Amendments to the Public Procurement Law Regulations

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Through Executive Decree No. 451, issued on June 9, 2022, the Regulations to the Public Procurement Law were amended. The amendment covers the provisions applicable to the acquisition of medicines and strategic health goods for outpatient care (“Products“) by the Public Health Network (“PHN“) to private pharmacies qualified by the national health authority (“Pharmacies“). 
 
The main aspects of this amendment are:

  1. The prices of the Products, which the PHN shall pay to the Pharmacies, shall be those provided in the electronic catalog. In addition, the PHN shall pay each Pharmacy an additional amount for “operating costs” to be analyzed and fixed by the National Health Authority (“NHA“).
  2. If one of the Products is not in the electronic catalog, the price will be the one fixed within the referential budget for the Corporate Reverse Auction of the respective Product (“CRA“). Said price shall be applied until 90 days after the signing of the Framework Agreement resulting from the CRA, after which the provisions mentioned in point 1 shall apply.
  3. Until the NHA fixes the “operating costs“, the PHN shall pay each Pharmacy 5% of the total value of the Products it has dispensed under the adhesion contracts entered into or to be entered into with PHN.
  4. The “operating costs” fixed by the NHA shall only apply to the adhesion contracts entered into from such fixation. The previous contracts shall be subject to the provisions mentioned in point 3 until their expiration, and if they are renewed, the amount fixed by the NHA shall apply to such renewal.

Executive Decree No. 451 entered into force on June 14, 2022.

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

Specialist in Corporate and Public Contracting Law
Mario Fernández, 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 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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Rules for applying income tax paid abroad as tax credit

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As of fiscal year 2022, any taxes paid abroad by individuals or corporations with tax residence in Ecuador over income obtained abroad may be used as a tax credit for the payment of income tax incurred in Ecuador. Previously this income was considered exempt. Through Regulation NAC-DGERCGC22-00000026 the Internal Revenue Service issued the rules and limits for the application of this amendment.

  1. Requirements

Taxpayers with tax residence in Ecuador who receive income abroad, which is taxable in Ecuador, may use the tax paid abroad as tax credit for the payment of income tax in Ecuador, in accordance with the following:

  1. The tax to be considered as tax credit will be the tax effectively paid or withheld abroad, provided that it may not be used as tax credit or reimbursed abroad.
  2. The tax credit may only be used when the tax paid abroad is income tax or any equivalent direct taxes.
  3. If the tax paid abroad has been paid in a currency other than US dollars, the value must be converted to US dollars according to the exchange rate reported by the Central Bank of Ecuador.
  4. The recognition and quantification of the income obtained abroad will correspond to the gross value, i.e., the value of the income before subtracting the tax paid abroad.
  5. If the foreign income is not taxed in Ecuador or is considered exempted, the tax paid abroad cannot be used as tax credit.
  6. The necessary evidence must be available to prove the payment of the tax abroad, for example, a certificate issued by the competent tax authority, duly legalized and translated into Spanish.
  1. The part of the tax paid abroad that exceeds the limit to be used as tax credit is not subject to refund, compensation or any other form of recovery and cannot be used in another tax period.
  1. Limits

The value to be used as tax credit for the payment of income tax shall be limited to the lower between:

  1. The tax effectively paid abroad; and,
  2. The value obtained by multiplying the effective income tax rate applicable to the taxpayer for that period, by the difference of the income obtained abroad minus the total expenses attributable to such income.

The effective rate is equal to the percentage obtained by dividing the total income tax incurred by the total taxable income.

  1. Double tax treaties

If the rules of a double tax treaty apply, the following must be taken into consideration:

  1. If the mechanism to avoid double taxation in the treaty is not the ordinary imputation method, the provisions of the regulation do not apply.
  2. If the mechanism to avoid double taxation in the treaty is the ordinary imputation method, the provisions of the regulation apply.
  3. If the mechanism for avoiding double taxation in the treaty is the ordinary imputation method with specific rules, the specific rules shall be applied first and then the rules of the regulation, insofar as it does not contradict the treaty.

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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The Organic Law of Personal Data Protection – Teleamazonas

Rafael Serrano, asociado de CorralRosales en Teleamazonas (vídeo subido a YouTube) más su logo

DETALLES

DATE: 15-06-2022

CORRALROSALES IN THE NEWS:

-Rafael Serrano

MEDIA:

Teleamazonas

Ecuador celebrates the first year of the entry into force of the Organic Law on Personal Data Protection. For this reason, the media Teleamazonas has asked our senior associate Rafael Serrano about its regulations.

According to Serrano, also vice-president of the Ecuadorian Data Protection Association (AEPD), “the Data Protection Law was published on May 26, 2021, and came into force at that time, only leaving two years for the sanctioning regime to come into force. Two years of latency, we could say. During this period, the aim was for both the private and public sectors to develop their capacities to adapt to the Law, since this implies a process of cultural changes”.

