Tag Archives: Ecuador

CorralRosales > Ecuador

Foreign shareholders information

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Regulation NAC-DGERCGC21-00000005 issued on January 21, 2021 by the General Director of the Internal Revenue Service establishes the transitory regime applicable in 2021 for filing information of foreign shareholders.

Prior to the enactment of the Law of Modernization of the Companies Law, on December 10, 2020, limited liability companies and corporations were required to submit to the Superintendence of Companies, in the month of January of each year, the list of foreign shareholders.

The aforementioned Modernization Law established that this information had to be filed before the Internal Revenue Service, in accordance with the terms and conditions established for such purpose.

However, Regulation NAC-DGERCGC21-00000005 issued by the Internal Revenue Service establishes that, for this one time only, companies must file this information through the web portal of the Superintendence of Companies (www.supercias.gob.ec) until January 31, 2021.

Compliance with this obligation does not exempt taxpayers from filing the Shareholders’ Annex (APS).

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Regulations issued by the superintendency for the control of market power

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Three regulations were issued by the Antitrust Authority (“SCPM”) and published in the Supplement of Official Gazette No. 374.
1. Reform of the Guidelines for Administrative Procedures:
(i) Regulates the process of meetings that precede the mandatory filing for antitrust clearance of economic concentration operations, determining that the meetings will be recorded and do not exempt the applicant from submitting the notification within 8 calendar days after the conclusion of the agreement leading to the economic concentration operation.
(ii) It establishes specific times for analysis by the National Intendancy for Control of Economic Concentrations (in the investigation stage) and in the Resolution Board (in the resolution stage), both in Phase 1 (resolution within 25 business days following the declaration of completeness of the filing) or Phase 2 processes (resolution within 60 business days following the declaration of completeness of the filing).
(iii) Determines the criteria to be considered by the National Intendancy for Control of Economic Concentrations to evaluate the innocuousness of an economic concentration operation and based on this, the determination of a resolution in Phase 1 or Phase 2.
(iv) Regulates information requests and the sanctioning procedure applicable for infractions of the Organic Law for Regulation and Control of Market Power that do not constitute anticompetitive practices (for example: breach of duty to collaborate, non-delivery of information required in the times and form determined by the Antitrust Authority, or failure to comply with corrective measures).
(v) Modifies the disposition and evaluation of corrective measures regime. The most relevant change being that the implementation of corrective measures is not mandatory every time a sanction is imposed, but that these measures will be imposed only when they are deemed necessary to restore the market.
2. Guidelines for the identification and review of regulatory barriers
Regulates the procedure to be applied by the National Competition Advocacy Office for the identification and review of regulations that impose illegitimate or disproportionate restrictions/entry barriers. This procedure, which can only be initiated by the SCPM´s own decision, has a maximum duration of 90 days from the date when the start of the analysis is resolved.
The legal review is composed of two stages: (i) a legality analysis by which the authority´s competence to issue the regulation under review, and (ii) a review of the consistency of said regulation with the existing regulation considering the hierarchy of norms.
If the reviewed regulation passes the legal analysis, the reasonableness and proportionality of the restriction it imposes will be analyzed in the second stage, weighed against the protected legal asset: the public interest. For this analysis, its suitability, necessity, and proportionality in the strict sense must be determined.
If it is determined after these analyses that the reviewed regulation is illegal or that it imposes an unreasonable barrier to entry, the Antitrust Authority will propose to the issuing Authority its elimination or modifications aimed to correct the undesirable effects.
3. Comprehensive modification of the guidelines for the filing fee for review of economic concentration operations
Prior to this modification, the fee to be paid for the analysis of economic concentration operations was determined based on the financial statements of the immediately preceding fiscal year of the entity over which the change of control that gives rise to the economic concentration operation falls. It corresponded to the highest resulting value of the following alternatives:
  • 0.25% of income tax
  • 0.005% of total revenue
  • 0.01% of the asset value
  • 0.05% of equity
With the modification (i) the calculation method is simplified with the determination of a base fee that will be defined on a yearly basis by the SCPM, based on the real costs of the analysis of economic concentration operations and (ii) solves the inconvenience for operations submitted from January to April of each year, period in which there are no audited financial statements, by expanding the possibility of calculating the fee based on the financial statements of the second immediately preceding year.
The simplification of the calculation occurs as follows:
(i) Considers a scale for applying the base fee, which is applied only based on the income of the entity that bears the change of control that gives rise to the economic concentration operation:

(ii) Determines that the rate applicable to the analysis of economic concentration operations notified for information purposes (not mandatory filing) is half the base fee, regardless of the value of the total revenue.

