tourist establishment operates.
  • Titles of credit of the periods from January 2020 to December 2021 are unpaid.

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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Living wage 2021

Edificio de cristal con un montón de ventanas + el logo de CorralRosales

On March 18th, the Ministry of Labor – by Ministerial Agreement MDT-2021-087- set the living wage for 2021 and established the payment procedure.

  • Living wage

The value of the monthly living wage for 2021 was set at US$447.41.

  • Economic compensation calculation period

To calculate the economic compensation of the living wage, employer shall consider income received by the employee from January 1st to December 31st, 2021.

If employees worked for a shorter period than the aforementioned, calculation will be proportional to the time worked.

  • Procedure to calculate economic compensation

The economic compensation to which workers whose monthly income is not less than the living wage are entitled, is the difference between the living wage for the year 2021 and the monthly income that the worker received during 2021.

To calculate employee´s monthly income, the following amounts received during the calculation period must be added and divided by 12:

  • Salary
  • Thirteenth remuneration
  • Fourteenth remuneration
  • Commissions or incentives paid by the employer.
  • Profit sharing
  • Additional benefits paid in cash by the employer
  • Reserve funds

In the case of part-time employees, economic compensation will be calculated proportionally to the hours worked. The ordinary workday is 240 hours per month.

  • Payment deadline

The economic compensation shall be paid until March 31, 2022.

  • Registration before the Ministry of Labor

Once the employer registers the labor profit sharing form of year 2021, the Ministry of Labor’s platform will generate the payroll of the employees entitled to the economic compensation to reach the living wage.

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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Acquisition of pharmaceuticals and strategic health goods

Boletín de CorralRosales sobre fármacos y bienes estratégicos de salud - Foto de medicamentos, laboratorio

Through Executive Decree No. 337 issued on January 27, 2022, published in the Official Register (Fourth Supplement) No. 630 of February 1st, 2022, the Law of the National Public Procurement System Regulations (hereinafter the “Regulation”) were amended replacing the Section related to the “ACQUISITION OF PHARMACEUTICALS AND STRATEGIC HEALTH GOODS”. The purpose of this reform is to achieve greater controls, have adequate planning, guarantee the quality of public expenditure, and avoid shortages of health units that are part of the Integral Public Health Network (IPHN).
The main aspects of this reform are:

1.    In order to select and incorporate the supplier of pharmaceuticals or strategic health goods (hereinafter the “Supplier”) in the electronic catalog of the public procurement portal (hereinafter the “Portal”), the corporate reverse auction procedure will be used.

2.    The entities of the IPHN, together with SERCOP, will select the Supplier that will be included in the Portal. The purchase orders will be generated in the Portal for the acquisition of the health goods they require on an independent and periodical manner.

3.    Once the selection procedure is completed, SERCOP will award the selected suppliers, with whom it will enter into a framework agreement that gives the supplier the right and obligation to be included in the Portal’s electronic catalog. If the framework agreement is not signed, the selected supplier will be declared as a failed awardee.

4.    Once the Supplier is enabled in the Portal, the entities will be able to make direct public purchases by generating the corresponding purchase orders.

5.    For the acquisition of pharmaceuticals, it will be necessary that such goods are included in the current National Plan for Basic Medicines, or their acquisition must be authorized according with the provisions issued by the National Health Authority.

6.    Procedures for the acquisition of pharmaceuticals and strategic health goods:

6.1.    Electronic Catalog: IPHN contracting entities will acquire pharmaceuticals and strategic health goods through this procedure.

6.2.    Exceptionally and in accordance with the provisions of the Regulation, acquisitions may be done through the following procedures:

6.2.1.    Institutional Reverse Auction, as long as the pharmaceuticals or strategic health goods are not available in the electronic catalog under centralized acquisition models.

6.2.2.    Single Supplier of Pharmaceuticals when the manufacturer or supplier is unique in the market and provided that it is not available in the electronic catalog. This will be verified through a market study.

6.2.3.    Acquisition through international organizations or agreements as long as their acquisition optimizes public procurement, guaranteeing the quality, safety and efficacy of pharmaceuticals and strategic health goods to be acquired.

6.2.4.    Direct import when special medications are required for specialized treatments that are not included in the Portal’s electronic catalog.