Our associate also adds that “the Law is created and a new entity is created, which is the Superintendence of Data Protection. The Council of Citizen Participation has approved the regulations of the contest for the appointment of the Superintendent of Personal Data. Additionally, the overseers for the above mentioned contest have already been appointed. The executive must send the corresponding list of three candidates to appoint the authority”.

The news item explains the lack of adaptation by the public and private sectors to the Data Protection Law. This will be a problem since the application of the sanctioning regime will begin in one year and both the public and private sectors will require several actions to be in compliance.

“This is a regulation to both the private sector and the public sector, which will also have to adapt and begin to prepare for the provisions of the Law. The lack of an authority means that there is a lot of uncertainty about what is going to happen,” confirms Serrano.

If you want to see the full video, click here.

Extension for the submission of financial statements

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By Resolution No. SCVS-INPAI-2022-00004075 dated May 27, 2022, the Superintendent of Companies, Securities, and Insurance resolved to extend the deadline for filing financial statements and reports for fiscal year 2021 of companies subject to its control and established a schedule for filing thereof based on the ninth digit of the company’s taxpayer number (RUC), as follows:

  1. Those companies whose ninth digit of the taxpayer number is 1, 2 and 3, must submit the information between June 1 and June 10, 2022
  2. Those companies whose ninth digit of the taxpayer number is 4, 5, 6 and 7, must submit the information between June 11 and June 20, 2022
  3. Those companies whose ninth digit of the taxpayer number is 8, 9 and 0, must submit the information between June 21 and June 30, 2022

Foto cuadrada de Milton Carrera, asociado senior de CorralRosales

Specialist in Corporate
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 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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VAT refund to exporters´ suppliers

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Regulation NAC-DGERCGC22-00000020 issued on May 11, 2022, by the Internal Revenue Service establishes the procedure for VAT refunds for: (i) direct suppliers of exporters of goods (Direct Suppliers), and (ii) direct suppliers of companies that are owned by exporters and part of the same productive chain up to the export of goods (Indirect Suppliers).
 
Right to refund: Direct and Indirect Suppliers may request a refund of VAT paid on the importation or local acquisition of goods, raw materials, services, and fixed assets, used in the manufacture and commercialization of goods taxed with 0% VAT rate, that are transferred to the exporter for export.
 
Periodicity: VAT refund applications shall be filed on a monthly basis. When the production processes are cyclical (greater than one month), the applications shall be submitted when the transfer to the exporter and the export is made.
 
Mechanisms: The return mechanisms are as follows:

  1. For VAT paid by Direct Suppliers, two mechanisms apply:
  2. Automatic provisional refund; and,
  3. Exceptional refund.
  4. For VAT paid by Indirect Suppliers, only the exceptional refund mechanism is provided for.

Automatic provisional refund: This mechanism allows Direct Suppliers to obtain an automatic provisional VAT refund before the resolution of the refund request is issued.

The request begins with the filing of the application through the Internal Revenue Service (SRI) system and, if accepted, the taxpayer must submit the requirements detailed below physically as an annex to the process. Once the annex is submitted, the SRI will issue a credit note for the provisional refund percentage.

The provisional refund percentage may vary from 50% to 100% of the amount requested and validated through the IRS system, depending on the tax risk indicators of each taxpayer.

If the amounts provisionally refunded are higher than those recognized in the final resolution, the tax administration will require the reimbursement of the amount refunded in excess. If these amounts are not refunded within the term, the tax administration will initiate a coercive process.
 
Exceptional return: This mechanism allows the definitive reimbursement of VAT without the issuance of a provisional liquidation.
 
Requirements: Before filing the VAT refund application, by either of the two mechanisms, the Direct or Indirect Supplier must comply with the following requirements:

  1. To be registered in the Taxpayers Registry (RUC) with active status.
  2. The right to the VAT reimbursements for the requested period must not be expired,
  3. Have completed the “pre-validation” process in the SRI system.
  4. Be registered in the VAT refund system for the automatic provisional refund mechanism.
  5. To have declared the VAT corresponding to the periods for which the refund will be requested.
  6. To have filed the simplified transactional annex, in the applicable cases.
  7. In the case of the automatic provisional refund, the “Agreement on provisional settlement of automatic refund” must have been signed online.

Once the return process has been initiated, the following requirements must be met:

  1. List of the sales receipts and/or import customs declarations that support the production costs and marketing expenses that support the tax credit for the VAT paid.
  2. Sales receipts of local acquisitions of fixed assets.
  3. Sales receipts rejected by the pre-validation system.
  4. List of sales receipts of goods transferred to the exporter.
  5. In the case of Direct Suppliers, a list detailing the customs export forms.
  6. In the case of Indirect Suppliers, a certification issued and signed by the exporter detailing that the export has been executed.
  7. If the taxpayer maintains accounting systems that allow the tax credit to be unequivocally differentiated, the accounting ledger of the tax credit account generated by the acquisitions made exclusively for the transfer of goods to the exporter, as well as the accounting ledgers of the accounts in which the sales are registered.
  8. Certificate issued by the exporter establishing the ownership of the company to which the Indirect Supplier makes its sales.

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 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

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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

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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

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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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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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