Tag Archives: Ecuador

CorralRosales > Ecuador

Deferral of tax obligations

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By Executive Decree 1030 issued on May 4, 2020, the President of the Republic ordered the following:

  1. The deferral of tax obligations established by Executive Decree 1021 shall be applicable to all small and medium-sized companies, except for those taxpayers whose tax ID (RUC), as of April 1, 2020, had registered any of the following as their main economic activity:
  • Ancillary activities of financial services activities; and/or
  • Financial services activities, except insurance and pension fund activities.

These taxpayers are able to pay the corporate income tax for the fiscal year 2019 and the value added tax (VAT) to be paid in April, May and June 2020 on a deferred basis. Payments will be made in 6 installments during the year 2020 in the following percentages: in each of the first two months, the taxpayers are required to pay 10% of the total value; and, in each of the remaining four months, taxpayers are required to pay 20% of the total value.

  1. The taxpayers subject to the Simplified Tax System (RISE) are able to pay the instalments of March, April and May in accordance with the following calendar:
RISE instalment to
be paid in:

Month of payment

March 2020 June 2020 April 2020 July 2020 May 2020 August 2020

Payments must be made according to the 9th digit of the tax ID (RUC) according to the following schedule:

Ninth digit of the RUC or
identity card

Expiration date

1 10 of the applicable month 2 12 of the applicable month 3 14 of the applicable month 4 16 of the applicable month 5 18 of the applicable month 6 20 of the applicable month 7 22 of the applicable month 8 24 of the applicable month 9 26 of the applicable month 0 28 of the applicable month
  1. The annual motor vehicle ownership tax, which would have been due in the months of March and April, may be paid according to the following schedule:
Expiration in the month of:

Payment of the tax:

March 2020 Until June 2020 April 2020 Until July 2020
  1. Those taxpayers who lay-off employees without cause during the state of emergency are not able to apply the benefits established by Executive Decrees 1021 and 1030.

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DISCLAIMER: The previous text has been prepared for informational purposes. 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 additional determined situation requires the specific opinion and concept of the firm.

CORRALROSALES

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

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DETAILS

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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DETAILS

DATE: 28-04-2020

CORRALROSALES IN THE NEWS: 

-Ana Samudio

MEDIA: Gestión Digital

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

Income tax – Withholding percentages

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Regulation NAC-DGERCGC20-00000030 issued by the Internal Revenue Service on April 22, 2020, amended Regulation NAC-DGERCGC14-00787 which establishes the income tax withholding percentages.

The following income tax withholding percentages have been modified:

Concept

Previous withholding percentage

Current withholding percentage

Real estate construction activities and similar activities. 1% 1,75% Insurance and reinsurance services provided by companies legally incorporated in the country and by branchesof foreign entities domiciled in Ecuador. The withholding must be applied over 10% of the invoiced or scheduled premiums. 1% 1,75% Commercial lease provided by companies legally established in Ecuador. The withholding must be applied over the lease payments and the purchase option. 1% 1,75% Services provided by media and advertising agencies. 1% 1,75%

 


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DISCLAIMER: The previous text has been prepared for informational purposes. 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 additional determined situation requires the specific opinion and concept of the firm.

CORRALROSALES

Implementation of an expedited merger control procedure by the Superintendence of Market Power Control

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On April 20, 2020, the Antitrust Authority issued an abbreviated analysis and control procedure applicable to certain combination transactions.

This expedited procedure, also known as fast-track, is common in most jurisdictions that have an antitrust merger clearance process and generally apply to transactions that either (i) do not imply any change in the market structure – such as a change of control of a local business in favor of a foreign acquirer with no prior participation in the Ecuadorian market-; or, (ii) in which,  a priori, the market power resulting from the operation is not significant enough to allow unilateral anticompetitive/abusive behaviors by the combined operator.

The analysis and resolution within a fast-track process must be completed within 25 business days. This term contrasts with the regular process that usually lasts between 4 and 14 months (when remedies apply).

