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Payment facilities and exceptional payment plan – IRS

Categories Bulletin, COVID-19ENG Posted on Author Gericó Associates Tags Ecuador, exceptional payment plan, Tax
payment-facilities-and-exceptional-payment-plan-lawyers-ecuador

Regulations NAC-DGERCGC20-00000043 and NAC-DGERCGC20-00000044 issued on June 23, 2020 by the General Director of the Internal Revenue Service, the rules for applying the Second and Third Transitory Provisions of the Law for Humanitarian Support to Combat the Health Crisis arising from COVID-19 were established.

The Second Transitory Provision of said law and Regulation NAC-DGERCGC20-00000043 establish that those taxpayers that applied the tax amnesty provided in the Law for the Promotion of Production, and that from January 2020 to June 22, 2020 have not paid 2 or more installments of their payment facility plan, may cover the amount owed until September 30, 2020 without surcharges, interest or fines.

Furthermore, the Third Transitory Provision of said law and Regulation NAC-DGERCGC20-00000044 establish that those taxpayers that applied the exceptional payment plan provided for in the Law on Tax Simplification and Progressivity, and that as of June 22, 2020 have not paid any of their installments, may cover the amount owed in 12 equal monthly installments, which must be paid on the 28th of each month, beginning July 28, 2020, without surcharges, interest or fines.

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DISCLAIMER: The preceding text has been prepared for general information purposes only. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any given situation requires the specific opinion and view of the firm in Quito / Guayaquil, Ecuador.

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Resumption of terms – IRS

Categories Bulletin, COVID-19ENG Posted on Author Gericó Associates Tags Ecuador, exceptional payment plan, Tax
resumption-of-terms-irs-tax-lawyers-ecuador

The Internal Revenue Service, through Regulation NAC-DGERCGC20-00000022, suspended the terms and deadlines in all administrative processes and the statute of limitations for collecting debts from March 16 to March 31, 2020. The suspension was extended until June 15, 2020 by regulation NAC-DGERCGC20-00000038.

By Regulation NAC-DGERCGC20-00000042, issued by the Director General of the Internal Revenue Service on June 16, 2020, the terms and deadlines in all administrative processes and the statute of limitations for collecting debts have been resumed, with the following exceptions:

  1. The terms and deadlines of administrative processes and the statute of limitations for collecting debts that are being attended in administrative units of the Internal Revenue Service located that are located in cities classified under “red light” remain suspended. These terms and deadlines will resume once the Emergency Operations Committee classifies the cities under “yellow or green lights”.
  2. In Quito Metropolitan District, the terms and deadlines of administrative processes and the statute of limitations for collecting debts will resume once the government institutions resume their work on-site. When this bulletin was issued, the day on which the on-site work is expected to resume is June 22, 2020.

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DISCLAIMER: The preceding text has been prepared for general information purposes only. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any given situation requires the specific opinion and view of the firm in Quito / Guayaquil, Ecuador.

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Reinstatement of administrative procedures at the Ministry of Labor

Categories Bulletin, COVID-19ENG Posted on Author Gericó Associates Tags administrative procedures, Ecuador, Labor, Ministry of Labor
administrative-procedures-reinstatement-ministry-labor

The Ministry of Labor (“MdT”) through Resolution No. MDT-2020-024 dated June 10th, decided to resume as of June 15, 2020, the hearings, terms, deadlines, and prescriptions that were suspended, within the following procedures:

  • “Visto Bueno” (employment termination with cause);
  • Administrative proceedings;
  • Administrative appeals;
  • Collection actions; and,
  • Other administrative procedures followed at any MdT unit.

Complaints submitted under the emergent procedure during the state of emergency will continue the on-line procedure until its completion.

Deadlines and terms of the administrative procedures for those county for which the restrictions continue to be under red light will be resumed when the restrictions change to yellow light, in accordance with the provisions issued by the county Emergency Operations Committee.

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DISCLAIMER: The preceding text has been prepared for general information purposes only. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any given situation requires the specific opinion and view of the firm in Quito / Guayaquil, Ecuador.

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Extension of deadlines for deferral of tax obligations

Categories Bulletin Posted on Author Gericó Associates
extension-of-deadlines-for-deferral-of-tax-obligations-lawyers-ecuador

Regulation NAC-DGERCGC20-00000036, issued on May 27, 2020 by the General Director of the Internal Revenue Service establishes the following rules for applying the Executive Decree 1030, which allows taxpayers the deferral of its tax obligations:

1. Which taxpayers are eligible for deferral of its tax obligations?

The following taxpayers are able to defer the payment of 2019 corporate income tax and VAT to be declared in the months of April, May and June:

  1. Micro, small and medium enterprises understood as those that obtained gross revenues of up to US$5,000,000.00 during fiscal year 2019.
  2. Taxpayers who during the fiscal year 2019, obtained gross revenue higher than US$5,000,000.00, provided that they meet at least one of the following conditions:
    • Taxpayers that, before March 27, 2020, have registered in their Tax ID one of the following as their main or secondary economic activity: operation of airlines, agricultural activities, provision of accommodation and/or food services.
    • Taxpayers that, before March 27, 2020 have registered in their Tax ID the province of Galapagos as their main tax address.
    • Taxpayers that are regular exporters of goods, or that 50% of their income derives from the export of goods.

