Doing Business In... 2021

Last Updated July 13, 2021


Law and Practice


Sánchez, García & Asociados S.A. is a law firm that not only seeks to satisfy its clients with immediate tax solutions but also to be able to anticipate their future needs. It has the experience and necessary resources to provide clients with a variety of legal services that meet the demands of doing business in Ecuador. Sánchez García & Asociados S.A. has more than 50 years of experience and constant improvement. The organisation is made up of a staff of professionals with vast experience in tax law, business law and other matters related to commerce and accounting. The firm has offices in the cities of Quito and Guayaquil, in Ecuador; as well as in Miami, USA. Among the clients that the firm advises, there are large companies in the food, oil, banking, insurance and reinsurance, construction and services industries.

Ecuador follows a civil law legal system which uses written and codified law as its main source of norms. The primary instrument of law is the Constitution of the Republic of Ecuador (Constitución de la República del Ecuador), it establishes the governmental structure of the country and the fundamental rights of individuals, as well as the mechanisms for the protection of said rights.

The Constitutional Court is the highest court in the country, and it is tasked with the control and administration of constitutional justice – ie, it specialises in the defence and protection of constitutional rights.

The judiciary, in turn, is an independent arm of the state and is in charge of the administration of legal justice. It is headed by the National Court of Justice, which is its highest body, followed by the Provincial Courts and tribunals. Alternative means of conflict resolution, such as mediation and arbitration, are also recognised and their resolutions can be enforced in the same way as a court sentence.

In Ecuador there are no restrictions on foreign investments. No prior authorisation is required for foreign individuals and legal entities to invest in Ecuador.

In general terms, Ecuador promotes foreign investment and expressly recognises the free transfer abroad, in foreign currency, of the periodic earnings or profits derived therefrom; of the resources obtained from the total or partial liquidation of companies or from the sale of shares, participations or rights representing capital, once the obligations set forth in law have been complied with, including tax obligations.

However, foreign investment that corresponds to financing, must be registered with the Central Bank of Ecuador (Banco Central del Ecuador) for certain legal purposes, especially in tax matters.

New Productive Investments

Ecuadorian legislation provides a series of tax incentives for new productive investments in certain sectors of the economy within the national territory and in certain territorial jurisdictions. These incentives include the following.

  • Income tax exemptions – lasting eight years in Quito and Guayaquil, and 12 years in the remaining part of the national territory – for investments in the following priority sectors:
    1. agriculture and production of fresh, frozen and industrialised foods;
    2. forestry, agro-forestry, and its processed products;
    3. metal-mechanical industry;
    4. petro-chemistry and oleo-chemistry;
    5. pharmaceuticals;
    6. tourism, the film industry and international events according to national regulations;
    7. renewable energies including bio-energy or energy from biomass;
    8. foreign trade logistics services;
    9. biotechnology and applied software;
    10. export of services according to national regulations;
    11. software development and services, technological hardware production and development, digital infrastructure, IT security, digital products and content, and online services;
    12. energy efficiency service companies;
    13. construction material industry and sustainable construction technologies;
    14. the industrial, agro-industrial and agro-business sector according to national regulations;
    15. the sectors of strategic import substitution and export promotion according to the Executive Decree (Decreto Ejecutivo) determined by the Ecuadorian President;
    16. hospital infrastructure services;
    17. educational services; and
    18. cultural and artistic services under the terms and conditions set forth in national regulation.

These exemptions are extended to 15 years when new investments in priority sectors are made in the border areas of the country.

These 15-year exemptions apply to investments in the following basic industries:

  • copper and/or aluminium smelting and refining;
  • steel foundry for the production of flat steel;
  • hydrocarbon refining;
  • the petrochemical industry;
  • the cellulose industry; and
  • the construction and repair of naval vessels.

These exemptions are extended to 20 years when they are made in the border areas of the country.

Investors may also have access to incentives related to foreign exchange taxes and import duties if they meet the necessary requirements to sign an investment contract with the Ecuadorian government.

As previously indicated, Ecuador does not require prior authorisations for foreign investment; however, by virtue of the principle of transparency, investment by foreign companies in domestic companies is limited to those foreign companies whose capital is represented by nominative securities and which meet the following conditions:

  • having an agent who can fulfil their obligations and answer lawsuits;
  • providing a list of their direct and indirect shareholders all the way up to non-entity investors (people);
  • annually justifying their legal existence.

If a foreign company fails to comply with these obligations until the next shareholder meeting of the domestic company (approximately one year), it will not be able to attend, participate or vote in the meeting.

If the non-compliance occurs for two or more consecutive years, the foreign company may be excluded from the domestic company, after complying with the procedure set forth in law.

In general, domestic and foreign investors have the same rights and obligations in Ecuador; however, new and productive investments are eligible for tax incentives.

Ecuadorian law, in strict compliance with the rights to due process and defence, establishes that administrative acts may be challenged administratively or judicially.

In administrative proceedings, mainly, remediable administrative acts may be rectified with retroactive effects.

In addition, the highest administrative authority, in the exercise of its power, may declare the nullity of administrative acts issued contrary to the legal system and its purposes.

