Category Archives: Bulletin

On December 29, 2023, the President of the Republic issued two Executive Decrees with tax amendments:

a.    The Internal Tax Regime Law Regulations.

b.    Regulation of Invoices, Withholding Certificates, and Complementary Documents.

On November 14, 2023, the Labor Ministry issued the General Rules to Control Employer Obligations and Inspection Proceedings by means of the Ministry Agreement No. MDT-2023-140, regulating the following relevant aspects:

• Employee data registry: The employer is required to register its employee’s information on the Sistema Único de Trabajo (hereby “SUT”) until 15 days after the beginning of the employment relationship.
• Employment agreements registry: The employer is required to register the employment agreements on the SUT until 15 days after the beginning of the employment relationship.
• Thirteenth and fourteenth remuneration accumulation (hereby “Remunerations”): Employees may require accumulating their Remunerations until January 15 of each year or 15 days after the beginning of their employment relationship (new employees).

Employees that may require to change the way they receive their Remunerations are able to do so by a written request presented until the January 15  of each year.

The following schedule is stablished for the employees to register the fourteenth and thirteenth remunerations and profit-sharing payment forms:

Thirteenth Remuneration Payment Registry RUC
Nineth digit Registry date From Until 1,2,3,4,5 January 5 February 5 6,7,8,9,0 February 6 March 6

 

Fourteenth Remuneration Payment Registry:
Coast and Insular Region RUC
Nineth digit Registry date From Until 1,2,3,4,5 March 20 April 20 6,7,8,9,0 April 21 May 21

 

Fourteenth Remuneration Payment Registry:
Amazon and Highland Region RUC
Nineth digit Registry date From Until 1,2,3,4,5 August 20 September 20 6,7,8,9,0 September 21 October 21

 

Profit Sharing Registry RUC
Nineth digit Registry date From Until 1,2,3,4,5 April 20 May 20 6,7,8,9,0 May 21 June 21

–    Internal Work Regulations: The employer that has 10 or more employees is required to elaborate and submit for approval the Internal Work Regulations before the Labor Ministry. The employer has a 30-day term to do so from the existence of the obligation.

–    Electronic Inspection: The Labor Ministry may conduct electronic inspections through the electronic mail registered in the SUT.

The information registered in the Labor Ministry Systems shall not be required by the labor inspectors unless the veracity of the information needs to be verified.

–    Sanction concurrency: The Labor Ministry may sanction the same employer for different obligations breach, to a maximum of 20 SBU (USD 9.000).

–    Recurrence: The Labor Ministry may sanction the recurrence con breach of labor obligations to a maximum of 20 SBU (USD 9.000).

Sanctions will be applied according to the following chart:

MINOR INFRACTIONS Number of employees 1 to 9 10 to 25 26 to 49 50 to 199 200 to 540 541 or more 1 SBU 4.17 SBU 7.33 SBU 10.5 SBU 13.67 SBU 16.83 SBU

 

SERIOUS INFRACTIONS Number of employees 1 to 9 10 to 25 26 to 49 50 to 199 200 to 540 541 or more 2.58 SBU 5.75 SBU  8.92 SBU 12.08 SBU 15.25 SBU 18.42 SBU

 

VERY SERIOUS INFRACTIONS Number of employees 1 to 9 10 to 25 26 to 49 50 to 199 200 to 540 541 or more 4.17 SBU 7.33 SBU  10.5 SBU 13.67 SBU 16.83 SBU 20 SBU

Sanctions may also be applied according to the specific breaches without considering the number of employees, as shown in the following chart:

SPECIAL INFRACTIONS Not registering the employment agreements $50 per agreement Late registering of employment agreements $25 per agreement Not registering the severance deed $200 per severance deed Late registering of the severance deed $50 per severance deed No authorization for reduce working day 0.5 SBU Not registering the thirteenth remuneration payment form $200 Not registering the fourteenth remuneration payment form $200 Not registering the profit-sharing payment form $200 Late registering of the fourteenth remuneration payment form $100 Late registering of the fourteenth remuneration payment form $100 Late registering of the profit-sharing payment form $100 Not registering the Internal Work Regulations $200 No fulfillment of the percentage on disabled personnel 10 SBU Hiring of children and adolescents $1.000