Small and medium-sized enterprises that, on April 1, 2020, have registered any of the following as their main economic activity in their Tax ID, will not be eligible for the deferral.

  • Financial services ancillary activities; and/or,
  • Financial service activities, except insurance and pension funding activities.

2. How can taxpayers benefit from the deferral?

In order to apply the deferral, taxpayers are able to submit an original or substitute tax return and pay any fines and interests applicable.

If the taxpayer has already filed the tax return, they are able to apply the deferral if they have outstanding tax obligations. Any payments made by the taxpayer prior to the date on which the substitute tax return is filed, these will be applied in accordance with article 47 of the Tax Code (first to interest, then to the tax amount and finally to fines).

3. Until what date can the income tax return be filed?

For purposes of tax deferral, taxpayers must file their original or substitute income tax return according to the following schedule:

 

Corporate Income Tax
fiscal year 2019
Ninth Digit of Tax ID Date of submission
(until)
1,2 and 3 4th of June, 2020
4,5 and 6 5th of June, 2020
7,8 and 9 8th of June, 2020
0 9th of June, 2020

Taxpayers domiciled in the province of Galapagos may file the return until June 9.

Taxpayers must pay the first instalment of the tax plus interests and fines, if applicable at the date the tax return is filed. The second instalment must be paid within the same deadlines, through the Multiple Payment Form.

The payment of the remaining four installments must be made according to the following percentages, through the Multiple Payment Form:

 

Quota Month of Payment Rate of
payment
3 June 2020 20%
4 July 2020 20%
5 August 2020 20%
6 September 2020 20%

4. Until what date can the VAT returns be filed?

For the purposes of tax deferral, taxpayers must file their original or substitute VAT returns according to the following schedule:

VAT  – March 2020
Ninth Digit of Tax ID Date of submission
(until)
1,2 and 3 4th of June, 2020
4,5 and 6 5th of June, 2020
7,8 and 9 8th of June, 2020
0 9th of June, 2020

 

VAT  – April 2020
Ninth Digit of Tax ID Fecha de presentación
(hasta)
1,2 and 3 4th of June, 2020
4,5, 6 and 0 5th of June, 2020
7,8 and 9 8th of June, 2020

Taxpayers domiciled in the province of Galapagos may file the return until June 9.

Taxpayers must pay the first instalment of the tax plus interests and fines, if applicable at the date the tax return is filed. The second instalment must be paid within the same deadlines, through the Multiple Payment Form.

The payment of the remaining four installments must be made according to the following percentages, through the Multiple Payment Form:

VAT – Month Payment quota: Month of
Payment		 Rate of
Payment
March 2020 3 June 2020 20%
4 July 2020 20%
5 August 2020 20%
6 September 2020 20%
April 2020 3 June 2020 20%
4 July 2020 20%
5 August 2020 20%
6 September 2020 20%

According to Executive Decree 1030, taxpayers that layoff their workers during the emergency will not be eligible for tax deferral. The Ministry of Labor shall notify the Tax Authority of any dismissals made during such period.

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DISCLAIMER: The preceding text has been prepared for general information purposes only. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any given situation requires the specific opinion and view of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Extension of deadlines for tax matters

Categories Bulletin, COVID-19ENG Posted on Author Gericó Associates
lawyers-ecuador-extension-of-deadlines-for-tax-matters

In accordance with the state of emergency declared by the President, the following tax authorities, in the exercise of their powers, have suspended the following deadlines and terms:

  1. Regulation NAC-DGERCGC20-00000022 issued by the Internal Revenue Service establishes that terms and deadlines in all administrative processes and the statute of limitations for collecting debts are suspended from March 16 to March 31, 2020. The suspension was extended until May 22, 2020 by regulation NAC-DGERCGC20-00000034.
  2. Regulation SENAE-SENAE-2020-0016-RE issued by the Customs Authority establishes that terms and deadlines in all administrative processes and the statute of limitations for collecting debts are suspended from March 17 to March 31, 2020. The suspension was extended until June 1st, 2020 by regulation SENAE-SENAE-2020-0025-RE.

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DISCLAIMER: The preceding text has been prepared for general information purposes only. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any given situation requires the specific opinion and view of the firm in Quito / Guayaquil, Ecuador.

CORRALROSALES

Excise tax on plastic bags

Categories Bulletin Posted on Author Gericó Associates Tags Ecuador, plastic bags, tax excise
plastic-bags-excise-tax

Regulation NAC-DGERCGC20-00000033 issued on May 6, 2020, by the General Director of the Internal Revenue Service established the following rules for the payment of the Excise Tax (ICE) on plastic bags.

Taxable base:

The taxable base of the excise tax is the number of plastic bags delivered by the commercial establishment to the consumer. A plastic bag is defined as one with or without a handle, produced from high- and low-density polypropylene or low-density polyethylene resins.

Tax rate:

The excise tax rate will be the described in the following chart:

Year

ICE specific rate
2020 US$0,04 by plastic bag
2021 US$0,06 by plastic bag
2022 US$0,08 by plastic bag
2023 US$0,10 by plastic bag

Collecting agents:

Commercial establishments which, in order to facilitate the transfer of goods, deliver plastic bags to the purchaser, shall act as a collecting agent of the excise tax.

All entities and individuals required to keep accounting books who market products at a wholesale or retail level are regarded as commercial establishments, also all franchisers and their franchisees, regardless of the number of establishments.

Exemptions

The following are exempted from paying excise tax:

  1. Plastic bags for industrial, agricultural, agro-industrial and export use, for frozen products.
  2. The plastic bags that contain at least 50% of recycled raw material post consumption.
  3. Plastic bags used as primary packaging. Plastic bags for single use that are in direct contact with food in their natural state and beverages, cleaning and personal hygiene items, chemicals, paints, lubricants, among others, are considered primary packaging.

The following plastic bags have a 50% discount from the excise tax rate:

  1. Biodegradable plastic bags regarded as those that come from natural renewable materials that can be decomposed into natural chemical elements by the action of biological agents, such as the sun, water, bacteria, plants or animals, without human intervention under normal environmental conditions.
  2. Compostable plastic bags regarded as those that come from biodegradable material that, when properly disposed of, are degraded in a shorter time than biodegradable plastic and which purpose is to be converted into fertilizer or compost.

Manufacturers and importers that are eligible for applying these exemptions or reductions must be certified by the Authority. The list of qualified manufacturers and importers will be published periodically on the institutional website of the Internal Revenue Service.

Declaration and payment of the tax:

Collecting agents must submit a monthly tax return with the operations carried out within each month, using the “Excise Tax Declaration Form”, code 3680. Taxpayers subject to the microenterprise regime must file the return every six months.

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CORRALROSALES

Deferral of tax obligations

Categories Bulletin Posted on Author Gericó Associates Tags Deferral, Ecuador, tax obligations
deferral-of-tax-obligations

By Executive Decree 1030 issued on May 4, 2020, the President of the Republic ordered the following:

  1. The deferral of tax obligations established by Executive Decree 1021 shall be applicable to all small and medium-sized companies, except for those taxpayers whose tax ID (RUC), as of April 1, 2020, had registered any of the following as their main economic activity:
  • Ancillary activities of financial services activities; and/or
  • Financial services activities, except insurance and pension fund activities.

These taxpayers are able to pay the corporate income tax for the fiscal year 2019 and the value added tax (VAT) to be paid in April, May and June 2020 on a deferred basis. Payments will be made in 6 installments during the year 2020 in the following percentages: in each of the first two months, the taxpayers are required to pay 10% of the total value; and, in each of the remaining four months, taxpayers are required to pay 20% of the total value.

  1. The taxpayers subject to the Simplified Tax System (RISE) are able to pay the instalments of March, April and May in accordance with the following calendar:
RISE instalment to
be paid in:

Month of payment
March 2020 June 2020
April 2020 July 2020
May 2020 August 2020

Payments must be made according to the 9th digit of the tax ID (RUC) according to the following schedule:

Ninth digit of the RUC or
identity card

Expiration date
1 10 of the applicable month
2 12 of the applicable month
3 14 of the applicable month
4 16 of the applicable month
5 18 of the applicable month
6 20 of the applicable month
7 22 of the applicable month
8 24 of the applicable month
9 26 of the applicable month
0 28 of the applicable month
  1. The annual motor vehicle ownership tax, which would have been due in the months of March and April, may be paid according to the following schedule:
Expiration in the month of:

Payment of the tax:
March 2020 Until June 2020
April 2020 Until July 2020
  1. Those taxpayers who lay-off employees without cause during the state of emergency are not able to apply the benefits established by Executive Decrees 1021 and 1030.

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Income tax – Withholding percentages

Categories Bulletin Posted on Author Gericó Associates Tags Ecuador, Income tax, Tax, Withholding percentages
withholding-percentages-income-tax

Regulation NAC-DGERCGC20-00000030 issued by the Internal Revenue Service on April 22, 2020, amended Regulation NAC-DGERCGC14-00787 which establishes the income tax withholding percentages.

