Tag Archives: Ecuador

The National Civil Aviation Council (CNAC) reformed the Operating Permit Regulations for the Provision of Commercial Air Transport Services through Resolution No. 003/2025, which came into effect on February 21, 2025. The reform aims to optimize the management and operation of the aviation sector in Ecuador. These changes align with the country’s current open-skies policy.

Main Changes Introduced:

• Modification of the Operating Permit (Art. 4): Introduces the homologation of the Air Operator Certificate (AOC) for foreign operators, which must be completed within a maximum period of one month. Additionally, the explicit reference to the criteria previously considered by the CNAC when granting a permit (service demand, connectivity, tourism and commercial exchange, and environmental standards) has been removed.
• Payment Requirements (Art. 8, 9, and 24): Establishes the obligation to submit a physical or digital invoice as a formal requirement along with the application.
• Administrative Deadlines (Art. 47 and 56): The processing time for certain stages of the necessary procedures to grant operating permits and to fully or partially suspend a permit has been reduced from five to four days.
• Financial Compliance with DGAC (Art. 51, 53, and 55): Airlines requesting renewals, modifications, or suspensions of their operating permits must not have outstanding debts with the DGAC.
• Certification of Foreign Operators (Art. 57): Foreign operators may not commence operations without obtaining recognition of their Air Service Operator Certificate (AOCR) from the DGAC, which must be completed within a maximum period of one month.

This reform aims to modernize and streamline administrative processes in commercial aviation, ensuring greater efficiency and transparency in sector regulation.

Xavier Rosales, Partner at CorralRosales
xrosales@corralrosales.com
+593 2 2544144

The Data Protection Authority (“DPA”) responded to Inquiry 02-2025 through pronunciation No. SPDP-2025-0031-O (“Pronunciation”). Through this Pronunciation the DPA addresses the legitimacy and legal basis applicable to the use of biometric data for employee attendance tracking.

In summary, the Pronunciation considers the following:

1. The Data Protection Law categorizes biometric data as sensitive and establishes that it can only be processed exceptionally.
2. The DPA has analyzed the existing legal bases with relation to the processing of biometric data and has pointed out the following with respect to the most relevant ones:

1. 1. The DPA has analyzed the existing legal bases with relation to the processing of biometric data and has pointed out the following with respect to the most relevant ones:
   2. Consent given by the employee cannot be considered valid in this context as the employer-employee relationship involves a power imbalance that prevents truly free consent.

1. Using biometric data for attendance tracking is deemed disproportionate, unnecessary, and excessive as the same objective can be achieved using less intrusive methods.

1. 1. The DPA recommends alternatives such as the use of magnetic cards, manual attendance logs, or computer-based registration, which can verify the IP address at login and logout.

1. Employers are required to conduct risk analysis and a data privacy impact assessment for any high-risk data processing, including those that involve the use of biometric data. This ensures that appropriate security measures are implemented to protect individuals’ rights and freedoms.

The DPA´s Pronunciation is not legally binding and does not serve as evidence in legal proceedings.

Rafael Serrano, Partner at CorralRosales
rserrano@corralrosales.com
+593 2 2544144

On February 6, 2025, the Constitutional Court of Ecuador (“Court”) issued Judgment No. 74-21-IN/25 (the “Judgment”), in which it assessed the constitutionality of various articles of the Regulation to the Arbitration and Mediation Law (“RLAM”):

Below is a summary of the most relevant aspects addressed by the Court:

Hugo García Larriva, Partner at CorralRosales
hgarcia@corralrosales.com
+593 2 2567676

Rafaella Romoleroux, Associate at CorralRosales
rromoleroux@corralrosales.com
+593 2 2544144

By Executive Decree No. 551, dated March 3, 2025, the President of the Republic of Ecuador issued the Regulations to the Law for Financial Relief and Economic Strengthening of Generations in Ecuador (hereinafter “LOPAFFE”). Below, we summarize the most relevant provisions:

1. Tax Credit for Employers

To apply the tax credit for maintaining employment as provided in LOPAFFE, the employer must have retained workers under the same salary conditions applicable in September 2024 during the months of October to December 2024.