 

On November 20, 2023, the Republic President issued the General Regulation on the Violet Economy Impulse Organic Law (hereby the “Regulation”) published on the Second Supplement of the Official Registry Nr. 444 on November 25, 2023. We highlight the following:

Equity Plans: Employers with 50 or more employees must elaborate, implement, and register their Equity Plans, according to the following conditions:

1. Equity Plans minimum content: i) Company general data, ii) Inform containing the diagnosis outcome results, iii) Equity measures, priority, and term of execution, iv) Human and material resources, v) Implementation, follow-up, and evaluation schedule, and vi) Follow-up, evaluation, and revision system.
2. The evaluation phase of the Equity Plans shall include quantitative and qualitative parameters on: i) The employer economic activity, operational years, number of employees (identifying their gender), ii) Hiring and selection process, iii) Training and education, iv) Rise and promotions, v) Administrative positions control (including gender equity control), vi) Salary equity, vii) Work environment conditions, schedules and benefits, viii) Exercise of personal, family and labor rights, ix) Female representation and participation on the work environment, and x) Harassment and discrimination prevention measures.
3. The Equity Plans will be valid for 4 years and must be registered on the Labor Ministry.
4. The Equity Plan must be physically and directly present to the Labor Ministry so long as a digital platform is stablished.

Sexual harassment in the workplace and prevention measures: The Regulation defines sexual harassment in the workplace, as occasional or repeated action whose purpose is to harm the sexual integrity of the employee. This type of harassment can occur during the working day, in work activities or because of these, whether by physical or digital means.

The following measures are established to prevent sexual harassment:

1. Provide every year trainings on the importance of prevention and immediate action in cases of sexual harassment.
2. Adapt the Internal Work Regulations to include mechanisms for preventing sexual harassment at work and including action plans to be taken.
3. Develop protocols or procedures for the prevention and investigation of harassment, discrimination, and violence in accordance with the principles of i) Confidentiality, ii) Equality and non-discrimination, iii) Impartiality, iv) Non-revictimization, v) Non-retaliation against those who make complaints, vi) Pro human being, vii) Transversality and viii) Attention, protection and accompaniment.

Legal termination of the employment relationship (visto bueno) on grounds of harassment: The Regulation determines that the time for the prescription shall be counted from the moment the Employer has knowledge of the facts through its representative or highest authority.

The victim’s testimony may be presented orally or in writing but does not constitute sufficient evidence on its own. To safeguard contact between the offender and the victim, the Employer may temporarily relocate or separate the accused on paid leave, holiday, or temporary telecommuting.

Violet Seal: This is an optional certification that will be awarded by the Labor Ministry or by non-profit organization qualify to award this Seal. This certification implies a recognition for companies that stand out in the areas of equal treatment and opportunities at work.

Entities that meet the requirements for obtaining the Violet Seal must submit their application to the Labor Ministry, which will issue a report granting or denying within a maximum of 60 days. The ” Violet Seal” certificate will be valid for one year.

Verification of the percentages of inclusion on boards of directors: The Superintendency of Companies, Stock and Insurance will control that all entities have one female member for every three members on their Board of Directors until December 31, 2024.

Verificación de los porcentajes de inclusión en directorios: La Superintendencia de Compañías, Valores y Seguros controlará que hasta el 31 de diciembre de 2024 todas las sociedades cuenten con un miembro femenino en su Directorio por cada tres integrantes.

On November 27, 2023, the President of the Republic submitted to the Legislature the draft of the “Law for Economic Efficiency and Job Creation”. The draft bill was classified as urgent; therefore, it must be processed by the National Assembly within the next 30 calendar days.

