Idealex – COVID-19 and international trade

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DATE: 15-05-2020

CORRALROSALES IN THE NEWS: 

-Andrea Moya

MEDIA: Idealex

The world is facing a health, human and economic crisis without precedent. The measures taken to reduce the effects of the pandemic, such as isolations and social distancing, have direct impacts on the supply and demand. The suspension of commercial and productive activities generates a global recession and higher unemployment.

In 2019, the global economy recorded its worst performance since 2009, with a grow rate of 2.5% and with global GDP grow projections for 2020 revised downwards. In 2019, the volume of world trade goods fell by 0.4% against 2018 and it is projected that in 2020 it would contract even more. COVID-19 appeared in this scenario.

According to the Economic Commission for Latin America and the Caribbean (ECLAC), COVID-19 is affecting the region for the following reasons:

  1. The decline in the economic activity of the region’s main trading partners.
  2. The drop in commodity prices.
  3. The interruption of global value chains.
  4. Lower demand for tourism services.
  5. Greater risk aversion and worsening global financial conditions.

According with ECLAC, the value of Latin America and the Caribbean exports will fall at least 10.7% by 2020 due to lower prices by 8.2% and volume in 2.5%.

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In the case of Ecuador, given that its main commercial partners China and the United States are the countries with the most infections, it is foreseeable that the value of non-oil exports reduces. This fact added to the fall of the oil prices will generate a significant fall on the value of Ecuadorian exports.

Under these circumstances, the country’s trade policy must facilitate a prompt answer to this crisis. The reduction of non-tariff barriers to import and exports, especial procedures for the release and clearance of goods, simplified mechanisms for the reimbursement of taxes and payment facilities for taxes on foreign trade are measures that would allow companies to overcome the challenges derived from the pandemic.

The Ecuadorian Customs Authority has made and efficient work in order to facilitate foreign trade operations during the state of emergency, it has maintained its services in all customs districts through electronic channels, it has implements specific procedures for the inspection of goods and it has suspended the terms applicable for the abandonment of good through the duration of the emergency.

However, the following measures are needed urgently:

  1. The Law for Simplification and Tax Progressivity issued on December 31, 2019 amended the Production, Commerce and Investment Code adding article 157.1. This article establishes a simplified procedure for reimbursing any taxes applicable to foreign trade (drawback). The amount of the reimbursement is equal to a percentage of the FOB value of the export and must be done automatically after the export customs forms are definitive. This process must be put into place in an effective and immediate manner.
  2. The Law for Tax Equity establishes that the foreign exchange tax (ISD) paid on the import of raw materials, capital goods and other goods to be incorporated in production processes may be regarded as tax credit for the payment of the importer’s income tax within the following five years. The importer is able to request a reimbursement of the foreign exchange tax that has not been credited against its income tax. However, the reimbursement request procedure is slow and bureaucratic. It is necessary to adopt simplified reimbursement processes that are effective and resolved on a timely manner.
  3. Article 116 of the Production, Commerce and Investment Code establishes that the importers are able to request payment facilities on foreign trade taxes derived from the import of capital goods. This benefit must by applicable to the payment of foreign trade taxes on the import of raw material and similar goods.
  4. The third general provision of the Law for the Development of Production, Investment Attraction, Employment Generation and Fiscal Stability establishes that the investment incentives included in such law will be applicable for 24 months, this deadline expires in August 21, 2020. The President is able to extend this deadline for 24 additional months. It is importer to extend this deadline in order to stimulate local and foreign investment which may generate employment. It is also important to simplify the processes needed to access certain benefits such as the exemption of tariffs and foreign exchange tax on the import of raw material and capital goods needed for the development of investment projects.

These measures will contribute to protect the cash flow of the taxpayers which is a fundamental issue in order to keep companies’ operating and avoid, to the extent possible, its closure and the subsequent loss of jobs and default with its creditors.

This crisis has worsened the country’s fragile economy, particularly for the fiscal imbalance that has been occurring for several years, and the lack of contingency funds to be injected in an economic recession. The alternative is not the “deglobalization”, but an international cooperation policy that allows each country to develop its best capacities. Ecuador urgently requires structural changes in the labor and tax areas, along with a clear foreign trade policy.

If you want to read this article in Spanish, click here


Table’s source: Special Report COVID-19 issued by the Economic Commission for Latin America and the Caribbean (ECLAC) – https://repositorio.cepal.org/bitstream/handle/11362/45351/1/S2000263_en.pdf

Latin Lawyer – Ecuador adopts expedited merger protocol amid covid-19 woes

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DATE: 29-04-2020

CORRALROSALES IN THE NEWS

-Xavier Rosales

MEDIA: Latin Lawyer

The prestigious international publication “Latin Lawyer” has published an article on the new accelerated merger protocol approved by the Ecuadorian antitrust authority as a measure to fight against the effects of Covid-19 in the country. To deal with this issue, the entity had the expert opinion of our Partner Xavier Rosales.

“It was something that had been expected for a long time, and it is positive for the development of companies,” says our Partner in the text, who believes that the head of the antitrust authority, Danilo Sylva Pazmiño, has a more open approach than previous ones, which facilitates the authorization process for non-problematic transactions.

As explained in the text, the Superintendency of Control of Market Power (SCPM) approved on April 20th a draft resolution that creates expedited reviews for certain transactions that require notification prior to the merger. According to local professionals, COVID-19 has caused widespread delays in the agency’s ability to examine and investigate certain transactions.

This new protocol will ensure that an agreement can be approved within 40 days. The authority will have 15 days to send its conclusions to its decision-making body that will have 25 days to issue a final decision. Previously, the authority had 50 days to send its conclusions to the First Instance Resolution Commission (CRPI), and the decision-making body 60 to issue a decision – with the possibility of requesting another 60 days if the merger is very complex.

This accelerated merger system will be available for holding companies that do not directly or indirectly do business in Ecuador, companies merging with a combined market share of less than 30% in all relevant markets, and dealings with companies in bankruptcy that have a credible defense.

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Gestión Digital – COVID-19 and the limits of antitrust law

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DATE: 28-04-2020

CORRALROSALES IN THE NEWS: 

-Ana Samudio

The main objective of antitrust law is to ensure the existence of an equal playing field so that competitors have the same opportunity to offer goods and services to consumers in every relevant market. This initial budget necessarily implies the ban of agreements between competitors – any express or implicit agreement that reduces uncertainty about the behavior of a competitor – and the abuse of market power.

Within the framework of necessary and urgent measures to confront the world health crisis derived from the COVID-19 pandemic, several competition authorities have seen the need to relax – and even suspend – the sanctioning regime applicable to agreements between competitors, allowing exceptionally that these take place when temporary cooperation is necessary to guarantee the fair provision of essential goods and services during the crisis.

The first such announcement was from the Norwegian competition authority, which allowed, over a three-month period, coordination of itineraries between two local airlines to ensure the availability of the service. This announcement was quickly followed by regulators in Germany, England and the Netherlands, who relaxed the control regime for agreements between competitors aimed at guaranteeing the provision of goods and services; allowing competitors: (i) the exchange of information regarding availability, (ii) the cooperation necessary to keep the establishments open, (iii) the sharing of logistics of warehouses and transport; and (iv) the assignment / exchange of personnel to meet demand.

On its part, the European Competition Network (ECN), which groups the European Union’s competition authorities, issued a joint statement determining that, under current circumstances, reasonable cooperation between competitors would not constitute a restriction of competition in the terms of the community regulation and / or creates efficiencies in the production and distribution of goods and services that overweight the restriction that they could generate; and defined channels of attention to resolve doubts that operators may have about the legitimacy / illegitimacy of an intended cooperation, in light of these exceptional circumstances.

Likewise, the authorities in charge of the control and judgment of competition matters in the United States of America -Department of Justice and Federal Trade Commission- have created an expedited procedure -with duration of seven (7) calendar days- for the analysis and authorization of cooperation between competitors. The entire process is carried out online, for which operators interested in cooperating must provide information that demonstrates the relation with the crisis, necessity, and reasonability of the cooperation, under the protection of the crisis unleashed by the pandemic.

In Colombia, an exceptional regulation was created by which the Logistics and Transportation Center, created as an independent entity from the competition authority, has the mission of evaluating and approving agreements between competitors that are intended to generate efficiencies in the logistics and cargo transportation market which would be deemed illegal at any other time.

Along with these measures that make the system applicable to agreements between competitors more flexible, several authorities have stressed the importance of guaranteeing the provision, at fair and competitive prices, of products considered essential to protect the health and life of consumers (such as respirators, masks and disinfectant products), while warning that the operators that abusing their market power to affect this guarantee will merit a swift and hefty sanction. Along these lines, the Superintendence of Control of Market Power in Ecuador has issued two warrants to producers and sellers of these goods, reminding them that, according to the Organic Law of Regulation and Control of Market Power, they cannot take advantage of the emergency to increase their profit margins through unjustified price increases and will remain vigilant and implement the necessary control actions to preserve consumer rights and free competition.

In the first of the warrants, the Superintendent of Control of Market Power stated, that “Any variation in prices must obey the dynamics of the market and the individual and independent decisions of economic agents and not to anti-competitive agreements or union recommendations.” This assertion -which a priori would be contrary to the affirmative actions taken by competition authorities from other jurisdictions that were explained above- applies to the anticompetitive price-fixing agreements and not to the fair temporary cooperation between competitors aimed to benefit the consumers and tends to guarantee the supply  in this delicate estate of emergency, under the exemption to the prohibition provided in article 12 of the Organic Law of Regulation and Control of Market Power, which in the present state of affairs would justify cooperation between competitors when the following conditions are met simultaneously:

  1. Consumers or users be allowed to participate equally in their advantages: The purpose of cooperation would be to guarantee the provision of goods and services during the state of emergency, with which this condition would be fulfilled.
  2. That they do not impose restrictions that are not indispensable for the achievement of those objectives: Any intended cooperation must be strictly limited to measures required to meet the objective.
  3. That they do not grant economic operators the possibility of eliminating competition with respect to a substantial part of the products or services contemplated: The terms of the cooperation must not constitute barriers of entry or permanence of other competitors in the market.

If you want to read this article in Spanish, click here

Gestión Digital – Implications of the Declaration of Sanitary Emergency and State of Emergency in the Administration of Justice

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DATE: 15-04-2020

CORRALROSALES IN THE NEWS: 

-Mateo Zavala

On Thursday, March 12, 2020, the Ministry of Public Health declared a State of Sanitary Emergency due to the outbreak of coronavirus—or COVID-19—to prevent a potential massive contagion among the population.

Despite having declared a State of Sanitary Emergency, the Judiciary Council and the National Court of Justice did not make any immediate pronouncements, which meant that activities in all Judicial Branch offices continued as normal.

On March 16, 2020, the Judiciary Council, through Resolution 028-2020, restricted public service in judicial offices, with the exception of judicial units with jurisdiction over: flagrante delicto, criminal, violence against women and the family unit, traffic, juvenile offenders, multi-competent units and penitentiary guarantees.

In turn, The National Court of Justice, through Resolution 04-2020, ordered on the same date the suspension of terms and deadlines in all judicial proceedings, except for flagrant crimes while the State of Sanitary Emergency continues; this is, until May 10, 2020.

Can a person go to court if constitutional rights not limited by the declaration are violated during the State of Emergency?

Note that declaring a State of Emergency, as set out in article 165 of the Constitution, only limits freedom of movement and freedom of association and assembly rights. Therefore, if during the State of Emergency any right other than those mentioned above is violated, citizens may initiate the actions set forth in the Constitution before the criminal judges on duty by meeting the requirements established in the Organic Law on Jurisdictional Guarantees and Constitutional Control, and in the decisions issued by the Constitutional Court.

The Constitution and the Organic Law on Jurisdictional Guarantees and Constitutional Control foresee the following actions in case of constitutional rights’ violation:

i) Precautionary measures action, which can be requested independently or in conjunction with another constitutional action for the protection of rights, will depend on whether the claim is to stop the violation of a right or to avoid the violation thereof; ii) Protective action; iii) Habeas Corpus action; iv) Access to public information action; and v) Habeas Data action.

Knowledge and resolution of these actions, in accordance with article 86 numerals 1 and 2 of the Constitution, pertains to any judge of the Republic, given that the aforementioned norm establishes that all judges of Ecuadorian territory are competent to hear and solve constitutional cases. Thus, if there is a violation of constitutional rights that are not restricted under the State of Emergency, it is possible to approach any of the flagrante delicto units to request cessation of the violation.

Do court servers perform teleworking? What happens to the hearings and other proceedings scheduled for the dates when the judicial offices are not open to the public?

Even though the Judiciary Council has taken several actions for the use of technological means in the administration of justice, such as electronic notifications, it decided to suspend public service for judges and courts and did not opt for teleworking for judicial—non-administrative— officials.

Previously scheduled proceedings and hearings, on dates when the State of Sanitary Emergency continues, will be rescheduled according to the availability of each judicial unit. The Judiciary Council did not deem it appropriate to carry out the proceedings and hearings via telematic means, although this is permitted by law.

If the health emergency continues beyond the initially established period, it would be highly convenient for the Judiciary Council to arrange for hearings and other proceedings to be conducted electronically, in order to alleviate the impact of the situation on the administration of justice. It is worth noting that some proceedings are scheduled for 2022, which reveals the overload in courts and tribunals.

If you want to read this article (in spanish), click here

ASIPI – Interview with María Cecilia Romoleroux

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DATE: 14-03-2020

CORRALROSALES IN THE NEWS: 

-María Cecilia Romoleroux

María Cecilia Rpmoleroux, Co-chair Host Committee, Quito

  1. The XXII ASIPI Workshops and Board of Directors will be held in November 2020. Its organization is always an interesting job for the Organizing Committee that you Co-Chair. Tell us how the work has been divided.

Paul and I have made a very good team, and the truth is that we have not divided the work; instead we are cooperating in all fields. The support of ASIPI’s young associates has been very valuable.

  1. What has been the most difficult in the organization of the Conference?

Agreeing with so many people is always complicated, but we have already achieved an agreement on everything. Quito is an easy city to show, since there is so much to see. The “Law Offices” event may always be the one that needs the most agreements, but the collaboration of Johana Aguirre and her team in this event has been invaluable.

  1. What does Quito have that differentiates it from other host cities?

Quito is a Cultural Heritage of Humanity with the best-preserved historical center in the region, making it a city that already offers a lot by itself. Now if you add to this the enthusiasm we have to show Quito during ASIPI, just try to picture the difference.

  1. Why should ASIPI members attend?

ASIPI is the most important Intellectual Property conference in the region, and if you add to this the fact of being able to know Quito, the first cultural heritage of America! And also to go to the Galapagos Islands, the result is an event that you cannot miss.

  1. We know that you are the first Ecuadorian to sit on the INTA board of directors, as well as the first Ecuadorian to be part of the Programming Committee of the International Association for the Protection of Intellectual Property (AIPPI). How did you achieve that honor? If a young associate asks you for advice on pursuing a similar career, what would you say?

I have indeed had the pleasure of having several positions of relevance, being one of my favorites Co-Chairing the “Quito 2020” Host Committee. My advice would be that these positions are only achieved by showing work and dedication to your own ideals and to each association. There are many “bumps” along the way but the key to success is to keep on going ignoring them, since they are only “bumps”.

If you want to read the full interview in Spanish (on page 14), click here

Revista Ekos – Between lawyer and woman: María Cecilia Romoleroux

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DATE: 3-01-2020

CORRALROSALES IN THE NEWS: 

-María Cecilia Romoleroux

MEDIA: Revista Ekos

María Cecilia Romoleroux is a career lawyer and has excelled in various fields at a national and international level. Her passion for the law has allowed her to be a pioneer in areas where women were not easily accepted.

Her career is marked by gender inequality, but this was not an impediment to being the first Ecuadorian woman to be part of the board of directors of the International Trademark Association (INTA) or of the Programming Committee of the International Association for Protection of Intellectual Property (AIPPI).

In an interview with Ekos Magazine, María Cecilia shared her experiences on the empowerment of women and the work that must be done in Ecuador to achieve gender parity. Her history began in the classrooms of the Pontifical Catholic University of Ecuador where only a small group of women could complete their studies, one by one they started to drop out due to various circumstances.

“For two years I worked in a free clinic for abused women. A situation that humanizes you and allows you to understand the need to empower women”, said Maria Cecilia, who stressed that no person should be an “appendix ”of anyone.

Thus, she decided to enter a more technical niche; the world of intellectual property. After a successful performance she joined a local association where she became vice president. However, when she was ready to be promoted to the presidency, they closed the doors for her because “they were not ready for a woman to be president much less on such a specific field”

“They took me out of the local sphere but I started working internationally. I joined various associations and tried to make a name of myself”, she said.

Some time later, María Cecilia joined CorralRosales as a partner and also has had an extensive career as a mediator and judge / judicial assistant. She is one of the few professionals who holds a partnership in a national law firm. According to Romoleroux, this is due to the fact that “women do not give themselves the opportunity to go far. It is necessary to work from dawn to dusk, travel and possibly miss many family-related activities.”

“You have to combine the roles between mother and lawyer.”

“Many times society does not help professional woman reach high positions”, says Maria Cecilia; an issue that was ratified by the Ekos Group Research Unit who conducted a survey to find out the number of women who hold CEO and management positions. The result shows that only 37.3% of women have such positions in contrast to that of men 62.7%.

“This reality is not very far from the realm of law. In such sexist communities it is difficult to be a mother, wife and professional at the same time”, said the expert. That is why there are countries – like Italy – that have limited spaces for women to be partners or directors of consortia or legal groups. On the other hand, factors such as the Ecuadorian work environment causes men to have an advantage above women at time of selection or hiring for new positions.

In spite of all the social obstacles, last year María Cecilia was recognized as “Women Chambers in Law 2018 for Ecuador” in the annual awards ceremony for Chambers and Partners Legal Directory within the Diversity and Inclusion Awards category, where her career, achievements and especially her legacy were analyzed; that is, the projects she is taking on to leave a mark or a way forward in the country.

Finally, María Cecilia Romoleroux shared what her motivation to dedicate herself to this legal field was and her answer was a simple: “life gave me this”.

Education:

1990: Doctor of Jurisprudence at the Catholic University of Ecuador

1991: Paralegal program at Georgetown University, United States of America

1993: International Relations – Ship for the World Youth, Japan

1997: Master Lucentinus in Copyright at the University of Alicante

Experience:

2000-2014: Mediator of the Ecuadorian-American Chamber

2002-present: Partner in intellectual property and regulation, CorralRosales

1999-2000: Secretary of the Ecuadorian Association of Industrial Property Agents

2001-2003: Vice President of the Ecuadorian Association of Industrial Property Agents

2003-2019: International Intellectual Property mediator for International Trademark Association

2009-2012: Judicial Assistant of the Administrative Contentious Court

2012-present: Mediator and arbitrator for ASIPI

2017-2019: INTA board member

2019-2021: Member of the Programming Committee at the Association Internationale pour la Protection de la Propriété intellectualle

2019-2021: ASIPI President of the Committee of Counterfeiting

Achievements:

2017: President of the first Latin American INTA conference in Cartagena

2018: Winner of the Chambers “Lawyer of the Year” award

2019: Nominated International Program Leader for INTA Boston

2020: Chairman of the Host Committee for ASIPI Quito

If you want to read the interview in spanish, press here

Teleamazonas – Annual and/or monthly taxes apply from January 1st

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FECHA: 2-01-2020

CORRALROSALES IN THE NEWS:: 

-Andrea Moya

DATE: Teleamazonas

Our Partner, Andrea Moya, has been interviewed by the Teleamazonas news to explain the tax amendments introduced by the “Tax Simplification and Progressivity Law” and the date on which the amendments come into force.

“When taxes must be paid on an annual or monthly basis, the amendments entry into force from the first day of the following month. All amendments, in general, are effective as of January 1, with certain exceptions. The first exception is the distribution of dividends. This amendments entry into force on December 31,” Andrea Moya said in the interview.

Another of the points analyzed by our Partner was the amendment to the sub capitalization limit. “Previously, in credits between related parties you had a sub capitalization rule. Now this limit for interest expense changed to 20% of the profit. This should only affect contracts signed as of this date,” she explained. However, this has not been clarified in the law.

Another of the reforms that will come into force in 180 days, is the VAT for digital services, such as Uber or Netflix. “All the concepts that the law does not regulate specifically, the Tax Authority will have to issue a regulation” Andrea Moya points out during her interview.

All these changes could mean an amount of 600 million US dollars in revenue for the Government.

If you want to watch the video, press here

Public-Private Partnerships in Ecuador

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DATE: 11-12-19

CORRALROSALES IN THE NEWS: 

-Jimmy Rodríguez

Ecuador is committed to accelerate the construction of infrastructure and the provision of public services through Public-Private Partnerships (“PPP”). For this purpose, it is essential to plan and prioritize strategic projects by sector; a transparent and predictable legal framework; and, above all, an inter-institutional structure with defined competencies and with the capacity to coordinate, monitor, and control.

The State and the private sector can be complementary agents in the provision of goods, jobs, and services to citizens. One of the fundamental responsibilities of the central and regional governments is to provide high-quality infrastructure and public services in a timely manner. By associating with the State, the private sector contributes with capital, as well as experience and specific knowledge. This figure is known as Public-Private Partnerships.

Chile, Colombia and Peru have had PPP regulations and experiences for at least a decade. In Ecuador, the Law of Incentives for Public Private Partnerships and Foreign Investments was enacted on December 18, 2015. So far, several APP contracts have been signed between the Central Government and private[1] partners. As part of the National Development Plan, The Ministry of Transport has 5 road projects in public tender and 9 other projects on the agenda[2]. On the other hand, although there are some initiatives promoted by the private sector, it is still a pending task of the regional governments to crystallize projects through this instrument.

The PPP scheme ensures the legal stability of the contract and grants access to tax benefits for the private partner, such as income tax 10 year´s exemption, tax outflow (ISD) exemption on imports, financing and payment of dividends, and the reduction of tariffs and VAT applicable to imports related to the project. The applicable law provides the possibility to submit any dispute that may arise between public entities and private partners to a national or international arbitration process.

The timely execution of the projects and the absence of conflicts derives from the capacity of the State to coordinate and monitor the execution of the projects, and cooperation between institutions. For this purpose, the State should have adequate material and human resources to ensure the success of the projects.

Given that the State has limited and scarce economic resources, it is decisive that Ecuador maintains the incentives contained in the Law of Incentives for Public-Private Associations and Foreign Investments, and that it applies a modern and transparent system of PPP which will contribute positively to the development of the country.

If you want to read this article in Spanish, click here


[1] The relevant infrastructure projects are: Posorja Port, Bolívar Port ; Río 7 – Huaquillas Highway; Guayaquil viaduct; and, Chongón – Santa Elena road system.

[2] Ver: https://www.obraspublicas.gob.ec/asociacion-publico-privada-2013-2017_esp/ (2019-11-22)

Idealex – Technological Tools in the Workplace

technological-tools-edmundo-ramos-rafael-serrano-idealex

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FECHA: 24-11-19

PROFESIONALES EN LA NOTICIA: 

-Edmundo Ramos
-Rafael Serrano

MEDIA: Idealex

Most companies provide their employees with technological tools (“ICTs”) such as corporate email, mobile phone, and computers in order for them to fulfill their tasks. It is common for the worker to use them for personal purposes, resulting in situations of unauthorized use of work ICTs, or the incorrect handling of information owned by the employer.

Since the employer is the owner of the ICTs, he may establish limits for the proper use of them. Article 46 of the Ecuadorian Labor Code does not establish any laws regarding the treatment of information and the consequent right of the employer to access and control it. Nevertheless, the employer must respect constitutional rights granted for the protection of data, correspondence and privacy. 

The right to inviolability and secrecy protects the communications made by the worker. For this reason, the employer will not be able to access email or information contained in the company’s computer or cell phone without the worker’s consent.

Communications can also be protected by the constitutional right to personal data protection: “The right to personal data protection, which includes access to and decision on information and data of this nature, as well as their corresponding protection. The collection, archiving, processing, distribution, or transferring of this data or information will require the authorization of the holder or the mandate of the law.”

Personal data is all the data or information that makes a person identifiable. In general, corporate emails refer to names, surnames, or positions of the person to whom the email is assigned, just as the cell phone number is linked to a specific person. The definition of personal data would include both the email and the cell phone number. Therefore, since this information can be considered as personal data, the authorization of the holder is required to access and review this information. 

Finally, the right to privacy also protects the use and access to ICTs. The American Convention on Human Rights recognizes this right, which provides the following: “No one can be subjected to arbitrary or abusive interference in his private life, his family, his home or his correspondence, nor of illegal attacks on his honor or reputation.”

The Inter-American Court of Human Rights has indicated, “… The scope of privacy is characterized by being exempted and immune from abusive or arbitrary invasions or attacks by third parties or the public authority.” The right to privacy would apply to personal communications made by the worker using work ICTs.

The rules that define the use and control of technological tools must be in writing in the different legal documents of each company, in order to have the necessary support to sanction their misuse:

Employment Contract: the employer must establish in the employment contract the delivery of technological tools and the use of them. The contract shall also recognize the rights of the employer to recover the ICTs and obtain a backup of the information contained therein.

Internal Work Regulations: It is essential to incorporate in this document, rules that regulate the use of technological tools. Employers may establish sanctions in their Internal Labor Regulations for their misuse or the inclusion of employee’s data and personal information. The internal regulation must establish the ownership of the information contained in these tools, as well as the periodicity for monitoring or supervision.

Internal Policy of the Company: these documents must explain the rights and obligations that the workers have regarding the ICTs. The policies shall establish the right of the employer to access and obtain copies of all the information within these technological tools. Workers must be notified and informed to the worker.  

Delivery / Receipt certificate: At the time the technological tools are delivered, the employer must establish the limitations and conditions under which the tools are delivered. It is important to detail the physical state and the data content of the tools so that, at the time of their return, the worker is responsible for any deterioration not attributable to their normal use.

Training: The employer shall conduct training for workers regarding the importance and limitations of the use of technological tools.

In conclusion, technological tools facilitate the execution of the functions performed by the workers, but their use must be regulated in detail so that both the employer and the worker know the limits and the sheer work-related purpose that must be given to them. The adequate protection of the company’s ICTs and information that they contain will be possible only if there is clarity in the rights and obligations regarding the use of such tools.

Edmundo Ramos’s Bio:

Edmundo Ramos is a partner at CorralRosales. He has more than twenty-five years of expertise representing local and international clients in labor and social security matters. Edmundo leads the CorralRosales Labor Department and participates actively in the area of ​​Dispute Resolution in the management of labor disputes.

Rafael Serrano’s Bio:

Rafael Serrano is an associate at CorralRosales. He has more than five years of expertise in the TMT industry. He leads the Data Protection Department with an emphasis on personal data protection, electronic commerce, and emerging technologies.

If you want to read this article in Spanish, click here

Gestión Digital – Draft Law for Fiscal Transparency

fiscal-transparency-gestion-digital-Andrea-Moya

DETAILS

DATE: 7-11-19

CORRALROSALES IN THE NEWS: 

-Andrea Moya

The following is a summary of the main amendments proposed in the draft of the “Draft Law for Fiscal Transparency, Optimization of Tax Expenditure, Encouragement of Job Creation, Strengthening of the Monetary and Financial Systems and Responsible Management of Public Finance”

Income tax

Dividends:

  • The taxable income will be 40% of the dividend effectively distributed. The concept of global dividend is eliminated (dividend distributed plus taxes paid by the company) and consequently the tax credit for taxes paid by the company.
  • The exemption for dividends paid to companies and for individuals residing abroad is eliminated. The applicable withholding percentage will be 25%.
  • In the case of dividends distributed in favor of individuals residing in Ecuador, the Tax Authority will establish the withholding percentage.
  • If the company that distributes the dividends fails to report its corporate structure, the withholding percentage applicable to the dividend paid abroad will be 35%.
  • It is ratified that the capital increase with retained earnings (stock dividend) will not be taxed.

Deductions:

  • Interest paid on loans granted by related or independent parties may not exceed 20% of the entity’s profit. Interest paid in excess of this ratio will be considered non-deductible.
  • Indirect expenses allocated from abroad by related parties will be considered non-deductible expenses.
  • The following additional deductions are reduced from 100 to 50%: (i) net increase in employment, (ii) medical insurance and / or prepaid medicine expenses granted to employees; (iii) depreciation of assets that reduce the environmental impact; and, (iv) certain expenses incurred by micro, small and medium businesses, such as: research and development expenses, expenses to improve productivity, and travel and promotion expenses for accessing international markets.
  • The deductibility of advertising and promotion costs and expenses will not be limited.