Administrative acts may be challenged before the Court for Contentious Administrative Proceedings (Tribunal de lo Contencioso Administrativo); however, acts of the tax administrations must be challenged before the Court for Contentious Tax Proceedings (Tribunal de lo Contencioso Tributario).

In Ecuador, the most common corporate vehicles are:

  • the limited liability company;
  • an anonymous company; and
  • the simplified stock company.

The limited liability company is a company formed by two or more partners for the realisation of commercial activities; the number of partners cannot exceed 15 and the assignment of its shares requires the unanimous consent of its partners, which is why it is commonly used for family businesses. The minimum initial capital of this company is USD400.

On the other hand, an anonymous company (private company) is an entity divided into shares, through which two or more persons are associated for the execution of commercial activities, whose shares may be freely transferred to third parties and which can subsist with only one shareholder. The minimum initial capital is USD800.

The simplified joint stock company is a corporate model introduced at the end of 2020, which has been quickly adopted, it is simple to incorporate and does not require a level of minimum capital. This entity allows for different types of shares, with different rights and obligations.

In these three types of companies, the partners or shareholders are liable for the entity, up to the amount of their contributions.

The process of incorporation of companies in Ecuador has been modernised so that the most commonly used entity type mentioned above can be incorporated through the portal of the Superintendence of Companies, Securities and Insurance (Superintendencia de Compañías, Valores y Seguros). However, the anonymous company and the limited liability company (see 3.1 Most Common Forms of Legal Entities) must be incorporated through a public deed that specifies the name of the company, the number of partners or shareholders, its duration period and the designation of an administrator. Furthermore, these entities will always require registration in the Mercantile Registry.

The simplified stock company no longer requires registration in the Commercial Registry of the canton in which it will operate, unlike a limited liability company or an anonymous company that still require this registration.

In order to facilitate entrepreneurship and to stimulate the economy, the Superintendence of Companies is currently working with the Internal Revenue Service (Servicio de Rentas Internas, or SRI) so that, immediately after the incorporation of a company occurs, its taxpayer identification number (Registro Único de Contribuyentes, or RUC) is generated for tax purposes.

Approval of Corporate Acts

The acts that require the approval of the Superintendence of Companies are as follows:

  • decrease in capital stock;
  • transformation;
  • merger;
  • spin-off;
  • dissolution, liquidation and abbreviated cancellation;
  • exclusion of shareholders;
  • reactivation;
  • any corporate act whose approval requires an inspection of control; and
  • recognition of corporate acts.

For other corporate acts, the Superintendence of Companies may subsequently carry out controls but there is no requirement at the outset.

Companies under the control of the Superintendence of Companies, Securities and Insurance must present, in the first quarter of each year:

  • the minutes of the general meeting of partners or shareholders;
  • financial statements prepared in accordance with current accounting and financial regulations;
  • the reports of the administrators and the auditing bodies; and
  • the list of administrators, legal representatives and partners or shareholders, including both legal owners and beneficial owners.

Additionally, until January 31st of each year, the legal representatives must report on the foreign companies that appear as partners or shareholders.

In addition, the Superintendence has the power to require the presentation of any accounting documentation that may be necessary to determine the financial situation of a company subject to their supervision.

The transfer of shares or "participations" must be reported to this agency, indicating the name and nationality of the transferor and transferee, within eight days after the registration in the corresponding books. The change of administrators must also be reported to the Superintendence of Companies, once the registration of the substitution of administrators on the Commercial Registry takes place.

The highest decision-making body of a company is the general shareholders' meeting, which appoints the persons who will occupy the positions of directors of the company.

In general, the administration is entrusted to a manager who holds the legal, judicial and extrajudicial representation of the company and in the case of their temporary absence, the president replaces them.

At the time of incorporation of a company, the administrators must be appointed prior to the registration of the company in the Commercial Registry (Registro Mercantil) or in the Companies Registry (Registro de Sociedades) of the Superintendence of Companies, in the case of a simplified stock company.

All changes concerning the administrators in an anonymous company as well as in a limited liability company must be reported both to the Commercial Registry and to the Superintendence of Companies; whereas, in the case of a simplified stock company, these changes must be reported only to the Superintendence of Companies.

In addition to these directors, companies may appoint a board of directors to perform specific functions determined in the incorporation documents.

The administrators shall be obliged to proceed with the diligence required by an ordinary and prudent business administration.

Directors who fail to comply with their obligations are jointly and severally liable to the company and third parties for the damage caused.

Shareholders or partners are responsible for full compliance with the obligations imposed on them in the company's by-laws, as well as for attending and participating in the shareholders' meetings to approve balance sheets, transfer of shares, distribution of profits and any other matter inherent to the company's performance.

The Companies Law (Ley de Compañías) provides that piercing of the "corporate veil" may occur upon court order in an ordinary proceeding or as an action within an initial lawsuit and has a statute of limitation period of six years from the date of the infraction that gave rise to the judicial proceeding.

Ecuador has developed regulations with the intention of protecting workers' rights, which are inalienable and intangible.