The tax credit percentage depends on the employer’s size and the increase or decrease in their gross income in 2023 compared to 2022. Therefore, the following categories are established to define the company size:

To determine whether gross income increased or decreased, the following criteria apply:

1. Gross income is considered higher if it increased by more than 10% in 2023 compared to 2022.
2. Gross income is considered similar if it increased or decreased by up to 10% between 2023 and 2022.
3. Gross income is considered lower if it decreased by more than 10% in 2023 compared to 2022.

1. Transfer of Real Estate

LOPAFFE establishes that income derived from the occasional transfer of real estate by individuals or legal entities shall be considered exempt from income tax, provided that no more than two real estate transfers per year are made.

The regulations specify that such transfers include accessory assets (e.g., parking spaces, storage units, etc.), provided that their transfer occurs in a single transaction.

Andrea Moya, Partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

Mateo Bravo, Associate at CorralRosales
info@corralrosales.com
+593 2 2544 144

On January 24, 2025, the Ministry of Energy and Mines (“MEM”) issued Ministerial Agreement No. MEM-MEM-2025-0002-AM (the “Agreement”), declaring the electricity sector a priority to address the 2025-2026 dry season. The Agreement came into force on February 19, 2025.

Below is a summary of the measures ordered by MEM:

1. Conduct research on the integration of nuclear and geothermal energy within the country.
2. CELEC EP must begin public procurement processes for the acquiring and/or leasing generation capacity, as well as for constructing and commissioning transmission systems.
3. CELEC EP and public electricity distribution companies must take action to ensure the contribution of new power generation.
4. Petroamazonas EP must ensure the availability of fuel, including natural gas, for both current and future electricity generation needs.
5. MEM must prioritize the execution of concession contracts and the issuance of enabling titles for private-sector projects.
6. The Ministry of Finance, the Ministry of Environment, and the National Planning Secretariat are encouraged to expedite and prioritize their processes to enable additional power generation.

Carlos Torres, Senior Associate at CorralRosales
ctorres@corralrosales.com
+593 2 2544144

Mario Fernández, Associate at CorralRosales
mfernandez@corralrosales.com
+593 2 2544144

The Internal Revenue Service (“SRI”), through Resolution No. NAC-DGERCGC25-00000004 dated February 24, 2025, established the obligation for mining actors to submit the “Mining Annex” to report detailed information on their exploration, exploitation, beneficiation, local commercialization, and export of metallic and non-metallic minerals (the “Resolution”). This reform aims to strengthen control in the mining sector, prevent money laundering, and generate records that facilitate tax determination processes.

1. Obligated Parties

The following natural and legal entities, both public and private, are required to submit the Mining Annex:

• Mining concession title holders, commercialization license holders, and beneficiation plant owners;
• Those who have signed contracts for operation, assignment, mandate, and transfer of mining rights;
• Those engaged in exploration, exploitation, beneficiation, transportation, commercialization, or export of metallic and non-metallic minerals.

1. Information to be Reported

Obligated parties must declare the following information for each mining right code, as applicable:

• Identification data. Taxpayer Identification Number (“RUC”), corporate name or full name, legal representative, fiscal year, semester, type of mining right or contract, and address.
• Mining concessions. Location (province, canton, parish), workers affiliated with the Ecuadorian Social Security Institute (“IESS”), mining right code and name, hectares, date of granting and registration, validity, regime and mining phase, contract details.
• Commercialization licenses. Location, workers affiliated with IESS, mining right code and name, concessioned hectares, date of granting and registration, validity, mandate contract information, principal identification, number and value of sales.
• Beneficiation plants. Location, workers affiliated with IESS, client’s mining right identification and code, quantity and type of processed mineral, service value, and information on recovered and commercialized tailings.
• Mining operators. Contract location, workers affiliated with IESS, mining concession code and operation contract, validity.
• Mandate contracts. Location, workers affiliated with IESS, principal’s identification, number and amount of sales, agent information.
• Produced mineral. Type, quantity, unit of measure, stock of primary and secondary mineral.
• Purchases. Sales invoice number, supplier identification, quantity, unit of measure, mineral type, amount, and origin.
• Local sales and exports. Sales invoice, client, commercialization contract details, type, value, unit of measure, and quantity of mineral, contents, payable amounts for primary and secondary minerals, credit notes, customs declaration number, tariff subheading, transportation, and shipping guide.
• Investments. Mineral concession code and regime, total and pre-operational investment amount, complementary exploration, deposit development.
• Property, plant, and equipment. Details of registered assets and reported machinery usage.