(iii) Allows payment via wire transfer.

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Unified basic salary and minimum wages for economic sectors 2021

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The Ministry of Labor by Ministerial Agreements: MDT-2020-249 of November 30, 2020 and MDT-2020-282 of December 22, 2020, resolved to maintain for 2021, the same values of the unified basic salary (“SBU”) and the minimum wages for economic sectors of the year 2020.

The Authority underpins its decision considering that the registered inflation at the end of 2020 was negative (-0.73%), therefore, an increase in minimum wages for 2021 is not justified.

In this regard, the SBU for 2021 is $400.00.

Current regulations provide that in no case will a SBU be set lower than that of the previous year.

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DISCLAIMER: The preceding text has been prepared for general information purposes only. CorralRosales is not responsible for any loss or damage caused as a result of having acted or stopped acting based on the information contained in this document. Any given situation requires the specific opinion and view of the firm in Quito / Guayaquil, Ecuador.

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Income tax payment for taxpayers subject to the microenterprises regime

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Regulation NAC-DGERCGC21-00000002 issued on January 6, 2021 by the General Director of the Internal Revenue Service and
published in the Official Registry 366 on January 8, 2021, approved the tax form 125 for the semi-annual payment of income tax for taxpayers subject to the microenterprises tax regime.

The tax form 125 and its instructions were published on January 14, 2021 on the IRS website at the link:
https://www.sri.gob.ec/web/guest/formularios-e-instructivos 

Taxpayers subject to the tax regime for micro enterprises must file an income tax return each semester basis, even if: (i) they are subject to file a monthly value-added tax return; or, (ii) they have not obtained income related to the regime.

During January 2021 and only for this occasion, taxpayers who belong to this regime are required to declare and pay the income tax of the first and second semester of 2020 accumulated.

In order to liquidate the tax, the taxable base is equal to the net sales from the business activity subject to this regime and the rate is equal to 2%. Any income tax withholdings may be reduced if applied during the same fiscal year and if related to the activities subject to the regime.

The tax form must be filed in the months of January and July each year depending on the ninth digit of the tax ID. Taxpayers whose ninth digit o is 1, 2 or 3 may -only for this occasion- file the tax return and pay the income tax applicable to the first and second semester of the 2020 on different days, according to the following calendar:

Taxpayers subject to the microenterprises tax regime that have also been qualified by the IRS as special taxpayers may – only for this occasion- file the tax return and make the payment of the income tax applicable to the first and second half of 2020, until January 19, 2021.

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New regulations for travelers entering Ecuador

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In accordance with the ruling issued by the Constitutional Court declaring the unconstitutionality of the executive decree that established the state of emergency throughout the national territory, the Tax and Customs Authorities have lifted the suspension of terms and conditions, as established below:
1. The Internal Revenue Service, through Regulation NAC-DGERCGC21-00000001 issued on January 3, 2021, repealed the Regulation NAC-DGERCGC20-00000081 issued on December 23, 2020, by which the terms and deadlines of all administrative processes and the statute of limitations for collecting debts were suspended until January 17, 2021.
2. The National Customs Service of Ecuador, through Regulation SENAE-SENAE-2021-0001-RE, issued on January 3, 2021, canceled the suspension of terms and deadlines of all tax administrative processes and the statute of limitations for collecting debts until January 20, 2021, ordered by Regulation SENAE-SENAE-2020-0062-RE, issued on December 22, 2020.
3. Although when this bulletin was prepared, these regulations have not been published in the Official Gazette, the authorities of the Tax and Customs Authorities have established that the terms counted in calendar days will run as of January 3 and the terms counted in working days will run as of January 4, 2021.

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Special consumptions tax (ICE) – Tariffs applicable in 2021

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The General Director of the Internal Revenue Service issued three regulations on December 23, 2020, which were published in the Second Supplement of the Official Registry 359 on December 29, 2020, which are:

1. Regulation NAC-DGERCGC19-00000078 establishes the Special Consumption Tax (ICE) specific tariffs applicable in 2021:

Compared to the tariffs applicable in 2020, the tariffs for cigarettes and soft drinks remain the same, the tariff for plastic bags increases -established by law- and the remaining tariffs are slightly reduced compared to 2020.
2. Regulation NAC-DGERCGC19-00000079 adjusted the manufacturer’s and ex-customs’ sales price value by US$4.29 per liter for applying the Ad Valorem tariff on alcoholic drinks, including beer, applicable for fiscal year 2021.
In 2020 the value was US$4.33 per liter.
3. Regulation NAC-DGERCGC19-00000080 established the percentages of increase to be applied over the ex-customs price or the total production costs to determine the referential prices of perfumes and toilet waters marketed through direct sale (the manufacturer or importer sells to final consumers directly and not through commercial establishments), for fiscal year 2021, according to the percentages detailed in the following table:

The values detailed in the table are the same as those established for the year 2020.
For calculating the tax, the total production costs of the nationally manufactured goods must include raw materials, direct labor, and indirect manufacturing expenses.
Any royalty payments calculated on the basis of volume, value or amount of sales will be considered part of the total production costs for calculating the tax. However, if the royalties do not exceed 5% of the sales, they should not be considered as part of the taxable base.