Below, we detail the most important content regarding tax and custom matters:

1.    Temporary tax domicile: Non-tax residents that enter Ecuador can apply a temporary tax regime. This regime allows the payment of income tax solely on Ecuadorian source income. The following individuals are eligible for applying this regime: (i) those who make an investment in real estate or productive activities of at least US$150,000; or (ii) those who have monthly earnings of at least US$2.500 over which social security contributions are paid.

2.    Income tax exemptions: Those taxpayers who invest in non-conventional renewable energy and industrialization of natural gases will be entitled to an income tax exemption of 10 years, beginning from the date in which income is generated. The exemption will not exceed the total amount of the investment.

3.    Additional deduction for employment generation: Those who generate a net increase of jobs for young people between ages 18 and 29 years old will be entitled to an additional deduction of the salary expense according to the following chart:

New jobs created Percentage of additional deduction 12 20% 25 30% 50 40% 100 50% 200 60% 300 70% 400 80% 500 90%

4.    Tax stability: Taxpayers who pay 2 additional percentage points over the applicable income tax rate are entitled to tax stability over the tax regime.

5.    Self-withholding for large taxpayers: Large taxpayers will be required to self-withhold income tax over their taxable income on a monthly basis. The withholding rate will be up to 3%, as established by future regulations.

6.    VAT paid on real estate projects: There will be a right to obtain a refund of VAT paid on the acquisition of goods and services for the construction of real estate projects.

7.    Banking: The use of the financial system is mandatory for all transactions over US$100.00 (the currently value is US$1,000.00).

8.    Calculation of customs tariffs: The freight cost is reinstated for the calculation of the taxable base of customs duties.

9.    Investment contracts: Job creation is required for applying tax incentives for new investments.

10.    Free Trade Zones: A free trade zone regime is established. This regime may be applied by a single user, or by several users organized under the same regime. The activities that can be developed in a free trade zone are:

a.    Production of goods, such as manufacturing, agriculture, aquaculture, and forestry.
b.    Provision of services, including tourism, auditing, consulting, professional services, telecommunications, healthcare, scientific research, and technical support.
c.    Commerce and logistics, such as transportation, storage, distribution, and handling.

The free trade zone regime will have the following characteristics:

a.    Tax regime: Tax benefits include:

–    Income tax rate of 0% for 5 years and 15% for the entire period of the regime.
–    Exemption of foreign trade taxes on the import of capital goods and raw materials, destined to the free trade zone.
–    Exemption from Value Added Tax (VAT), Outflow Tax (ISD), foreign trade taxes and other taxes that may be created in the future regarding the transactions carried out within the free trade zone.
–    Exemption of income tax on dividends paid by operators and users to their shareholders.

b.    Labor regime: employment agreements entered within the free trade zones will be considered as temporary and can be renewed indefinitely.

c.    Customs regime and foreign trade:

–    Goods that enter the free trade zone from the Ecuadorian territory shall be considered as exported.
–    Goods that enter the Ecuadorian territory from a free trade zone are considered imported. Up to a maximum of 30% of the goods produced in free trade zones can be allocated to the Ecuadorian territory.
–    Goods exported from a free trade zone to third parties are not subject to export customs formalities.

11.    Remission of interest, fines and surcharges: The remission of interest, fines and surcharges is established for the payment of tax obligations collected by the Internal Revenue Service. The percentages, deadlines and conditions will be established by future regulations.

The Regulated Consumer must own the SGDA or acquire ownership at least 5 years before the end of the authorized term of operation of the SGDA. The Regulated Costumer can engage third-party services for installation, operation, maintenance, dismantling, and other SGDA-related activities.In excess energy production, a credit is generated for the Regulated Consumer, which can be offset against its consumptions from the distribution network. The compensation’s treatment varies based on the applicable tariff: (i) general tariff without demand, (ii) general tariff with demand, (iii) general tariff with hourly demand.

The Regulation, published in Official Registry Supplement 441 on November 21, 2023, can be accessed through the following link: