The Law on Energy Competitiveness (“LOCE”) was published in the Second Supplement of the Official Registry on January 11, 2024. Below, we summarize the most important energy and tax matters:
1. Projects included in the Master Plan for Electricity (“PME”) may be delegated to private entities through public selection processes in the following cases:
a. When it is necessary to meet the public interest, or
b. When the service cannot be provided by entities wholly or partially owned by the Government, according to the needs of the electric system.
2. Projects not included in the PME based on unconventional renewable energies that have been identified by the private sector may be delegated to their promoter if the project does not exceed 10MW in power. Larger projects must be delegated through a public selection process, and benefits will be recognized for the promoter’s participation.
3. The construction, operation, and maintenance of public lighting systems may be delegated to private companies.
4. All projects delegated to the private sector must be developed by companies established in Ecuador.
5. The delegation to the private sector of existing infrastructures financed with the General State Budget is prohibited. Entities wholly or partially owned by the Government Public shall be responsible for managing such infrastructures.
6. Private entities may build new networks and distribution infrastructure to supply electricity for commercial and industrial clients isolated from the electric distribution grid. Expenses incurred for this purpose will be considered deductible for calculating the applicable income.
7. Regulated and non-regulated consumers may install distributed generation systems for self-supply (“SGDA”). These systems must use unconventional renewable energies and can be owned by the consumer or a third party.
The depreciation and amortization value of the equipment, and technology acquired for SGDA implementation will be deductible with an additional 100% for income tax purposes.
8. Energy block transactions may be conducted through the sale of energy via contracts signed by participants in the electric sector or through short-term transactions.
9. Clients who make payments for public electricity and lighting services until June 30, 2024, will not be subject to interest payments. Clients located in Manabí and Esmeraldas will not be subject to paying any amount due for the services received during the state of emergency caused by the 2016 earthquake. These benefits do not apply to industrial clients.
10. Other tax regime amendments include:
a. 0% VAT rate will apply to the transfer of equipment and accessories for solar photovoltaic generation and wastewater treatment plants.
b. Electric vehicles are described as those propelled solely by electric power sources, with batteries charged exclusively using this type of energy and that produce zero direct polluting emissions. Electric vehicles shall not be understood as those that have self-generation systems with an internal combustion source.
c. The remission regime is amended, payment must be made by July 31, 2024.
d. The Foreign Trade Committee (COMEX) shall tax agricultural machinery that works with clean energy sources with a 0% tariff. This amendment must be carried out until May 10, 2024.
e. Payments made abroad by private financial institutions for credits and financial returns from fixed-term deposits or investments, will not be exempt from the payment of Outflow Tax (ISD) until January 11, 2025.
The President of the Republic must issue the applicable regulations by February 10, 2024.