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Tariffs applicable in 2021 for calculating income tax

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Regulation NAC-DGERCGC19-00000077 issued on December 23, 2020, by the General Director of the Internal Revenue Service establishes the tariffs applicable in the fiscal year 2021 for calculating income tax.

1. Tariffs for calculating and paying income tax applicable to income received by Individuals and Undivided Inheritances in the fiscal year 2021:

2. Tariffs for calculating and paying income tax applicable to patrimonial increase derived from inheritances, legacies, donations, discoveries and any type of act or contract by which the ownership is acquired free of charge of goods and rights in the fiscal year 2021:

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Annual declaration of hazardous waste

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Within the first ten (10) days of the next year, generators of hazardous waste must submit the annual declaration of hazardous waste to prevent and reduce the generation of such waste.
1. About the Hazardous Waste Generator
Article 237 of the Organic Code of the Environment establishes that any hazardous waste generator must obtain an administrative authorization.
The waste generator will be responsible for the environmental management of the waste from its generation to its elimination and final disposal.
The generator will be jointly responsible in case of incidents that produce pollution and environmental damage.
2. About the Annual Hazardous Waste Declaration
Part of the generator of hazardous waste’s obligations is the presentation of the Annual Declaration to prevent, reduce, or minimize the generation of hazardous waste.
The Annual Declaration must be filed within the first ten days of January.
The declaration submitted will be subject to verification by the authority, which may request additional information in this matter.
3. Non-compliance
Non-compliance with the Annual Declaration may result in the cancellation of the registration as a generator of hazardous waste.
Additionally, it may be considered a minor Non-Conformity according to article 500 j) “failure to comply with the obligations established in the administrative authorizations.”
CorralRosales will be happy to assist you in the presentation of the Annual Declaration of Hazardous Waste as well as any questions you may have regarding waste management.

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Amendments to the law of companies

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On December 10, 2020, the Law of Modernization to the Law of Companies was published in the third supplement of Official Gazette 347, of which the most relevant aspects are the following:

a) Permitted activities outside the corporate purpose: Companies are allowed to occasionally or in an isolated manner enter into acts or contracts for investment, research or experimentation purposes, or as reasonable contributions of a civic or social nature.

b) Elimination of the opposition process: The process of opposition by third parties to the reduction of capital, change of name, early dissolution and change of domicile is hereby eliminated.

c) Single shareholder: The stock company and the limited liability company may subsist with a single shareholder. For its incorporation, at least two contracting parties must participate. Consequently, the cause for dissolution is hereby eliminated if a second shareholder is not incorporated within six months.

d) Corporate acts that do not require approval:  The voluntary and anticipated dissolution does not require previous authorization of the Superintendence of Companies, Securities and Insurance. Therefore, the direct inscription of the corporate act in the Mercantile Registry is allowed for the beginning of the liquidation, which will be supervised by the control entity.

Neither does the change of name, change of domicile and modification of the corporate term require prior authorization.

e) Indefinite term: Stock and limited liability companies can be set up for an indefinite term.

f) President of the board of directors and legal representative: In the companies in which the bylaws provide for the existence of a board of directors, the legal representative of the company may not be the president or representative of that body.

g) Share premium: When non-shareholders participate in a capital increase, it may be decided the new shares to be issued with a value greater than the nominal value (share premium) to be paid by the new shareholders. The issue premium will be part of the voluntary reserves and will be freely agreed upon by the investor and the company.

h) Voluntary control: Stock companies may or may not have commissaries as a control body.

i) Loss absorbency: When a company registers operational losses and has reserves, these will be automatically called to be wiped out.

j) Cause of dissolution for losses: A company will incur in a cause of dissolution for losses when these represent 60% or more of the assets and this situation is maintained for more than 5 continuous years.

k) Transfer of the registered office abroad: The transfer of the registered office of an Ecuadorian company abroad is allowed if the receiving country allows the maintenance of the legal status of the company.