The fast-track process is applicable to the following 6 scenarios:

  1. When the change of control of the business occurs in favor of a foreign economic operator with no prior economic activity in Ecuador.
  2. In horizontal combinations (transactions between competitors) where the joint market share of the economic operators involved in the transaction and of their affiliate entities -when applicable- is less than 30% in each relevant market affected by the transaction.
  3. In horizontal combinations that occur in markets where the Herfindahl-Hirschman index (HHI) before the combination is less than 2,000 points and, as a result of the transaction, the HHI index variation is less than 250 points.
  4. In vertical combinations (transactions between operators in the same production/marketing chain), where the joint market share of the economic operators involved in the transaction and of their affiliate entities -when applicable- is less than 30% in each relevant market affected by the transaction.
  5. In vertical combinations where the Herfindahl-Hirschman index (HHI) of each of the vertically integrated markets post-merger is less than 2,000 points.
  6. In transactions involving one or more economic operators that are at risk of bankruptcy, duly supported and qualified by the Antitrust Authority.

The implementation of the fast-track processis highly positive to facilitate new business opportunities, particularly involving foreign investors. In addition, it contributes to the timely application of the competition regulation in the scope of merger control during the state of emergency deriving from Covid-19.

 

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DISCLAIMER: The previous text has been prepared for informational purposes. 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 additional determined situation requires the specific opinion and concept of the firm.

CORRALROSALES

Negotiable commercial invoices in Ecuador

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The most frequent criticisms to the Commercial Code (C. Com.) might be over-regulation, lack of dissemination and discussion. Composed of 1348 articles, 3 general provisions, 1 transitional provision, 5 derogatory provisions and 1 final provision, the Commercial Code (C. Com.) entered into force on May 29, 2019. This was the awakening of a new set of norms that regulate a significant portion of the commercial activity in Ecuador. However, the legislator, irresponsibly, failed to grant a transition period prior to its entry into force, as done with other regulatory bodies. This, in one way or another, prevented traders and businessmen from having a reasonable period of time to inform themselves adequately about the new contract types and to anticipate the impact that it could generate in the development of their business.

Negotiable commercial invoices (FCN, for their acronym in Spanish) are not new. Article 201 of the 1960 Commercial Code, as subsequently amended, provided that: “Commercial invoices containing an unconditional payment order, acceptance of which is signed by the purchaser of goods or his delegate, with the express statement that these have been received satisfactorily, shall be called “negotiable commercial invoices” and shall have the nature and character of securities.”

But, in market practice, few traders issued FCNs, possibly out of ignorance, because they considered them to be too stringent (in terms of their issuance requirements) or impractical.

In recent years, some traders have used the issuance of FCNs as a mechanism to obtain liquidity, including for trading through the country’s stock exchanges. Reports from the Quito Stock Exchange show that FCNs have acquired importance in the local market. According to the information of said institution, in 2018, US$271,777,234 FCNs were traded, as of June 2019 this amounted to US$184,297,068 and in January 2020 US$115,066.25.

Currently, FCNs are (i) sales vouchers, (ii) negotiable and executive securities “when they contain an unconditional payment order, acceptance of which is signed by the purchaser of goods, interests or services or his delegate, with the express statement that these have been received satisfactorily, or that have been tacitly accepted” (Art. 203 C. Com.)

FCNs can be issued in physical, electronic or dematerialized form. If in physical form, 3 copies must be produced, namely, the original for the buyer or purchaser, and two copies for the issuer. Only the first copy is negotiable; the others contain the phrase “NON-NEGOTIABLE”.

For electronic issuance, the issuer shall mandatorily “send or make the electronic voucher available to buyers or purchasers under the conditions, in the timing and by the means established by the country’s internal tax administration entity. Not sending these vouchers, their unavailability or inaccessibility are equivalent to withholding them.” (Art. 204 C. Com.)  The dematerialization of FCNs must be done in accordance with the provisions and regulations of the securities market. This implies a book entry in a system for the registration or booking of the securities. In other words, there is no cardboard representation of the document, as it will be supported by electronic accounting records.

