Tag Archives: Quito

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

On January 22, 2025, the plenary session of the National Court of Justice issued Resolution No. 02-2025, which establishes a mandatory precedent regarding the calculation of severance payments for unjustified dismissal.

Key points of the precedent:

The remuneration applicable to calculate severance payments must always be the last one received, provided that it is more favorable to the worker. This means that, when determining the severance payment:

• The last best salary received will be taken into account. • Either the salary from the previous month or from the same month in which the dismissal occurred may be considered.

This criterion aims to ensure the protection of the worker, guaranteeing that the most advantageous salary base is used when calculating the severance. The resolution does not specify whether only the value corresponding to the best month’s salary or the components specific to the settlement will be considered for its application.

Implications for employers and employees:

• Employers will need to adjust their decisions on this matter based on this mandatory precedent. • Employees may seek an unjustified dismissal at the time they deem most favorable to maximize their severance payment.

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

Mateo Zavala, Associate at CorralRosales
mzavala@corralrosales.com
+593 2 2544144

Through Resolution No. JPRM-2024-029-M (“Resolution“), issued on December 31, 2024, the Monetary Policy and Regulatory Board (“JPRM“) reformed the “Regulation governing payment methods, systems and fintech activities in Ecuador” contained in Resolution No. JPRM-2024-018-M.

The Resolution aims to guide the financial environment towards the interoperability of payment systems for real-time electronic money transfers (“Interoperability“).

Below, we highlight the key aspects that have been amended and introduced by the Resolution:

I. Concepts

The Resolution defines the following:

1. 1. 1. Payment Network Administrators: These entities pertain to auxiliary payment system operators qualified to provide clearing services, including the processing of payment transfers. This includes the Central Bank of Ecuador, which oversees the payment network facilitating money transfers among its members.

1. 1. 1. QR Code: a type of two-dimensional information encoding with specific and standardized fields defined by the Central Bank to facilitate payment transactions.

1. 1. 1. Distributed Directories: a data structure and operational model managed by Payment Networks, designed to store and manage keys along with all relevant information associated with customers.

1. 1. 1. Payment Network Members: these include private banks; public banks engaged in intermediation and receiving funds from the general public; credit unions; mutual savings and loan associations for housing; central funds; neobanks; Specialized Electronic Deposit and Payment Companies (SEDPES); participants in the Auxiliary Payment System duly authorized to provide “electronic payment processing services” on behalf of one or more financial entities; and the Central Bank of Ecuador.

1. 1. 1. Key: a unique and public identifier that enables the client to link their payment credentials with personal information, such as their identification number, mobile phone number, or personal email address, to make or receive payments.

1. 1. 1. Payment Networks: technological infrastructure with procedures and services designed to channel electronic money transfers for real-time payments.

1. 1. 1. Central Key Management Service: an operational model managed by the Central Bank, designed to manage the necessary customer information, facilitating payment interoperability through keys.

1. 1. 1. Payment Integration System: a technological infrastructure managed by the Central Bank, comprising procedures and services to manage key operations, process and clear inter-network payment transfers, and transmit the required information for settlement.

The concept of clearing is also redefined, establishing it as the process performed to determine the net position, whether favorable or unfavorable, of the Payment Network Members, which must be settled through adjustments to their accounts at the Central Bank.

II. Principles and Use Cases for Interoperability

Interoperability will be governed by principles such as accessibility, high service standards, scalability, neutrality, non-discrimination and fair access, as well as transparency.

The use cases to be considered for the implementation of Interoperability include: (i) Person-to-Merchant, (ii) Merchant-to-Person, (iii) Person-to-Person, (iv) Person-to-Public Institution; and (v) Public Institution-to-Person.

III. Obligations Related to Interoperability

The Payment Network Administrators and their Members are required to ensure Interoperability between their platforms and with existing infrastructures within the payment system to process real-time payments. To achieve this, Payment Networks must be connected to the Payment Integration System managed by the Central Bank.

Entities such as private banks, public banks, credit unions, mutual savings and loan associations for housing, Specialized Electronic Deposit and Payment Companies (SEDPES), and participants of the Auxiliary Payment System authorized to provide electronic payment services, along with others conducting electronic money transfers for payments, are obligated to guarantee interoperability and offer their clients payment services using keys. These entities must necessarily connect to any Payment Network to fulfill this requirement.

The members of Payment Networks have several obligations to ensure the system’s operationality and security. They must implement robust controls to prevent fraud and protect personal data, guarantee the availability of services 24 hours a day, 365 days a year, and inform clients about fees, transfer times, and service conditions before each transaction. Additionally, they must establish effective mechanisms to resolve complaints, errors, and claims, thereby protecting the rights of users. Furthermore, they have specific obligations related to the management and administration of keys.

Payment Network Administrators are responsible for processing intra-network operations with adequate security standards, validating keys and credentials, and ensuring the technological integration of their participants. They must also comply strictly with the operational and security regulations issued by the Central Bank, ensuring the reliability and efficiency of the system. In its role as the administrator of the Instant Payment Network, the Central Bank is also bound to fulfill these obligations.