6.2.5.    For the cases foreseen above, if there are no established procedures for the acquisition, it will proceed in accordance with the legal regulations of the country in which the pharmaceuticals or strategic health goods are contracted, or the commercial practices or business models of international application; or, failing that, respective procedural agreements will be previously subscribed under centralized procurement models.

7.    IPHN procuring entities should perform adequate planning processes for the acquisitions.

8.    Acquisitions will be subject to quality, safety, efficacy, technical data sheets, random post-registration controls, in the places of manufacture, storage, transportation, distribution and traceability. The traceability system will consist of the individual and unequivocal identification of each unit of pharmaceuticals or strategic health goods to be delivered, which will allow monitoring throughout the entire distribution chain.

9.    In order to carry out selection procedures for corporate purchase, an Inter-institutional Committee will be formed composed of the highest authorities or delegates of the SERCOP, Ministry of Public Health, IESS, ISSFA and ISSPN.

10.    All entities, public or private, that participate in the execution of the Decree must ensure the protection and confidentiality of patient data.

11.    When the Supplier does not comply with the purchase orders for pharmaceuticals and strategic health goods generated in the electronic catalog tool by the IPHN entities, the values derived from the execution of the guarantees will be deposited in the SERCOP account to be distributed among the health subsystems of the IPHN.

12.    All medical devices, supplies or goods that currently appear in the catalogs of standardized goods and services, and that could be declared strategic health goods, must maintain this category until the termination of the respective framework agreements.

13.    Until the SERCOP signs the framework agreements with the Suppliers for the acquisition of medicines and strategic health goods whose reference budget does not exceed the coefficient of 0.0000002 of the initial State budget (US$7,099.68), the contracting entities of the IPHN may carry out low value procedures if it is not possible to use any of the procedures established in the Law of the National Public Procurement System on a timely manner. 

14.    Until SERCOP, together with the Interinstitutional Committee, carries out the process of cataloguing medicines and strategic health goods, the IPHN contracting entities may acquire them through the exceptional processes established in the Regulation through centralized or decentralized acquisitions, guaranteeing the supply of these products.

Ricardo Mancheno - Foto en blanco y negro

Specialist in Government Procurement
Ricardo Mancheno, partner at CorralRosales
rmancheno@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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Compliance plan regarding the implementation of the Data Protection law in controlled entities

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Through resolution SB-2021-2126 subscribed on December 2, 2021, and published on the Official Gazette 604 of December 23, 2021, the Superintendence of Banks (hereinafter the “Superintendence”) reformed the “Regulations on managing operating risk” (hereinafter the “Regulations”) applicable to “banks, financial service entities and ancillary service entities.”

This reform updated the Regulations to consider the risks arising from the entry into force of the Data Protection Law on May 26, 2021.

Article 23 of the Regulations establishes that controlled entities must “(…) generate plans and programs that allow them to comply with provisions of the Data Protection Law.”

It is relevant to note that in the first transitory provision of the Regulations, the Superintendence states that “(…) it is the controlled entities responsibility to present to the Superintendence of Banks, until March 31, 2022, a compliance plan in relation to all obligations recognized on the Data Protection Law.”

Rafael Serrano, asociado de CorralRosales, con traje y corbata. En el fondo, una parte de Guayaquil (Ecuador)

Specialist in Data Protection
Rafael Serrano, partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

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Regime for regularization assets located abroad

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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. Regulating 

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 Regime for Regularization of Assets Located Abroad (hereinafter the “Regime”). 

1.    Who can benefit from the Regime?

Tax residents in Ecuador who as of December 31, 2020, meet the following conditions are eligible for the Regime:
  • The taxpayers have maintained assets abroad such as money, real estate, shares, etc. derived from income that should have been subject to income tax in 2020 or before, but such tax has not been paid, provided that:
  • The Tax Authority has not initiated an assessment procedure and the assessment is not final,
  • The assets are not subject to judicial litigation,
  • The assets are not located in countries classified as high risk or non-cooperative by the Financial Action Task Force (FATF), and
  • The money is in a financial institution.
  • The taxpayer has carried out transactions subject to Outflow Tax (ISD) and have not paid such tax, provided that conditions (i) and (ii) above are met.