l) Global assignment of assets and liabilities to liquidate a company: A company may transfer in block all its assets to third parties, shareholders or other parties in exchange for a consideration. The global transfer of assets and liabilities must be approved unanimously by the general meeting of shareholders, granted by public deed and will not require the approval of the Superintendence of Companies, Securities and Insurance.  The global assignment of assets and liabilities will have the effects of the transfer of companies as economic units as provided in the Code of Commerce.  The assigning company will cancel its registration in the Commercial Registry without any additional procedure once the total value received from the global assignment of assets and liabilities has been distributed among its shareholders.  The joint and several obligations that under the Commercial Code are attributable to the person transferring the company will be assumed by the shareholders of the extinct company in proportion to their participation in the share capital.

m) Association or Joint Purse Agreements: The regulations regarding this figure, with some modifications, are excluded from the Law of Companies and are incorporated as reforms to the Code of Commerce.

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New employment agreement modalities

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The Ministry of Labor (“MdT”) has regulated the following employment agreement modalities:
1. PRODUCTION AGREEMENT
(MDT-2020-220) 
– Sector: Productive sectors.
– Term: For the duration of the work, service, or activity to be performed; continuously or discontinuously, for up to 1 year, renewable for an additional year. If this period is exceeded, the employment relationship becomes an open-term agreement. A 90 day trial period may be agreed.
– Work day: The working days will be carried out as part-time or ordinary with a maximum of 40 hours per week that may be distributed in no more than 6 days a week. If the activities require uninterrupted services, the parties may agree on consecutive days of up to 20 successive working days.
– Termination of the agreement: It will end upon the conclusion of the term or the contracted activity. If the unilateral decision of the employer terminates the employment relationship before the agreed term, the worker will be entitle to severance.
– SUT registration: Within a period of 15 days upon its execution.
2. SPECIAL AGREEMENT FORTOURISM AND / OR CULTURAL AND CREATIVE SECTORS
(MDT-2020-221)
– Sector: Tourism, cultural and creative.
– Term: For the duration of the work, service, or activity to be performed; continuously or discontinuously, for up to 1 year, renewable for an additional year. If this period is exceeded, the employment relationship becomes an open-term agreement. A 90 day trial period may be agreed.
– Work day: The working days will be carried out as part-time or regular with a maximum of 40 hours per week that may be distributed in no more than 6 days a week. If the activities require uninterrupted services, the parties may agree on 20 to 70 consecutive days. Shifts that exceed 20 continuous days must be registered in the Ministry of Labor.
– Termination of the agreement: It will end upon the conclusion of the term or the contracted activity. If the unilateral decision of the employer terminates the employment relationship before the agreed term, the worker will be entitle to severance.
– SUT registration: Within a period of 15 days upon its execution.
3. ENTREPRENEURSHIP AGREEMENT
(MDT-2020-222)
– Sector: Employers registered in the National Registry of Entrepreneurship (RNE).
– Term: Up to 1 year, renewable up to the term of registration in the RNE. If this period is exceeded, the employment relationship becomes an open-term agreement. A 90 day trial period may be agreed.
– Work day: The working days will be carried out as part-time or regular with a maximum of 40 hours per week that may be distributed in no more than 6 days a week. If the activities require the provision of uninterrupted services, the parties may agree on consecutive days of up to 20 successive working days.
– Termination of the agreement: It will end upon the conclusion of the term. If the unilateral decision of the employer terminates the employment relationship before the agreed term, the worker will be entitle to severance.
– SUT registration: Within 15 days upon its execution along with the certificate issued by the RNE.
4. AGREEMENT FOR YOUNG PEOPLE
(MDT-2020-223) 
– Sector: All sectors.
– Agreement for young people: Work agreement aimed to  promote the employment of young people up to 26 years of age.
– Agreement for young people: under academic education: The purpose of this agreement is to promote the employment of young people up to 26 years old who are studying at any educational level. Their remuneration may not be less than US$333.32.
– Work day: The working days will be carried out as part-time or regular with a maximum of 40 hours per week. If the activities require the provision of uninterrupted services, the parties may agree on consecutive days of up to 20 successive working days.
– Term: For the duration of the work, service or activity to be carried out; continuously or discontinuously, for up to 1 year, renewable for an additional year, or until the worker reaches 26 years of age. If they exceed this period, the employment relationship becomes an open-term agreement. A 90 day trial may be agreed.
– Termination of the agreement: It will end upon the conclusion of the term or the contracted activity. If the unilateral decision of the employer terminates the employment relationship before the agreed term, the worker will be entitle to severance.
– SUT registration: Within a period of 15 days upon its execution.

 

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