1. Submission Deadlines

The Mining Annex must be submitted semiannually during September and March, according to the ninth digit of the obligated party’s RUC. Submission is required even if no information was generated during the period.

1. Consequences of Non-Compliance

Mining actors who fail to submit the Mining Annex as required by the Resolution, submit it late, or present incomplete information may face administrative penalties, including a fine of up to US$ 1,000.

Andrea Moya, Partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

Carlos Torres, Senior Associate at CorralRosales
ctorres@corralrosales.com
+593 2 2544144

By means of the third supplement to the Official Registry No. 734 from January 31, 2025, the National Court published Resolution No. 01-2025 (Resolution), which establishes a binding judicial precedent related to the payment of indemnities contained in article 51 of the Organic Disabilities Law.

According to the Resolution, to be entitled to the indemnification corresponding to disabled employees, or people who support disabled people, only the following conditions must be fulfilled:

1. That an untimely dismissal is configured.
2. That the dismissed person is disabled or oversees the support of a person with a disability.

Consequently, it is not necessary for the employee to inform the employer that they are a disabled person or that they oversee the support of a disabled person.

The Resolution, therefore, forces the employer to employ methods that allow to determine the condition of the employee whose untimely dismissal results in special indemnities that can reach important values.

Included below the link to access the full text of the Resolution.

Edmundo Ramos, Partner at CorralRosales
eramos@corralrosales.com
+593 2 2544144

María Victoria Beltrán, Senior Associate at CorralRosales
mbeltran@corralrosales.com
+593 2 2544144

The Internal Revenue Service (SRI) issued in 2024 Resolution No. NAC-DGERCGC24-00000033, establishing the conditions for the filing of the Beneficial Owners Report and Corporate Composition (REBEFICS, by its acronym in Spanish). This new report replaces the previous Shareholders and Partners Annex (Annex APS) and introduces important changes in the information to be reported, particularly regarding the identification of beneficial owners.

1. Parties required to file the REBEFICS

The REBEFICS report must be filed by the following taxpayers:

• The companies described in article 98 of the Internal Tax Regime Law.
• Branches of foreign companies.
• Permanent establishments of non-resident foreign companies.
• Trusts or similar structures incorporated abroad when the trustee, the administrator, the constituent or the beneficiaries are tax residents in Ecuador.

1. Structure of the REBEFICS

The report is divided into two segments:

a. First Segment: Corporate Composition

In this segment, the structure of the company must be reported up to the last level of the corporate composition in which individuals who are beneficial owners and/or tax residents in Ecuador are identified.

However, there are certain exceptions:

• • The non-tax resident company must be reported as the last level when the individual at the end of the chain are not tax residents in Ecuador and hold less than 10% of the share capital of the local entity.
  • When in the corporate structure there are companies, whose shares are listed on the stock exchange, only the owners of shares that are not traded or reserved for a limited group of investors shall be reported.

b. Second Segment: Beneficial Owners

This new segment seeks to identify the individuals who have effective control of the companies. The beneficial owner will be identified as the individual who meets the following criteria:

• • Individuals with direct or indirect participation: Those who own, acting alone or jointly, 10% or more of the capital, voting rights, dividends, earnings or profits of the company.

