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Investment & Legal Framework
- Companies require recognized international performance
- Competitive economic offer
- Quality of materials, equipment and service
- Percentage of national aggregated value
If the offer includes financing:
- Firm financing plan with an internationally respected
and established bank
- Financing percentage over the investment value
- Credit terms
- Grace period to pay capital (at least equal to the
execution time of the project)
- Interest rate (all in cost)
Contracting modes:
- Direct financing Government to Government
- International Bidding with Financing
- Strategic Alliances
- Service Contracts
- Auction - Bidding
DOING BUSINESS IN ECUADOR
THE TAX SYSTEM
Principal taxes
Taxes are levied in Ecuador both at a national level
by the central government and at a local level by
municipal authorities. The principal national taxes
are corporate income tax, personal income tax,
overseas payments tax, value added tax - VAT and
excise tax (ICE). Other taxes include business fees,
inheritance and gift tax, municipal tax on total assets
and municipal property taxes.
Basic legislation and tax administration
The Tax Code (Código Tributario) is the general law
that prevails over other laws with respect to taxation.
The Internal Tax Regime Law (Ley Orgánica de
Régimen Tributario Interno) covers income tax,
overseas payments tax, value added tax and excise
tax. This law came into effect on 1 January 1990
and since then several regulations and reforms have
been added. Special tax provisions are included
in other laws such as the Tax Equity Law (Ley de
Equidad Tributaria), Hydrocarbons Law (Ley de
Hidrocarburos), Mining Law (Ley de Minería),
Tourism Law (Ley de Fomento Turístico), Free
Trade Zone Law (Ley de Zonas Francas), Factory
Law (Ley de Maquila), Stock Market Law (Ley de
Mercado de Valores) and Telecommunications Law
(Ley de Telecomunicaciones). Municipal taxes are
generally governed by the Municipal Tax Law (Ley
de Régimen Municipal).
Income tax, value added tax, excise tax, and
inheritance and gift tax are administered by Central
Government through the Internal Revenue Service
(Servicio de Rentas Internas). The municipalities
administer the various municipal taxes. Written
questions may be addressed to tax authorities on
tax implications of specific proposed transactions.
Tax authorities must observe the criteria included in
the formal answer.
Double Tax Relief
Relief under Double Tax Treaties
Ecuador has ratified agreements with the countries
of the Andean Community, Belgium, Brazil, Canada,
Chile, France, Germany, Italy, Mexico, Romania,
Spain and Switzerland to prevent double taxation of
income. These treaties cover most types of income.
The treaties are based on the Model Treaty of
the Organization for Economic Cooperation and
Development (OECD) and observe the principle of
the source of income.
In general terms, income from real estate may be
taxed in the country in which the property is located.
Companies’ profits are taxed in the country in which
operations are carried out, unless the company is
operating in another country through a permanent
establishment. In that case, such profits are taxed
in the other country up to the amount attributable
to such an establishment. Ecuador is party to the
multilateral treaty concluded by the Community
Andean countries. Ecuador has also signed some
bilateral tax treaties dealing with international
shipping and air transport.
Ecuador is a member of the Andean Community,
along with Bolivia, Colombia, and Peru. In 1992, the
Andean Community decided on a common regime
for the treatment of foreign capital and trademarks,
patents, licenses, and royalties. These decisions
were then incorporated into Ecuadorian legislation.
Under this legislation, foreign investment is split into
three categories:
1. Direct foreign investment that is not considered
subregional
or neutral.
2. Subregional foreign investment from other Andean
Pact countries.
3. Neutral foreign investment by international public
financial entities owned by member countries of the
FOREIGN INVESTMENT RULESAND
INTERNATIONALAGREEMENTS