Each payment network must maintain a Distributed Directory to validate access rules and execute key resolution. For this purpose, Payment Network Administrators must adhere to the regulations issued by the Central Bank.

IV. Access Technologies for Initiating Payments

Keys and QR codes are mechanisms and technologies used to initiate payments.

With respect to keys, the members of Payment Networks must establish processes for registration, modification, suspension, cancellation, portability, and ensure their updating in their Distributed Directories. Similarly, QR codes must comply with the technical standard issued by the Central Bank.

Transactions conducted using these technologies may not exceed the amount of one statutory wage.

V. Payment Integration System

The Payment Integration System will be created and managed by the Central Bank to facilitate real-time electronic money transfers. The Payment Integration System will process the various payments and key operations required by all participants interconnected with the Central Bank.

VI. Compensation and Settlement

Inter-network operations shall be cleared by the Central Bank, while intra-network operations shall be cleared by each respective Payment Network.

The settlement of both types of operations shall take place in the account that each member must maintain with the Central Bank.

VII. Information, Monitoring and Supervision

The members of the Payment Network and its Administrators must submit the information required by the Central Bank.

Actions that limit interoperability will be investigated and sanctioned by the Central Bank in accordance with the provisions of the Monetary and Financial Code.

VII. Implementation

Within ninety (90) days from the issuance of the Resolution, the Central Bank must determine compliance dates, integration criteria, and timelines for implementing the standards introduced by the Resolution.

The Payment Integration System must be developed by the Central Bank within eighteen (18) months. Upon its implementation, payment network administrators, participants, and members of payment networks subject to reserve requirements must, within the timelines established in the Resolution, make the necessary technological and operational adjustments to ensure interoperability and connect to the Payment Integration System.

The Central Bank must issue the “Regulation on QR Code Standards,” and all participants using QR codes for payments must adapt and comply with this regulation within six (6) months of its issuance.

Juan Fernando Riera, Associate at CorralRosales
jriera@corralrosales.com
+593 2 2544144

Below, we summarize regulations applicable to Outflow Tax (ISD):

1. Circular NAC-DGECCGC24-00000010 issued by the Internal Revenue Service

The reform of Ecuador’s National Tariff due to the implementation of the VII Amendment to the Harmonized System affected several tariff subheadings included in Resolution CPT-03-2012 and its subsequent reforms. This resolution establishes the subheadings which importation generated ISD tax credit for income tax payment purposes until December 31, 2024.

Through Circular NAC-DGECCGC24-00000010, the Internal Revenue Service communicated that the tax credit benefit remains valid until December 31, 2024, for goods affected by the VII Amendment. To identify the affected subheadings, the Interinstitutional Technical Committee issued report CPT-CTI-2024-001-I, which detailed the alignment of subheadings from the VI to the VII Amendment.

Therefore, the ISD paid on the importation of goods listed in Resolution CPT-03-2012 and its reforms retains its tax credit status, as per the alignment performed by the Interinstitutional Technical Committee. This information can be consulted at the following link:  CIRCULAR NAC-DGECCGC24-00000010

1. Ministerial Agreement 047 Issued by the Ministry of Economy and Finance

In accordance with Executive Decree 468, the Ministry of Economy and Finance (MEF) established the tariff subheadings subject to reduced ISD rates starting January 1, 2025.

The ISD rate will be 0% for January, February, and March 2025.  Beginning April 2025, certain subheadings will be subject to a 0% rate (pharmaceutical sector), while others will be subject to a 2.5% rate (other sectors). The detailed list can be consulted at the following link: ISD – Registro Oficial-9-70

Tariff subheadings not listed in the Ministerial Agreement will be subject to the 5% ISD rate.

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

Through Executive Decree No. 487 issued on December 19, 2024, the President of the Republic of Ecuador amended the Regulations for the Application of the Internal Tax Regime Law and revised the rules governing the Single Income Tax for Sports Betting Operators. Below is a summary of the key points:

1. License to Operate

Both resident and non-resident operators in Ecuador must obtain a License to Operate Sports Betting (LOPD). This license will be granted by the Ministry of Sports, which must issue the regulations and conditions for obtaining it within three months.

The LOPD will be valid for five years. However, operators must pay an annual fee equivalent to 655 unified basic salaries (USD 307,850 for the year 2025).

1. Tax Modifications

• All entities engaging in sports betting activities will be subject to this tax, even if they are established as non-profit organizations, with the exception of the Guayaquil Charity Board (Junta de Beneficencia de Guayaquil) and the Fe y Alegría Foundation.

• The definition of “prize” has been modified for the purposes of calculating the withholding tax applicable to players and the taxable base for the operator’s tax. A player will be considered to have received a prize if, within a monthly period, the amount received from correct predictions exceeds the amount wagered.

• Bonuses freely available to the player will also be included in the amount received from correct predictions.

• The invoice and monthly withholding certificate for each player must be issued by the fifth business day of the following month.

• Operators have three months to adjust their systems and implement the necessary mechanisms to comply with these obligations.

Andrea Moya, Socia en CorralRosales
amoya@corralrosales.com
+593 2 2544144