Work is a right, a social duty and the basis of the State's economy; therefore, workers are guaranteed full respect for their dignity, a decent life, fair remuneration, and the performance of a healthy and freely chosen job.

It follows that it is the duty of the State to promote full employment and to value all forms of work, with respect for labour rights.

Lately, labour reforms have been issued that contemplate ways of making of labour more flexible with the aim of stimulating hiring and generating new and greater sources of employment.

The main regulatory bodies that govern Ecuadorian labour law are:

  • the Constitution of the Republic of Ecuador (Constitución de la República del Ecuador);
  • the Labour Code (Código del Trabajo);
  • the Social Security Law (Ley de Seguridad Social);
  • the Ministerial agreements issued by the Ministry of Labour; and
  • the Resolutions of the Board of Directors of the Ecuadorian Social Security Institute (IESS).

An employment contract is defined as an agreement whereby a person undertakes to render lawful and personal services in exchange for a remuneration fixed in the respective contract.

Although there are several types of contracts, depending on the nature of the work to be performed, the typical type of employment contract in Ecuador is the individual employment contract for an indefinite term; however, this type of contract may include a trial period of ninety days, and there are also contracts with a term of one year, which were incorporated into the legal system after the COVID-19 pandemic.

The main characteristics of the individual employment contract are that it is a bilateral relationship between employer and employee; based on the will of the parties; which implies a subordination or dependence to the organisation and management of the employer, within the limits established by law; in exchange for periodic remuneration.

Although the Ecuadorian Labour Code recognises the tacit contract as a form of individual contract, the written contract is generally used because the secondary regulation issued by the Ministry of Labour establishes the employer's obligation to report contracts through its institutional web page.

It should be noted that the workday in Ecuador is 40 hours per week, from Monday to Friday, notwithstanding the fact that, due to the nature of the activity, the workday may require work to be performed on weekends.

COVID-19 – Post-pandemic Labour Reforms

Among the labour reforms that emerged from the COVID-19 pandemic in Ecuador are the regulation of teleworking, the agreements for the preservation of employment sources, the "special emergency contract" and the emergency reduction of working hours.

Teleworking was recognised as a form of work through the use of technological services, with the same rights and obligations, both for workers and employers, regardless of the place from where the worker provides their services.

The employment preservation agreements sought that both workers and employers reach an agreement regarding the economic conditions of the employment relationship, without this agreement generating the termination of the employment relationship.

The special emergency contracts were created for the sustainability of production and sources of income in emergency situations or for new investments or lines of business by individuals or legal entities, with a term of one year, renewable for the same period.

Finally, the emergency reduction of the working day provided for a maximum reduction in working hours of 50%, with a maximum reduction in salary of 55% and that the amount contributed to social security (IESS) would be based on the salary received.

In addition, a contract for young people and a contract for young people in training were introduced to enable people up to 26 years of age to access their first job, while continuing their studies and combining their professional growth with their educational development.

Support to the Tourism and Productive Sector

In order to support the tourism, cultural, creative and productive sectors, the following contracting forms were established.

  • Tourism sector contract – a contract with a term of one year, renewable for the same period and which may include a 90-day trial period; the working week is 40 hours per week, distributed over up to six days per week.
  • Contract for the productive sector – a contract with a term of one year, renewable for the same period, with a working week of 40 hours distributed over up to six days per week; if the productive activities require uninterrupted services, there is the possibility of agreeing changes in the working hours.
  • Entrepreneurship contract – a contract made between a worker and an employer registered in the National Entrepreneurship Registry (Registro Nacional de Emprendimiento, or RNE) with a term of one year that may include a trial period of 90 days, which may be renewed by mutual agreement of the parties until the expiration date of the RNE certification; this contract establishes the same working hours as the productive sector contract.

The maximum working day is 40 hours per week with a duration of up to eight hours per day; however, due to the nature of the economic activity, uninterrupted working days may be agreed upon, as in the case of the entrepreneurial contract and the productive contract.

In certain cases, due to the nature of the work and in accordance with the regulations issued by the Ministry of Labour, working shifts that exceed eight hours per day may be agreed upon, provided that they do not exceed the maximum of 40 hours per week or ten hours per day, in schedules that may be distributed irregularly in the five working days of the week.

It is suggested that workers have mandatory rest on Saturdays and Sundays and in the case of teleworking, workers have the right to disconnection for a period of 12 continuous hours in a 24-hour period. For services that cannot be interrupted, it is suggested that workers have a rest of 48 consecutive hours.

It should be noted that the contracting forms established since the COVID-19 pandemic allow the 40-hour workweek to be distributed over six days a week.

As for the payment of overtime hours, these may not exceed four in a day, nor 12 in a week; if they take place during the day or up to midnight, the employer shall pay the remuneration corresponding to each of the overtime hours with a 50% surcharge.

If the hours are between midnight and 6AM, the employee shall be entitled to 100% overtime.