Please note that physical and electronic invoices are traded by endorsement, while for dematerialized invoices the transfer is perfected with registration in the respective bookkeeping system and that, in addition to the requirements determined in the tax regulations, the FCNs must compulsorily contain the following:

  • Be identified as “NEGOTIABLE COMMERCIAL INVOICE”
  • The payment date and place. If payment by installments is established, the number of installments, the due date and the amount to be paid for each of them, as well as the unpaid balance, shall be indicated. The term of payment may not exceed 360 days from the issue of the invoice. (short term security)
  • The unconditional order to pay a certain amount of money
  • The clear specification, in figures and in writing, of the amount to be paid and the currency in which it will be done
  • The express statement by the buyer or purchaser to receive the goods, interests or services to his or her full satisfaction
  • The physical or electronic signature of the issuer of the invoice or of the respective delegates
  • The physical or electronic signature of the buyer or purchaser of the goods, interests or service or their respective delegates
  • The signature of the acceptor contained in the invoice or attached document, except in the case of tacit acceptance, which we will review later.
  • In the case of a physical commercial invoice, information on the endorsements with the identification requirements will be incorporated on the back of the document or attachment

With regard to the acceptance, the Commercial Code will facilitate claims, providing that the buyer-purchaser, his delegate or agent must expressly accept the contents in writing, either in the same document or in a physical or electronic attachment, which must include the date of receipt. In accordance with the provisions of the previous Code, the FCNs will be considered to have been tacitly accepted if, within 8 days of the date of receipt, no claim has been made regarding its contents.

What is important and new is that the Commercial Code recognizes 3 complaint procedures, which must be proven by whoever intends to benefit from this:

  1. The possibility of returning the invoice without acceptance, with the text “cancelled” or with the acceptance tested.
  2. Expressly claim its contents by letter, together with the return of the invoice without acceptance or with the acceptance tested or with the request for the issue of a credit note.
  3. In case of an electronic or dematerialized invoice, the claim will be made through the request for issuance of a credit note or cancellation of the invoice.

On the other hand, in the case of a legal collection action for non-payment events, a claim must be filed in executive proceedings provided that the following requirements are met:

  1. The invoice has not been returned or claimed by any of the mechanisms referred to above.
  2. Its payment is currently due, and the executive collection action has not prescribed.
  3. The obligation is clear, pure, determined and liquid.

In conclusion, the contribution of the Code of Commerce is valuable regarding the regulations that govern FCNs, as it benefits commercial practice and inserts dynamism into businesses. This has become an attractive business strategy to obtain greater liquidity and to have highly liquid securities.

 

Ramón Paz y Miño
Senior Associate at CorralRosales
rpazymino@corralrosales.com

State of emergency – tax measures (April 1st)

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Regulation NAC-DGERCGC20-000000025 issued by the Internal Revenue Service on April 1, 2020 regulates the application of Executive Decree 1021 by which regulated certain tax issues with regard to the state of emergency.

1. New deadline for filing the income tax return

Taxpayers, except non-profit and government entities, may file the corporate income tax return for the fiscal year 2019, without generating fines or interest, until the dates described in the following chart:

Tax ID 9th digit

Due date

1 and 2 April 15, 2020 3 and 4 April 17, 2020 5 and 6 April 21, 2020 7 April 23, 2020 8 and 9 April 29, 2020 0 April 30, 2020

Non-profit and government entities may file the corporate income tax return for the fiscal year 2019, without generating fines or interest, until the dates described in the following chart:

Tax ID 9th digit

Due date

1 and 2 May 4, 2020 3 and 4 May 5, 2020 5 and 6 May 6, 2020 7 and 8 May 7, 2020 9 and 0 May 8, 2020