2.    Who are not eligible for the Regime?

The following are not eligible for the Regime:
  • Individuals who, as of November 29, 2021, have an enforceable conviction for crimes against the development regime, crimes against the efficiency of the public administration, customs, or economic crimes, and
  • Individuals who have been public officials at any time since 2015, their spouses, domestic partners or family members up to the second degree of consanguinity and second degree of affinity, and entities in which these officials have or have had a participation of more than 10%.

3.    What are the requirements to be eligible for the Regime?

Taxpayers may apply for this Regime until December 31, 2022, for such purpose they must comply with the following requirements:  
  • Taxpayers must submit a reserved sworn statement in which they state the following:
  • That as of December 31, 2020, they did not maintain any other assets and did not carry out other operations that should have been subject to tax, which comply with the conditions to benefit from the Regime.
  • The taxable income that was not taxed in Ecuador, detailed for each fiscal year to which the Regime will be applied.
  • For each asset, the date and value of acquisition, the commercial value as of December 31, 2020, the place where they are located and, in case of money, the financial entity where it is deposited.
  • The amount of the operations that should have been subject to the pay outflow tax (ISD), the date of the taxable event and its description.

The valuation of the assets shall be made at commercial value. The sworn statement must include the supporting documentation of the value of the assets.
  • b.    Declare and pay the Temporary Tax for the Regularization of Assets Abroad. The taxpayer may request payment facilities.
  • c.    Submit the patrimonial statement including the regularized assets until December 31, 2022.


4.    How is the tax to be paid for the regime calculated?

The taxable base is equal to the sum of:
  • a.    The values of the assets included in the sworn declaration; and,
  • b.    The value of the operations that were not subject to the payment of outflow tax (ISD) included in the sworn statement.
The applicable tax rate will be established according to the following:
    


5.    What are the effects derived from applying the Regime?
  • Taxpayers will not be subject to assessment process regarding income tax for the fiscal years 2020 and prior years, and outflow tax (ISD) for operations occurring up to December 31, 2020.
  • The taxpayers will not be subject to legal or administrative sanctions derived from the noncompliance of the formal duties related to the above taxes.
  • Criminal proceedings will not be initiated regarding crimes of unjustified private enrichment, tax fraud or customs fraud.

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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Income tax withholding to workers

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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 to be considered for calculating the income tax withholding to workers.
 
Employers must withhold income tax from their employees on a monthly basis. For this purpose, they must follow the following procedure:

  1. The taxable income of the employee for the fiscal year must be projected.
  2. From such value, the amount of the contribution to the Social Security Authority must be deducted.
  3. The amount obtained will be the income taxable base, over which the tax rate must be applied according to the following table:
  1. The amount of the tax obtaining from applying the tax rate must be reduced by the discount for personal expenses.
  2. The result must be divided by 12 to establish the monthly rate to be withheld to the employee.


In order to calculate the maximum amount of the personal expense deduction, employers must apply the following procedure:

  1. The value of the employee’s personal expenses projected for the year must be informed to the employer. The maximum amount of personal expenses is equal to the value of the Basic Family Basket (BFC) of December of the previous fiscal year multiplied by 7. For the calculation of the monthly withholding of the fiscal year 2022 the maximum value for the personal expenses is US$5,037.55 which is equal to the value of the BFC of December 2021 (US$719.65) multiplied by 7.
  2. The employee’s gross annual income must be determined. This is equal to the total value of the employee’s income, including exempted income.
    1. If the employee’s gross annual income does not exceed US$24,090.30, the tax credit to be discounted from the income tax will be 20% of the value of the projected personal expenses (maximum US$5,037.55).
    2. If the employee’s gross annual income exceeds US$24,090.30, the tax credit to be discounted from the income tax will be 10% of the value of the projected personal expenses (maximum US$5,037.55).

The personal expenses to be considered for the calculation of the tax credit are those incurred for housing, health, food, clothing, tourism, and education, including art and culture.

* On the Circular NAC-DGERCGC21-00000007 issued by the Internal Revenue Service on December 30, the value of the FBC as of November 2021 was used as an example, since the value of December 2021 was not known at that date.

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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