In Ecuador, the following forms of termination of labour contracts are contemplated:

  • for the causes previously foreseen in the contract;
  • by agreement of the parties, which is known as a waiver;
  • upon completion of the work, work period or services covered by the contract;
  • due to the death or incapacity of the employer or the extinction of the contracting legal entity;
  • due to the death of the employee or their permanent and total incapacity for work;
  • for a fortuitous event or force majeure that make the work impossible, and in general, any other extraordinary event that the contracting parties could not foresee or that, if foreseen, could not be avoided;
  • by approval requested by the employer and/or the employee; and
  • termination requested by the employee.

Workers and employers, without any distinction and without the need for prior authorisation, have the right to form the professional associations or unions they deem convenient, to join them or to withdraw from them, as permitted by law and the by-laws of such associations.

The purposes of workers' associations are:

  • professional training;
  • culture and education of a general nature or applied to the corresponding branch of work;
  • mutual support through the formation of co-operatives or savings banks; and
  • others that serve for the economic or social betterment of the workers and the defence of the interests of their class.

T SEAL of Good Labour Practices

In May 2021, through Ministerial Agreement No MDT-2021-165, issued by the Ministry of Labour, the regulations for obtaining the T SEAL for good labour practices were issued. The purpose is to recognise employers that adequately comply with their labour obligations, encourage the formalisation of labour, close gender gaps and ensure fair working conditions.

The benefits of obtaining the T SEAL for good labour practices include avoiding ex officio inspections of employers, that the employer may:

  • notify the agreements reached with its workers regarding the working day;
  • obtain priority attention for requirements related to the Ministry of Labour such as contract records, termination minutes, over-payments, complaints; and
  • ensure the unification of profits, consultations and requirements related to the Red Socio Empleo (Employment Partner Network).

Individuals residing in Ecuador are subject to income tax on the income obtained in the country and abroad from labour and capital. Non-residents pay this tax on the income generated in Ecuador.

In relation to income from work, Ecuadorian law establishes that employers must withhold the following items.

  • Income tax on ordinary and extraordinary income obtained from work, less the value of personal social security contributions. In addition, the employee may request that their personal expense projection be considered and, on the result exceeding USD11,210 (year 2021) the employer will apply a progressive rate, from 5% to 35%, to withhold the tax.
  • The employee's personal social security contribution corresponds to 9.45% of the income received. On the other hand, the employer must contribute to social security a total of 12.15% of the same base.

In addition, employees are entitled to participate in 15% of the net profits of the business. This amount is subtracted for the calculation of the employer's income tax.

The main taxes to be considered are income tax, value added tax, special excise tax and the tax on foreign exchange outflows.

Income Tax

Companies incorporated in Ecuador, as well as branches and permanent establishments of foreign companies, apply the general rate of 25% on their taxable income.

However, this general rate may have the following modifications.

  • Reduction of three percentage points in the rate (22%) for micro and small companies, as well as for regular exporters that maintain or increase employment in the fiscal year.
  • Increase of three percentage points when the company fails to comply with its duty to inform its corporate composition up to the last level of ownership or if, in the shareholding chain, there are intermediaries in tax havens whose beneficial owners are residents of Ecuador. This increase will be applied only to the portion of the taxable base that is attributable to these cases, unless they correspond to 50% or more of the capital stock, in which case the entire taxable base will be applied.

There are also special regimes that may be applied depending on the characteristics of the company and the activity, these are set out below.

A special tax regime for micro-enterprises for individuals and companies that meet the regulatory requirements. The income tax rate is 2% calculated on gross income.

Companies engaged in the production, marketing and export of bananas in the country are subject to a single income tax, whose rates range between 1% and 2% on the value of turnover for local production and marketing, and 3% of turnover on the value of export turnover (FOB) minus the Minimum Supporting Price set by the National Agriculture Authority or the purchase price paid by the exporter to the producer if this is higher.

Meanwhile, income obtained from other agricultural activities may be subject to a single income tax with a progressive rate of 0% (up to USD20,000) to 1.8% on the value of gross sales.

Finally, there is a single income tax levied on the profit on the sale of the capital representative shares and rights, to which all individuals or legal entities, national or foreign, resident or not, that directly or indirectly dispose of shares, participations, other rights representing capital or other rights that allow the exploration, exploitation, concession or similar, of companies domiciled or permanent establishments in Ecuador are subject to.

The profit they receive is taxed at a progressive rate of 0% to 10%.

Income Tax Withholding on Dividends

Withholding taxes on dividends distributed by national or foreign companies resident in the country are regulated as set out below. 

First, as a general rule, only 40% of the dividend actually distributed will be considered taxable income.

Second, withholdings must be made or not made, depending on who receives dividends, as follows.

  • National companies are exempt from withholding.
  • Individuals resident in Ecuador will be subject to a progressive withholding tax of up to 25%, whether they receive dividends directly as shareholders or are the beneficial owners of the shareholding chain.
  • Individuals and foreign companies will be subject to a general withholding of 25% of the taxable income considered.
  • When the distributing company fails to comply with its duty to inform the regulator of its corporate composition, the withholding tax will be 35% on the dividends corresponding to the non-compliance.

Third, the capitalisation of earnings will not be considered as a dividend distribution.

Finally, the withholdings made constitute a tax credit for residents.