2. Taxpayers that are able to defer the payment of taxes:

The following taxpayers are able to defer the payment of corporate income tax of the fiscal year 2019 and, value added tax (VAT) to be declared in April, May and June 2020:

  • Micro-enterprises understood as those that obtained gross revenues of up to US$300,000.00 during fiscal year 2019.
  • Taxpayers that, before March 27, 2020, have registered the province of Galapagos in their Tax ID (RUC).
  • Taxpayers that are regular exporters of goods, or that 50% of their income derives from the export of goods; or,
  • Taxpayers that, before March 27, 2020, have registered one of the following as their main economic activity in their Tax ID:
    • The operation of airlines,
    • The provision of accommodation and/or food services; or,
    • Activities of the agricultural sector.

 

3. Deadlines for paying the corporate income tax:

Taxpayers described in paragraph 2 are able to pay the corporate income tax of the fiscal year 2019 in a single installment, according to the general rules of the Income Tax Regime Law and its regulations, or in six installments, in accordance with the following percentages:

Month for filing
the tax return  Payment
installments 

Payment
percentage

April, 2020 April, 2020 10% April, 2020 May, 2020 10% April, 2020 June, 2020 20% April, 2020 July, 2020 20% April, 2020 August, 2020 20% April, 2020 September, 2020 20%

The first installment shall be paid on the date the return is due in accordance with the schedule set forth in paragraph 1. The remaining 5 installments shall be made through the Multiple Payment Form in accordance with the following schedule:

Tax ID 9th digit:

Due date:

1 10th of each month 2 12th of each month 3 14th of each month 4 16th of each month 5 18th of each month 6 20th of each month 7 22th of each month 8 24th of each month 9 26th of each month 0 28th of each month

If the taxpayer doesn’t pay the tax within the deadlines described before, it would be subject to pay the applicable interests and fines.

 

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DISCLAIMER: The previous text has been prepared for informational purposes. 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 additional determined situation requires the specific opinion and concept of the firm.

CORRALROSALES

Measures to mitigate the effects of COVID-19 on labor issues

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The arrival of COVID-19, cataloged as a global pandemic, and the measures that Governments have adopted to mitigate its effects, have brought a deep economic crisis that affects directly both employers and workers.

According to ILO’s (International Labor Organization) official data, it is estimated that COVID-19 could cause the loss of 25 million jobs worldwide.

In Ecuador, the President of the Republic declared a state of emergency and suspended on-site labor activities from March 17th to April 12th. This period may be extended according to the development of the pandemic.

Those entities that perform activities within health, safety, airports, financial, food, pharmacies and exporting sectors and its supply chain are authorized by the Government to operate.

Entities belonging to other sectors are able to operate if services they provide and the activities carried out by their workers can be performed from home through “emergency telework”, as the authority has called it.

Some emergency measures have been established with the purpose of protecting employment and guaranteeing the health of workers, but also with the objective of preserving the financial stability of the employer. These measures are described below:

1. Suspension of work maintaining payment rights

For those entities that are required to suspend all or part of their activities as a consequence of the Government’s measures, the following should be considered:

  • Employer must pay its workers during the period on which activities are suspended.
  • Employer and its workers may agree on a payment schedule of the salaries accrued during the period on which activities are suspended.
  • Employer has the right to recover the period on which activities were suspended, increasing the working schedule up to 12 hours a week and 8 hours on Saturdays.
  • If worker does not fulfill with recovery time, employer may deduct from any future salary payments what employee had received during the suspension period.

In order to introduce suspension of work, employer must fulfill the online process implemented by the Ministry of Labor.