The following income tax withholding percentages have been modified:

Concept

Previous withholding percentage

Current withholding percentage
Real estate construction activities and similar activities. 1% 1,75%
Insurance and reinsurance services provided by companies legally incorporated in the country and by branchesof foreign entities domiciled in Ecuador. The withholding must be applied over 10% of the invoiced or scheduled premiums. 1% 1,75%
Commercial lease provided by companies legally established in Ecuador. The withholding must be applied over the lease payments and the purchase option. 1% 1,75%
Services provided by media and advertising agencies. 1% 1,75%

 


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Implementation of an expedited merger control procedure by the Superintendence of Market Power Control

Categories Bulletin, COVID-19ENG Posted on Author Gericó Associates Tags antitrust, combination transactions, Covid-19, Ecuador
combination-transactions-control-antitrust

On April 20, 2020, the Antitrust Authority issued an abbreviated analysis and control procedure applicable to certain combination transactions.

This expedited procedure, also known as fast-track, is common in most jurisdictions that have an antitrust merger clearance process and generally apply to transactions that either (i) do not imply any change in the market structure – such as a change of control of a local business in favor of a foreign acquirer with no prior participation in the Ecuadorian market-; or, (ii) in which,  a priori, the market power resulting from the operation is not significant enough to allow unilateral anticompetitive/abusive behaviors by the combined operator.

The analysis and resolution within a fast-track process must be completed within 25 business days. This term contrasts with the regular process that usually lasts between 4 and 14 months (when remedies apply).

The fast-track process is applicable to the following 6 scenarios:

  1. When the change of control of the business occurs in favor of a foreign economic operator with no prior economic activity in Ecuador.
  2. In horizontal combinations (transactions between competitors) where the joint market share of the economic operators involved in the transaction and of their affiliate entities -when applicable- is less than 30% in each relevant market affected by the transaction.
  3. In horizontal combinations that occur in markets where the Herfindahl-Hirschman index (HHI) before the combination is less than 2,000 points and, as a result of the transaction, the HHI index variation is less than 250 points.
  4. In vertical combinations (transactions between operators in the same production/marketing chain), where the joint market share of the economic operators involved in the transaction and of their affiliate entities -when applicable- is less than 30% in each relevant market affected by the transaction.
  5. In vertical combinations where the Herfindahl-Hirschman index (HHI) of each of the vertically integrated markets post-merger is less than 2,000 points.
  6. In transactions involving one or more economic operators that are at risk of bankruptcy, duly supported and qualified by the Antitrust Authority.

The implementation of the fast-track processis highly positive to facilitate new business opportunities, particularly involving foreign investors. In addition, it contributes to the timely application of the competition regulation in the scope of merger control during the state of emergency deriving from Covid-19.

 

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Contribution for financing the comprehensive treatment of cancer

Categories Bulletin Posted on Author Gericó Associates Tags cáncer, comprehensive treatment, contribution, Tax
cancer-financing-comprehensive-treatment-tax

Regulation NAC-DGERCGC20-000000019 issued by the Internal Revenue Service and published on April 3, 2020 in Official Registry 479, established the rules for applying the contribution for financing the comprehensive treatment of cancer.

General provision fourteen of section I of the Monetary and Financial Code establishes that individuals or entities that receive credits from the private financial sector will pay a contribution equal to 0.5% of the amount of the credit.

The contribution tariff may be reduced to 0.01% by executive decree in cases duly justified by economic or social reasons.

The regulation establishes the following parameters for the applying the contribution:

1. Withholding agents

The withholding agents of the contribution are:

  • Credit cooperatives under the control of the Superintendency of Popular and Solidarity Economy; and,
  • Entities of the private financial sector under the control of the Superintendency of Banks.

These entities shall withhold the total amount of the contribution from individuals and entities who have been granted credits, portfolio purchase, discounts on bills of exchange, repo operations, renewal of loans, including deferred payments on credit cards and overdrafts.

2. Declaration and payment

Withholding agents must file the contribution return on a daily basis, using the “Form for Declaring the Contribution for Financing the Comprehensive Treatment of Cancer”. This return may be filed up to 48 hours after the date on which the withholding is made.

In the case of overdrafts, the contribution shall be calculated and paid by the withholding agent, once the operation is settled.

In the event that the declaration and/or payment of the contribution is not made within the 48 hours, the withholding will be subject to pay fines and interest.

In the case of credits granted from January 1 until April 3, 2020 by credit cooperatives controlled by the Superintendency of Popular and Solidarity Economy, they may declare and pay the value of the withholding through the form described above within 45 working days since April 3, 2020.

 

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