Value Added Tax (VAT)

This tax is levied on the transfer of tangible goods and intellectual property rights, as well as the rendering of services. The tax rates are 0% for goods and services expressly established in the law and 12% for others.

Generally, the amounts paid for this tax constitute a VAT tax credit for companies and can be used up to five years after its declaration, so it can be recovered. Exceptions are those cases in which the company only sells goods or services taxed at 0% VAT rate, in which the tax paid will be charged to the expense.

Special Consumption Tax (ICE)

ICE is levied on nationally produced or imported goods and services that are considered luxury or harmful to health, such as motor vehicles whose price exceeds USD20,000, aeroplanes, paid-for television, alcoholic beverages and cigarettes.

Different rates are established for this tax depending on the type of property and its characteristics.

This tax must be declared and paid by the producer, importer or service provider at the time of commercialisation or customs clearance, but its cost must be passed on to the final consumer in the sales price.

Tax on Foreign Exchange Outflows (ISD)

This tax is levied on the transfer of money abroad, with or without the intervention of the financial system. The rate is 5%.

The tax regulations establish the exemptions from the payment of this tax; in many cases these are related to foreign investments and financing such as dividends, financial yields, payments of capital and interest on loans that comply with the characteristics established in the law.

With respect to the ISD paid on imports of raw materials, inputs and capital goods that are incorporated in production processes in the country and that are part of the list of items published by the government, which totals 3856 items, the company may choose one of the following options: (i) use it as a tax credit for the payment of income tax, (ii) request a refund from the tax authorities, or (iii) record it as an expense.

Income Tax

The national tax regulations provide for total or partial exemption from income tax for a period of eight to 20 years, mainly for new productive investments made by new or existing companies, which are developed in certain economic sectors, where these are designated as priority or basic industries, provided that certain employment generation and contractual conditions are met, as regulated in various legal instruments of the regulatory entities. The number of years of exemption is applied according to the sector and the place where the investment is developed, as per 2.1 Approval of Foreign Investments.

As part of this incentive scheme, there is also an exemption from the Tax on the Outflow of Foreign Currency for those companies qualifying under the aforementioned conditions and that sign an investment contract with the Ecuadorian State.

Ecuadorian tax regulations also maintain the exemption from income tax for 20 years for new productive investments made by micro, small and medium-sized enterprises, community and/or associative tourism.

On the other hand, a ten-year income tax exemption is foreseen for public private partnerships (PPP) established for the development of public projects in prioritised sectors.

The income tax exemption is also in force for a period of up to five years, on income obtained by taxpayers who carry out exclusive activities on any free digital technology that includes Ecuadorian added value.

Micro companies (those whose annual income is less than USD300,000 and maintain a payroll of up to nine workers), can access the income tax exemption for three years, provided that they generate employment and incorporate national added value in their production processes.

Finally, an income tax exemption is provided for the first ten years of operation, to the administrators or operators of a Special Economic Development Zone (ZEDE). Additionally, they will have an additional reduction of ten percentage points in the income tax rate, which will be applicable for a term of ten years as from the end of the period of total exoneration of such tax, as mentioned above.

For such ZEDES, there is also an exemption from the Tax on the Outflow of Foreign Currency on payments made abroad by their administrators and operators for imports of goods and services related to their authorised activity.


As part of the ISD exemptions in force, the regulations also provide for, mainly:

  • payments made abroad for dividends distributed by companies in favour of other foreign companies or individuals not resident in Ecuador;
  • payments made abroad for financial returns, capital gains and capital from investments from abroad that enters into the Ecuadorian stock market;
  • payments made abroad – from financial yields, capital gains and capital – in securities issued by companies domiciled in Ecuador, which had been acquired abroad, destined to the financing of housing, microcredit or productive investments;
  • payments made abroad for financial returns, capital gains, and capital, of those time deposits or investments, with resources from abroad, in institutions of the national financial system;
  • payments of capital or dividends made abroad, in an amount equivalent to the value of the capital brought into the country by a resident, either as own financing without interest or as a capital contribution, provided that they are destined for productive investments, and these values have remained in Ecuador for a period of at least two years from their entry; and
  • payments made abroad for the amortisation of principal and interest generated on loans granted by international financial institutions or specialised non-financial entities qualified by the corresponding control entities in Ecuador, which grant financing with a term of 180 calendar days or more, are also exempt.


Finally, it should be noted that the Ecuadorian regulatory framework provides for the refund of VAT incurred in the purchase and import of goods and services, which are incorporated in the production of goods and services that are exported.

This is contemplated mainly for:

  • exporters of goods;
  • exporters of services (in the cases and under the conditions provided for in the relevant regulations, such as inbound tourism and information technology services);
  • direct suppliers to exporters of goods;
  • exports of inbound tourism services; and
  • social housing construction projects.

Tax consolidation for tax purposes is not contemplated in Ecuadorian law.