2. Reduction of working hours (work schedule)

Employers may reduce the working hours temporarily or permanently and reduce proportionally worker´s remuneration – including teleworkers – under the following scenarios:

  • With worker’s consent

According to article 82 of the Labor Code, it is possible to agree with worker to permanently or temporarily reduce their working hours and their remuneration proportionally. For its implementation, it will be necessary to enter into an addendum to the employment agreement and file such addendum with the Ministry of Labor and the Ecuadorian Institute of Social Security (“IESS”).

  • Without worker’s consent

According to article 47.1. of the Labor Code and Accord MDT-2020-077 issued by the Ministry of Labor, the latter may authorize the reduction of working hours. Such reduction will be mandatory for workers, under the following conditions:

  1. Working hours may not be reduced to less than 30 hours per week.
  2. The measure can be applied for up to 6 months, renewable for an additional 6 months.
  3. Employer contribution to IESS must be paid based on the full remuneration corresponding to 8 hours of work per day.
  4. In the event that during the reduction of the working hours the labor relationship is terminated without cause, severance shall be calculated based on the last monthly remuneration received by worker before the working hours reduction.
  5. If the company generates profits in the fiscal year in which the measure was applied, it will not be entitled to distributing dividends without first paying workers the balance they stopped receiving as a result of the reduction in working hours.

In order to introduce suspension of work, employer must fulfill the online process implemented by the Ministry of Labor.

3. Emergency vacation planning

During the health emergency, employer may require its workers to take any pending paid vacation time. Employer may also agree with its workers for them to take advance vacation time.

4. Work leave with or without payment

Additionally, employers may resort to the following alternatives in order to maintain employment and at the same time preserve the financial status of the company: 

  • Leave without payment

With worker’s consent, a “leave without payment” may be agreed. In order to apply such leave, an agreement must be entered between the parties. Under this alternative, the employment relationship does not end, worker holds his/her seniority in the company.

An exit notice for “leave without payment” must be registered in IESS online system. Therefore,  worker will not be covered by Social Security during the leave period.

  •  Leave with partial payment

With worker’s consent, a “leave with partial payment” may be agreed. In order to apply such leave, an agreement must be entered between the parties. Under this alternative, employer recognizes the worker a percentage of his/her remuneration during the leave period.

Contribution to the IESS will be made on the amount actually paid to the worker, but it may not be less than 50% of the statutory minimum wage (currently US$400.00).

5. Modification of working conditions

Employer and workers may agree on work alternatives established in the existing regulations, due to conditions arising from the COVID-19 pandemic, such as mobility restrictions, preventing infection risks and employer’s financial situation. All these must not imply a waiver to workers’ rights. For example, parties could modify the type of agreement or take health and safety measures such as workers’ remaining in suitable places inside the employer’s facilities, among many others.

6. Termination of the employment relationship

If it is not possible for employer to maintain its workers or part of them, company will be able to unilaterally terminate the employment contracts by paying the corresponding severance determined by law. Government has not established the intangibility of employment contracts due to the pandemic, except for those specific cases already provided by law.

Some lawyers have expressed their opinion that labor contracts may be unilaterally terminated without severance payments under these circumstances due to force majeure (restrictions imposed by the government). We do not agree with these criteria, due to the social nature of labor law, pro operario principle, and consequently, the possible risks employer would assume now and in the future.

Finally, it shall also be considered that workers who lose their jobs due to causes beyond their control and who meet the conditions established by  IESS – 24 accumulated monthly contributions and at least 6 continuous contributions immediately prior to termination – will be able to access “unemployment insurance” for a maximum period of 5 months, once 60 days have elapsed without employment.

 

Marta Villagómez
Senior Associate at CorralRosales
mvillagomez@corralrosales.co

Reforms to Ministry of Labor guidelines on the application of reduction, modification or emergency suspension of work activities

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On March 28, the Ministry of Labor amended the Ministerial Agreement MDT-2020-077, regarding guidelines on the application of reduction, modification or emergency suspension of work activities during the sanitary emergency.

Working-day schedule modification

Employer that modifies working schedule due to the sanitary emergency, must allow their workers to rest for 2 consecutive days.