• • Individuals with control or decision-making capacity: Those who have the necessary powers to appoint or remove the majority of the directors, influence financial, operational or commercial agreements, or exercise any other type of control over the company.
  • Individuals with managerial functions: If no beneficial owners is identified according to the above criteria, the persons in charge of making strategic decisions in the company will be considered as such.

1. Information to be reported:

With respect to the beneficial owners, the following must be reported:

• • Name and surname.
  • Type and number of identification.
  • Date of birth.
  • Place of nationality and tax domicile.
  • Complete address.
  • Criteria to be considered an beneficial owner.
  • Participation percentage.

Additionally, the ultima beneficial owners must submit a letter with this information to the local reporting company.

1. Filing Deadlines

The report must be filed annually during the month of February, according to the ninth digit of the Taxpayer Identification Number (RUC) of the company. In addition, if there are changes in the corporate composition or in the information of final beneficiaries, an update must be filed until the 28th of the month following such change.

1. Consequences of non-compliance

If a company fails to file the REBEFICS report or does so with incorrect information, it will be subject to a 28% income tax rate instead of 25%; and dividends distributed to its shareholders will be subject to a withholding tax of 14.8% instead of 10%.

1. Report before the Superintendence of Companies, Securities and Insurance

The beneficial owners report to be filed before the Superintendence of Companies, Securities and Insurance has not been modified. Therefore, there is no threshold, and a complete list of all shareholders must be reported, indicating their names, surnames and marital status, if they are individuals, or the corporate name, if they are legal entities and, in all cases, their nationalities and domiciles. If the list of partners or shareholders includes other legal entities, they must also provide the list of their members, and so on until the corresponding individual is determined or identified.

In the case of direct or indirect shareholders that are companies listed on a stock exchange, a certificate attesting such fact, issued by the competent authority of the country of origin, duly notarized and apostilled, may be submitted.

Andrea Moya, Partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144

The National Agency for Health Regulation, Control and Surveillance (ARCSA), Dr. Leopoldo Izquieta Pérez, has issued the Technical Sanitary Regulation for the oversight and control of advertising and promotion of pharmaceutical drugs, processed natural products for medicinal use, homeopathic drugs or products, and medical devices.

The regulation establishes a legal framework for advertising and promotion of drugs, processed natural products for medicinal use, homeopathic products or medications, and medical devices.

Under this regulation, drug advertising will not require prior approval from the authority, but must comply with the legal framework, as well as with the conditions approved in the health registry. To verify compliance, ARCSA will carry out subsequent controls.

The following will be considered forms of advertising at points of sale:

• Packaging that includes additional quantities of the same product.
• Discount coupons or messages such as “savings” when featured directly on the product’s packaging.
• Advertising displayed through digital media, websites, or social networks, including promotional offers or marketing content.

In addition, regulation specifies that when third parties advertise drugs, they must have a contract with the registration holder. Otherwise, third parties will be liable to the authority for any non-compliance.

The regulation also stipulates that pharmaceutical establishments are strictly prohibited from offering incentives to healthcare professionals.

The technical regulation will come into force on July 23, 2025.

Technical and Sanitary Regulation for Obtaining the Health Registration, Control, and Surveillance of Biological Products for Human Use

The National Agency for Health Regulation, Control and Surveillance (ARCSA), Dr. Leopoldo Izquieta Pérez, has issued the Technical and Sanitary Regulation for Obtaining the Health Registration, Control, and Surveillance of Biological Products for Human Use.

The new technical regulation stipulates a legal framework to ensure the quality, safety, and efficacy required for granting health registration certificates for biological products. The following products will not be classified as biological products for human use:

• Allergenic products prepared based on an individualized prescription;
• Advanced therapy products of non-industrial manufacture; and,
• Products under investigation.

Within six months from the date this regulation comes into effect, those who have not obtained the release certificate for the first batch of products and are commercializing them in the country, must apply for the release certificate. After the granted period, ARCSA will initiate the corresponding administrative processes.

The technical regulation will come into force on June 21, 2025.