Ecuadorian tax legislation establishes that interest paid on transactions with related parties is deductible, according to the following considerations:

  • for banks, insurance companies and entities of the financial sector of the popular and solidarity economy (economía popular y solidaria), for external credits with related parties, in the part that does not exceed 300% of their net worth.
  • for other companies and individuals, the total amount of net interest in operations carried out with related parties shall not exceed 20% of the profit before labour participation, plus interest, depreciation and amortisation corresponding to the respective fiscal year, except for interest payments on loans used to finance delegated management and public projects of common interest.

In addition, all foreign loans must be registered with the Central Bank of Ecuador.

In Ecuador, the transfer pricing rules are contained in the Internal Tax Regime Law (Ley de Regimen Tributario Interno), its regulations, resolutions issued by the SRI and as a technical reference the OECD guidelines.

However, taxpayers that have a tax liability of more than 3% of their taxable income, do not carry out operations with residents in tax havens or preferential regimes and do not have a contract with the State for the exploration and exploitation of non-renewable resources will be exempt from this regime.

With respect to transactions with related parties, taxpayers, as the case may be, must submit the following information:

  • related party transactions schedule – if the annual operations exceed USD3 million; and
  • comprehensive transfer pricing report – if annual operations exceed USD15 million, verify with the related parties rule.

Advance Pricing Agreement (APA)

The legislation recognises this figure which consists of an agreement between a taxpayer and the tax administration, by means of which they agree in advance the guidelines and criteria to be considered for the valuation of the operations that the taxpayer will have with its related parties, which will be applicable for the following three fiscal years.

This is an advantage because it provides tax stability and reduces the controversies that may arise with the control agency.

The Ecuadorian tax system contains the principle of economic essence, which establishes that at the time of qualifying the tax generating events, substance prevails over form, thus avoiding tax evasion and the abuse of economic benefits.

In addition, the SRI combats tax evasion through the exercise of its tax assessment authority.

In recent years, the SRI has worked on the implementation of international standards on transparency and information exchange, within the framework of the Global Forum on Transparency and Information Exchange.

The Organic Law for the Control of Market Power (Ley Orgánica de Control de Poder de Mercado) states that economic operators that incur the following conditions must report the economic concentration on a mandatory basis to the Superintendence for the Control of Market Power.

  • If the total turnover in the country of all involved operators exceeds, in the accounting period prior to the event in question, the following amounts according to the Unified Basic Wage (UBW) of the worker in Ecuador (UBW as of 2021 corresponds to USD400):
    1. market concentrations involving the financial system – 3.2 million UBW;
    2. market concentrations involving insurance and reinsurance entities – 214,000 UBW; and
    3. market concentrations involving operators not detailed in the previous points – 200,000 UBW.
  • For the case of market concentrations involving operators that engage in the same economic activity, when a market concentration equal to or greater than 30% of the relevant market for the product or service in the country or within a geographic market is acquired or increased.

This notification must be reported within eight days of the conclusion of the agreement.

Once the petition is received, the Superintendence of Control of Market Power (Superintendencia de Control de Poder de Mercado) has 60 working days to make a decision on the matter. This resolution can be challenged in administrative proceedings.

However, in the event of a market concentration that does not meet any of the aforementioned conditions, it may be reported to the Superintendence for the Control of Market Power on an optional basis.

In the event that a market concentration has not been notified to the Superintendence for the Control of Market Power, this entity may carry out the necessary investigations to determine the existence of such concentration.

If the Superintendence of Market Power Control concludes that the transaction should have been notified and it was not, 30 working days are granted to issue the necessary justifications; in the event that the explanations do not satisfy the lack of notification to the control entity, the investigation procedure will be initiated, which may not exceed 60 working days, extendable only once for 60 more days.

At the end of this term, the Superintendence has 30 working days to resolve the investigation.

It should be noted that in use of its legal powers, the Superintendence for the Control of Market Power may request information from third parties, including public entities, to determine the existence of market concentrations that have not been notified to it.

Failure to comply with this notification constitutes a minor infringement with a fine of up to 8% of the total turnover of the infringing economic operator in the year preceding the assessment of the fine.

In Ecuador, in order to ensure good market practice, restrictive practices of two or more economic operators; aggressive practices of harassment, coercion and undue influence against consumers; abuse of market power and unfair practices, including conduct carried out through advertising media, are penalised.

Unfair practices are considered to be acts of confusion, deception, imitation, denigration or comparison; violation of corporate rights; inducement to contractual infringement; and abuse of judicial or administrative processes or non-compliance with regulations.

Such conduct is classified as a serious infringement and is punishable by a fine of up to 10% of the total turnover of the infringing company or economic operator in the fiscal year immediately preceding the year in which the fine is imposed.

Abuses of dominant position as well as cartels are behaviours typified and sanctioned according to the Organic Law for the Control of Market Power – see 6.3 Cartels for further detail.

Definition and Duration of Protection

Patents of invention

A patent shall be granted to any invention, whether product or process, in all fields of technology, provided that it is new, has an inventive level and is susceptible to industrial application. Patent holders may be natural or juridical persons, and licences may be granted to one or more third parties.

The term of the patent shall be twenty years, counted from the filing of the application.

Registration Process

The procedure is done at the National Secretariat of Intellectual Rights, which requires a phonetic search, opening of a virtual box, online application, payment of the registration application fee (USD208) and a form examination that verifies compliance with the requirements.

