Download Incentives for Private Investment

Ecuador :
a smart investment option!
1
An Ethical Economy
Through innovative and
clear regulations that
encourage efficient business operations, our
Government bolsters the rights of our society and
the environment, ensures respect for nature, the
workers and our society as a whole.
An ethical management of our economy is at the
center of ECUADOR’S development.
2
Accomplished Reforms by the State
Actions
Production and Investment
Results
Incentives and a clear framework
for investment
Tax Amendments
Fiscal stability
Constitutional Assembly
Modern institutional framework
Labor Reform
Stable labor relations
3
Development Model and the Role of the State
The Production Code sets out a new and modern legal
framework that encourages private investment.
The code specifically highlights the Government's model
for economic development and transformation of our
production matrix
Monetary policy based on dollarization.
General incentives for private investment to make
ECUADOR more competitive.
Plus additional incentives in specific sectors with high
potential to serve internal and external markets and to
shift the productive matrix from the export of raw
materials to that of value added products. To consult the
list of sectors go to www.mcpec.gob.ec
4
Protection for Private Investment
Legal
incentives
Agreed
arbitration
Investment
contracts
Low Risk
Investment
Production and Investment Code, with all these instruments,
protects private investment.
5
An Intelligent Investment - 8 Strategic Reasons for
Investing
1.Growing, stable economy.
2. Clear legal framework, that gives
incentives to investors
3. Dollarized economy.
4. Human talent and social
investment.
5. Strategic geographical location.
6. Air, land and sea access to
international markets
7. Efficient infrastructure and
logistics
8. The country with the highest
biodiversity per square kilometer
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Incentives for
Private
Investment
7
Current Incentives
INCENTIVES
Exemption from income tax on dividends and profits earned and
paid out to companies (except tax havens) or non-resident
individuals in Ecuador.
Exemption of earnings from the occasional disposal of real
estate, shares or stakeholders.
GOALS
TAX AFFECTED
encourage investment
Income tax
stimulate the capital market and
access to housing
Income tax
avoid the double payment of
income tax
Income tax
Exemption of returns on fixed-term deposits of one year or
more.
Foster savings
Income tax
Additional deduction for net increase in annual employment.
Foster higher employment
Corporate
Income Tax
Deduction of payments for the international commercial leasing
of capital goods.
Foster production
Income tax
Reduction of 10 percentage points in the rate of income tax on
amounts reinvested in equipment and machinery.
Foster investment
Income tax
Accelerated depreciation, on request, of goods with a useful
life of no less than 5 years.
Foster investment
Corporate
Income Tax
Zero tariff on electricity
Exemption
VAT
Exemption of capital earnings, profits, benefits or returns
distributed by investment funds, severance funds and
commercial trust funds.
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New General Incentives for Investments
Income tax rate reduction: from 25% to 22%. Starting in
2011, 1% each year.
Exemption from the minimum income tax calculation:
incremental expenses for new employment or salary
increases, acquisition of new assets for productivity and
technology improvements, cleaner production and all
the incentives in this code.
For new companies: exemption from the minimum tax
payment for the first 5 years.
Exemption from Capital Outflow Tax for payments sent
overseas on foreign loans, with a term of over one year
and a rate not higher than that authorized by the
Ecuadorian Central Bank.
9
General Incentives for Investments
Additional deductions for the
calculation of income tax as
mechanisms
to
encourage
improvements in productivity,
innovation and eco-efficient
production.
Benefits for selling stock to
workers, such as the deferment
of income tax for companies
Those established for Special
Economic Development Zones
[ZEDE, in Spanish], providing
they meet the qualifying criteria.
10
Incentives for New Investment in Priority Sectors
Total exemption from income tax and advance payment thereof, for 5 years,
for new investments made in priority sectors of the economy.
Fresh and
processed food
Pharmaceutical
Petrochemical
Renewable
energy
Metalworking
Forestry and
agroforestry chain,
and resulting
manufactured
products
Biotechnology and
applied software
Import Substitution Sectors and others with export potential can be found in our
website www.mcpec.gob.ec
Tourism
Logistics
services
11
Incentives for Micro and Small Enterprises and
the Grass-roots Mutually Supportive Economy
(EPS for its initials in Spanish)
Preferential access to public
procurement.
Public investment in programs
to increase their productivity
and export capacities.
Access to preferential interest
rates and customized credit
schemes in public financing
12
Incentives for micro and small companies
National Public Guarantee Fund
to secure operations for private
financing
Financial Instruments to facilitate
access of micro and small
companies to capital markets.
Public and private investments
aiming to improve productivity,
level of innovation, quality, and
export promotion.
13
Incentives for medium size companies
Extra deductions from income tax,
for expenditure and investments in the following items:
 Technical training (up to 1% of the
annual wage and salary expenses).
 Expenditures on improving the
company's productivity (up to 1% of
turnover).
 Expenditures on international
promotion of the company and its
products (up to 50% of the
promotion and advertising
expenses).
14
Incentives for reducing the cost of credit
The compulsory Income Tax- withholding is
eliminated for interest payments and
repayments of international loans.
This benefit does not apply to loans from
organizations domiciled in tax havens.
Reduction in costs due to the elimination of
the Capital Outflow Tax on financing.
15
Incentives for green production
An additional deduction from Income Tax of
100% of the expense of purchasing machinery
and equipment for cleaner production, and for
the implementation of renewable energy
systems (solar, wind or similar), or for the
mitigation of environmental impact.
16
Incentives for Investment in Depressed Areas
Companies making investments in depressed areas may
take advantage of an additional 100% deduction from
income tax of new hiring costs on new jobs created in
the area, for the first 5 years.
A “depressed area” will be defined by such indicators as
lower human, economic and social development.
17
Incentives for ZEDE
(Special Economic Development Zones)
A further reduction of 5 percentage points on income tax,
on a permanent basis (17%) until contract expiration,
for managers and operators of ZEDE,
Zero VAT rate for the import of goods.
Foreign goods will not be subject to the payment of tariffs while
they remain in ZEDE zones.
Managers and operators will have tax credit on the VAT paid on their
local purchases of services, supplies and raw materials used in their
production processes.
Exemption from the Capital Outflow Tax for the payment of imports
and for payments sent overseas caused by foreign financing.
18
Incentives for companies selling their stock to
employees and others
Companies choosing to open up their capital structure and to sell
shares to their workers, will have the following benefits:
1. Deferred payment of income tax for 5 years.
2. Companies opting for a loan to finance the
shares’ purchase will be exempt from income
tax interest .
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