Others:

  • Payment of the advance income tax is no longer mandatory.
  • The reduction of the income tax rate for exporting entities that reinvest their profits goes from 10 to 8 percentage points.
  • Income obtained abroad that has been subject to tax in the country of origin will no longer be exempted from paying income tax in Ecuador. The tax paid abroad will be considered as tax credit.

Value Added Tax (VAT)

  1. The following goods will be subject to 0%VAT:
    • Flowers.
    • Test strips for glucose.
    • Newsprint.
  1. Digital services:

Digital services will be subject to 12% VAT. Digital services are those provided and / or contracted through the Internet that are automated and require minimal human intervention.

In the case of import of digital services, VAT will be paid by the importer of the service. Credit card issuing entities will withhold the VAT when the digital service provider is not registered in Ecuador.

Excise Tax

  1. Taxable base: The presumptive minimum profit margin to be applied on the ex-customs or ex-factory price is increased from 25 to 30% based.
  2. Taxed goods: The following goods are taxed at the rates described below:
    • Liquids containing nicotine to be administered through nicotine administration systems (electronic cigarettes): 50%
    • Soft drinks with sugar content less than or equal to 25 grams per liter and energy drinks: 11%
    • Soft drinks with sugar content greater than 25 grams per liter: US$0.20 per 100 grams of sugar.
    • Vehicles: the calculation formula is modified according to the sale price of the vehicle to avoid leaps in the rates.
    • Post-paid mobile phone service provided to individuals: 10%
    • Craft beer: The rate is reduced from US $ 2.00 per liter to US $ 1.5 per liter.
    • Industrial beer: The rate is increased according to market share.
    • Plastic bags: US$ 0.10 per bag

Currency Exit Tax

Exemptions:

  • Loans granted abroad: (i) there is no longer required that term of the credit is at least 360 days, and, (ii) the loan may be used to invest in shares issued by Ecuadorian entites.
  • Dividends: Dividends paid to entities or individuals residing in tax havens is exempted.

The tax rate applicable to the import of raw materials and capital goods, is reduced from 5 to 2.5%; however, the right to tax credit for such imports is eliminated.

Single and Temporary Tax

Who are obliged to pay? Companies whose gross income in fiscal year 2018 exceeded one million dollars.

How much should be paid? The amount to be paid is shown in the following table. The amount shall not exceed 25% of the generated, declared or determined income tax of fiscal year 2018.

Gross taxable income from (USD $) Gross taxable income up to (USD $) Rate
1,000,000 5,000,000 0.10%
5,000,001 10,000,000 0.15%
10,000,001 Onwards 0.20%

When should it be paid? Until March 31 of fiscal years 2020, 2021 and 2022.

Capital Repatriation Regime

The tax residents of Ecuador can benefit from this regime if as of December 31, 2018:

  • They have maintained abroad revenues subject to income tax in Ecuador or, have made monetary transactions subject to outflow tax (ISD), which have not been declared or if the tax has not been paid.
  • Have kept assets abroad which have been acquired with these revenues and, that have not been registered in the equity declaration.

If taxpayers decide to repatriate and invest the income in Ecuador, they will be subject to the following rules:

  • If the income is declared until March 31, 2020, it will be subject to pay a tax rate equal to 1%;
  • If the income is declared from April 1, 2020 until June 30, 2020, it will be subject to pay a tax rate equal to 2%; and
  • If the income is declared from July 1, 2020 until December 31, 2020, it will be subject to pay a tax rate equal to 4%
  • If taxpayers decide to declare their income, assets or investments abroad, but not repatriate and reinvest in Ecuador, it will be subject to pay a tax rate equal to 8%.

The income will be regarded as invested in Ecuador if it remains in Ecuador for a minimum period of 12 consecutive months counted from the date on which the investment is made and if it’s purpose is one of those established in the law, such as: investments and financial products provided by financial institutions, stock exchanges and stock brokerage houses, acquisition of real estate and other assets necessary to carry out economic activities in the country or, investments destined to research and development of technology.

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