Suspension of work activities 

  • Employer is entitled to recover the period on which activities were suspended, increasing the working schedule up to 12 hours during the week and 8 hours on Saturdays.
  • Employer and workers may agree on a wage payment schedule during the period on which activities are suspended.

Emergency vacation planning

During the health emergency, employer may require its workers to take any vacations days they have available. Employer may also agree with their workers to take early vacations, to do so, the corresponding vacation request must be submitted.

Working conditions modifications 

Employer and workers may agree on work alternatives established in the existing regulations, due to conditions arising from the Covid-19 pandemic, such as the mobilization impossibility, prevention infection risks and employer´s financial status. All these must not imply a waiver to workers’ rights.

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DISCLAIMER: The previous text has been prepared for informational purposes. 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 additional determined situation requires the specific opinion and concept of the firm.

CORRALROSALES

State of emergency – tax measures

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By Executive Decree 1021 issued on March 27, 2020, the President of Ecuador, adopted the following tax measures within the state of emergency:

1. Income tax withholding:

The following entities will be required to withhold and pay on a monthly basis income tax over their total taxable income obtained in each month:

Entity activity 

Monthly income tax withholding rate (%)

Financial institutions under the supervision of the Superintendency of Banks and entities that provide mobile telephone services. 1,75% Entities that have entered into contracts with the Goverment for the exploration and exploitation of hydrocarbons under any modality or, contracts for specific works and services under the Hydrocarbons Law or, complementary petroleum services as well as transportation of crude oil. 1,5%

The withholding tax receipt must be issued in the name of the withholding agent and the value withheld will be consider as tax credit for paying the withholding agent’s income tax.

2. Tax payment deadlines:

For this time only, the taxpayers who at this date are considered as:

  • Micro-enterprises;
  • Those domiciled in Galapagos Islands;
  • Those who are regular exporters of goods, or that 50% of their income derived from the export of goods; or,
  • Those whose economic activity is:
    1. The operation of airlines,
    2. The tourism sector, exclusively those that provide accommodation and/or food services; or,
    3. The agricultural sector.

Will be able to pay the corporate income tax for the fiscal year 2019 and the value added tax (VAT) to be paid in April, May and June 2020 as follows:

  1. Payments will be made in 6 installments during the year 2020 in the following percentages: in each of the first two months, the taxpayers are required to pay 10% of the total value; and, in each of the remaining four months, taxpayers are required to pay 20% of the total value.
  2. These payments will be made according to the ninth digit of Tax ID as follows:
Ninth Digit of Tax ID 

Payment Date

1 10th of each month 2 12th of each month 3 14th of each month 4 16th of each month 5 18th of each month 6 20th of each month 7 22nd of each month 8 24th of each month 9 26th of each month 0 28th of each month

Taxpayers domiciled in the province of Galapagos are able to make the payment until the 28th of each month..

If a payment deadline overlaps with a mandatory rest day or holiday, the deadline shall be the next working day unless that day falls on the following month, in which case the payment deadline shall be anticipated to the last working day of the month.

If the taxpayer makes the payment after the deadlines have expired, he must pay the respective interest and fines in addition to the tax

  1. The payment of 2019 corporate income tax for the entities described above, will be made from April to September 2020 in the percentages and terms indicated in numbers 1 and 2 of this document.
  2. The payment of VAT for the months of April, May and June 2020 will be made in the percentages and terms described above, in the following months:
VAT to be paid in the month of

Months of Payment:

April 2020 From April to September, 2020 May 2020 From May to October, 2020 June 2020 From June to November, 2020
  1. Taxpayers subject to the Micro-enterprise Taxation Regime shall file their VAT return on a semi-annual basis. These taxpayers will not be subject to the exception regime detailed above.

 

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DISCLAIMER: The previous text has been prepared for informational purposes. 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 additional determined situation requires the specific opinion and concept of the firm.

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