Once the registration is filed, the application is published in the Industrial Property Gazette, which allows a third party to file an opposition within 30 days. If there is no opposition, an examination of registrability and the issuance of the title is carried out.

Definition and Duration of Protection


This is any sign that is apt to distinguish products or services in the market susceptible to graphic representation – such as words or combination of words, images, figures, symbols, graphics, logos, monograms, portraits, labels, emblems and shields, sounds, smells, flavours, letters, numbers, delimited colours or their combination, shape of the products, containers or wrappings, reliefs, textures, animations, gestures and sequences of movements, or holograms.

The term of the registration is ten years and its renewal will be in successive ten-year periods.

Brands can either be collective brands or brands of certification. Collective brands belong to two or more different persons or companies, the registration of which cannot be transferred or licensed and the law prevents the granting of sublicences. Brands of certification are intended to be applied to products or services whose quality, origin or other characteristics have been certified by the holder of the mark. An example is the "country mark", which refers to the values of the country where a product is produced and is granted by executive decree.

Commercial slogan

This is the word, phrase or legend used as a complement of a trade mark provided that they do not contain allusions to similar products or trade marks, the transfer must be made together with the trade mark registration and its validity of the registration will be subject to the validity of the trade mark registration.

Trade names

The law defines a trade name as any sign that is apt to identify a person or commercial establishment in the exercise of its economic activity and distinguish it from others that carry out identical or similar activities; these are independent of the names or corporate names of legal entities.

The transfer of the trade name may only be made together with the company and the registration shall be valid for a period of ten years and its renewal may be for successive periods of ten years.

In addition, it is possible to request the declaration of well-known distinctive signs, on those recognised as such in the country or any country member of the Paris Convention, TRIPS or with which Ecuador maintains treaties on industrial property, protecting them against unauthorised use and registration, preventing the reproduction, imitation, translation, transliteration or transcription that may create confusion.

Registration Process

The procedure is done at the National Secretariat of Intellectual Rights, which requires a phonetic search, opening of a virtual box, online application, payment of the registration application fee (USD208) and a form examination that verifies compliance with the requirements.

Once the registration is filed, the application is published in the Industrial Property Gazette, which allows a third party to file an opposition within 30 days. If there is no opposition, an examination of registrability and the issuance of the title is carried out.

Definition and Duration of Protection

Industrial designs

This is the particular appearance of a product resulting from any meeting of lines or combination of colours, or from any external two or three-dimensional shape, line, contour, configuration, texture or material. Protection is acquired as long as the industrial design is new and its protection will have a term of ten years.

Layout diagrams of integrated circuits

This consists of a combination of elements or interconnections that are common, and can only be protected if considered original. This registration may be filed within two years from the diagram's exploitation and its protection will be for ten years.

Utility models

A patent shall be granted for any new form, configuration or arrangement of elements of any device, tool, instrument, mechanism or other object that makes it possible to improve or differentiate its operation, use or manufacture from the object incorporating it or that provides it with some advantage or technical effect that it did not have before. The term of protection is ten years from the date of application.

Registration Process

The procedure is done at the National Secretariat of Intellectual Rights, which requires a phonetic search, opening of a virtual box, online application, payment of the registration application fee (USD208) and a form examination that verifies compliance with the requirements.

Once the registration is filed, the application is published in the Industrial Property Gazette, which allows a third party to file an opposition within 30 days. If there is no opposition, an examination of registrability and the issuance of the title is carried out.


The rights of authors and other owners over their works, as well as the rights of performers, phonogram producers and broadcasting organisations are recognised, granted and protected.

Duration of Protection

The term of protection of these rights covers the whole life of the author and 70 years after their death, and when the rights belong to a legal entity, the term of protection shall be 70 years from the date of disclosure or publication or its realisation.

Registration Process

Registration is of a declarative nature, since the work is protected from the very moment of its creation, the recognition of copyrights and related rights is not subject to registration, deposit or compliance with any formality.

However, it is advisable to register it at the Registration Unit of the National Secretariat of Intellectual Rights (SENADI), in order to formalise the generation of an intangible asset.

The author has moral and patrimonial rights over these titles, which are also susceptible to any transfer by any title and, in general, to any act or contract possible under civil or commercial law as real estate.


Varieties belonging to all plant species are protected. The right may be obtained by the person who has created a plant variety, when it is new, distinct, uniform and stable, and has been assigned a denomination that constitutes its generic designation.

Term of Protection

The term of plant breeders' rights is 18 years for varieties of livestock and forest, fruit and ornamental trees, including their rootstocks; and 15 years for other varieties.

Registration Process

The procedure is carried out at SENADI, by submitting a breeder's form, analysis of substance and form, sworn statement, fee and reports.

Once the form is submitted, it is published in the Plant Breeders' Rights Gazette so that the opposition, examinations, etc, can be carried out. Once the technical opinion is issued, the resolution and the certificate of breeders' rights are issued. The process may take from one to five years.