Technical sanitary regulation for health registration, control, and surveillance of general drugs for human use

The National Agency for Health Regulation, Control and Surveillance (ARCSA), Dr. Leopoldo Izquieta Pérez, has issued the Technical Sanitary Regulation for Health Registration, Control, and Surveillance of General Drugs for Human Use.

The new technical regulation stipulates that obtaining health registration for new drugs must adhere to the structure of the Common Technical Document (M4 CTD) of the International Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH). The document is organized into the following modules:

• Module 1: Administrative Information and Prescription Information
  Legal, technical, and administrative information.

• Module 2: Summaries
  Summaries of preclinical, clinical, and quality data.

• Module 3: Quality Information
  Data on active ingredients, manufacturing, and product controls.
• Module 4: Non-Clinical Study Reports
  Non-clinical data such as pharmacological, toxicological, and safety studies conducted.
• Module 5: Clinical Study Reports
  Clinical data obtained from studies in humans, such as clinical trial reports, efficacy and safety data, and statistical analyses.

The authority will consider “new drugs” if its active ingredient is entering the country for the first time, including new combinations, new administration routes, new pharmaceutical forms, and concentrations of active ingredients outside the dosage ranges already registered locally or internationally by an authority recognized by the World Health Organization. Generic drugs will not be considered new medicines.

In this context, applicants seeking health registration for new medicines must submit the CTD format within six months from the date the regulation is published in the Official Bulletin.

Among other significant changes, the regulation stipulates that abbreviated chemical formulas must not be used on medicine labeling.

Furthermore, Article 71 states that if medicines remain unmarketed in the country for one year, their health registration will be suspended. However, this contradicts Article 12, which stipulates that in such cases, the health registration will be canceled.

Additionally, for medicines classified as “over-the-counter,” the physical patient information leaflet may be substituted with a digital version once ARCSA establishes the website serving as a repository for approved leaflets.

The technical regulation will come into force on June 30, 2025.

Ministerial Agreement No. 00069-2024 (Regulation for the Oversight of Clinical Trials with Medicinal Products and Processed Natural Products for Human Use)

The Ministry of Public Health issued Ministerial Agreement No. 00069-2024 (Regulation for the Oversight of Clinical Trials with Medicinal Products and Processed Natural Products for Human Use).

The regulation establishes a legal framework for the authorization and oversight of clinical trials conducted in Ecuador involving medicinal and processed natural products for human use.

Clinical trials must be approved by the Human Research Ethics Committee and authorized by ARCSA. According to the regulations, the research protocols that are currently being carried out in the country will not be authorized.

Regarding informed consent processes for trial participants, it must be ensured that this also applies to the future use of their biological material and data, as appropriate.

Furthermore, the regulation stipulates that the sponsor of the trial must inform ARCSA of any serious and unexpected adverse reactions that may be related to the products under investigation and that occur within or even outside the country.

The sponsor must have a legal representative domiciled in the country.

The technical regulation will come into force on December 31, 2024.

Felipe Samaniego, Partner at CorralRosales
felipe@corralrosales.com
+593 2 2567676

Verónica Manrique, Associate at CorralRosales
veronica@corralrosales.com
+593 4 2630441

Through Circular NAC-DGECCGC25-00000002, published in Official Register 727, Fourth Supplement, on January 22, 2025, the Internal Revenue Service reminded taxpayers of the criteria to determine whether a jurisdiction is considered a tax haven.

For this purpose, taxpayers must analyze each case to determine whether at least two of the following conditions, established in the second unnumbered article following Article 4 of the Internal Tax Regime Law, are met:

1. Having an effective income tax rate lower than 60% of the rate applicable in Ecuador or where the rate is unknown.
2. Allowing the performance of economic activities without substantial development in the jurisdiction to qualify for tax benefits.
3. The absence of effective information exchange in accordance with international transparency standards, such as information on legal owners and beneficial owners, reliable accounting records, and banking information.

Therefore, even if a jurisdiction is not explicitly included in the lists issued by the Internal Revenue Service, it may still be considered a tax haven.

Andrea Moya, Partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144