Penalties for misuse of intellectual property rights related to plant species can be as follows:

  • administrative, with fines ranging from USD600–60,800;
  • civil, through legal actions for damages; and
  • criminal penalties, with fines ranging from USD22,000–118,000.

The main rules for the protection of personal data are:

  • the Constitution of the Republic of Ecuador (Constitución de la República del Ecuador);
  • the Organic Law on Personal Data Protection (Ley Orgánica de Protección de Datos Personales), published on 26 May 2021; and
  • the Policy for the Treatment and Protection of Personal Data in Portals and Websites.

The Constitution guarantees the right to data protection of natural persons, giving them control over their personal information and the law empowers them – in a free, informed and unequivocal manner – to decide on access, rectification, updating, deletion, opposition, portability, consultation and suspension of the processing of their data, in addition to being subject to a decision based solely or partially on automated assessments.

The right to data protection gives individuals control over their personal information, allowing them to decide freely, informed and unequivocally on access, rectification, updating, deletion, opposition, portability, consultation and suspension of the processing of their data and not to be subject to a decision based solely or partially on automated assessments.

The Ecuadorian Organic Integral Penal Code (Código Orgánico Integral Penal) typifies several crimes related to the right to data protection, such as:

  • violation of privacy, punishable by a prison term of one to three years;
  • illegal disclosure of database, punishable by imprisonment ranging from one to five years;
  • illegal interception of data, punishable by three to five years imprisonment; and
  • non-consensual access to a computer, telematic or telecommunications system, punishable by three to five years imprisonment.

The Personal Data Protection Law would have extraterritorial application when a data controller or data processor, who is not domiciled in Ecuador, is subject to national legislation, due to a contract or public international law regulations in force; or, when a data controller or data processor, who is not established in the country, carries out this processing, related to the offer of goods or services to Ecuadorians or residents of Ecuador and on the control of their behaviour in Ecuador.

According to the Data Protection Law, enacted in May 2021, the Data Protection Authority is the regulatory and surveillance body in charge of guaranteeing all citizens the protection of their personal data, and of carrying out all necessary actions to ensure that the principles, rights, guarantees and procedures provided for in the Law and its Regulations are respected. This control will be represented by the Superintendent of Personal Data Protection.

The corrective measures and sanctions regime will apply as of 26 May 2023, due to the fact that the Data Protection Law was published in May 2021.

Business Development in the World of COVID-19

The year 2020 brought with it the COVID-19 pandemic and accompanying mandatory confinement in most countries and, subsequently, the application of social distancing, which generated the need to rethink the mechanisms of human interactions, considering that the economy does not stop.

Thus, governments have put in place plans to continue economic development through the enactment of regulations and public policies that allow work to persist despite the pandemic and to maintain new biosecurity measurements.

One of these public policies has been the prioritisation of teleworking. In Ecuador this form of work already existed but it has been updated through the Organic Law of Humanitarian Support (Ley Orgánica de Soporte Humanitario), enacted on 22 June 2020, to make it more versatile, in a globalised world and with digital systems that allow immediate communication of people regardless of their geographical location.

This Law regulates the rights and obligations of workers and employers who adopt teleworking, recognising the right of the former to disconnect for 12 continuous hours in a 24-hour period.

In addition, new and more flexible forms of labour relations have been incorporated, among which the following stand out: the emergency reduction of working hours, the emergency special contract, the contract for young people, the contract for young people in training, the artistic contract, the entrepreneurship contract and the productive contract.

At the same time and progressively, public institutions have been adapting their IT platforms so that people can exercise their right to petition and appeal virtually.

The private sector has also made significant efforts to incorporate more and better telematic tools in its processes, in order to avoid the unnecessary movement of people.

All these advances have had certain setbacks but these are gradually being overcome.

In the tax area, no legal reforms have been issued in recent months; however, the new democratically elected government in Ecuador, which is of a centre-right tendency, as of its inauguration on 24 May 2021, has expressed its commitment to supporting the private sector, strengthening dollarisation, reducing the tax burden and making labour relations more flexible to expand sources of employment, especially for young people.

The challenge for the incoming government, in addition to overcoming the health crisis caused by the pandemic, will be to open the Ecuadorian economy to the world by entering into new and expanded bilateral and multilateral trade agreements, further stimulating foreign investment, as well as implementing responsible fiscal and labour policies that are better adapted to the country's current needs.

Sánchez García & Asociados S.A.

República del Salvador Avenue
N35-20 and Suecia street
Oe12C, Quito 170505

+22 465 381
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Law and Practice


Sánchez, García & Asociados S.A. is a law firm that not only seeks to satisfy its clients with immediate tax solutions but also to be able to anticipate their future needs. It has the experience and necessary resources to provide clients with a variety of legal services that meet the demands of doing business in Ecuador. Sánchez García & Asociados S.A. has more than 50 years of experience and constant improvement. The organisation is made up of a staff of professionals with vast experience in tax law, business law and other matters related to commerce and accounting. The firm has offices in the cities of Quito and Guayaquil, in Ecuador; as well as in Miami, USA. Among the clients that the firm advises, there are large companies in the food, oil, banking, insurance and reinsurance, construction and services industries.

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