Ecuador Info
Joined: 23 Nov 2006
Posts: 16
Home Country: ecuador
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 Posted: Wed Nov 29, 2006 1:03 pm Post subject: DOING BUSINESS IN ECUADOR / ECUADOR BUSINESS GUIDE |
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DOING BUSINESS IN ECUADOR
STARTING A BUSINESS
STANDARDIZED COMPANY
Legal Form: Compana Limitada
Minimum Capital Requirement: 800
City: Guayaquil
Registration Requirements:
Procedure 1. Hire a lawyer to prepare the minutes of incorporation
Time to complete: 1 day
Cost to complete: USD 500
Comment: The minutes include the constituting contract, articles of incorporation and the bylaws of the company and the formation of capital. A lawyer has to prepare the minutes containing the contract for the incorporation of the company, and sign them. Those minutes have to be notarized by a Notary Public. The lawyer cannot notarize those documents. The cost includes all the operative expenses and the lawyer's fees.
Procedure 2. Register company name at the Superintendent of Companies
Time to complete: 1 day
Cost to complete: no charge
Procedure 3. Deposit 25% of paid-in capital in a special account of "Completion of Capital" (Integración de Capital )in the name of the company in formation
Time to complete: 1 day
Cost to complete: no charge
Comment: The minimum deposit for opening the "Completion of Capital" account is 25% of the share capital. Proof of approved company name has to be presented.
Procedure 4. Notarize the charter of incorporation and bylaws
Time to complete: 2 days
Cost to complete: USD 75 (varies)
Procedure 5. The lawyer presents the documents (attached with three certified copies of charter and bylaws) to the Superintendent of Companies for the approval of the constitution of the company
Time to complete: 5 days
Cost to complete: no charge
Comment: Registration fee is paid annually to the Superintendent. Cost of contribution is 1% of total assets.
The Superintendent of Companies cut the time of processing company applications as it has eliminated internal proceedings, increased the number of staff and used a better computer system. The entrepreneur can verify the stage of the registration procedure online.
Procedure 6. Publish an abstract of the charter in a daily newspaper that circulates in the area in which the company operates
Time to complete: 2 days
Cost to complete: USD 15
Procedure 7. Enroll in the Chamber of Commerce (Industries, etc)
Time to complete: 1 day
Cost to complete: USD 60
Comment: All companies are required to be affiliated to one of the production chambers (as the Chamber of Commerce, Chamber of Industries, etc.). The field of the chamber to be chosen by the company must be related with the activities of the company as they are stated in its by-laws. Affiliation to the chambers must be made before the registration of the constitution deed in the Register of Commerce. Amounts could vary depending of the chosen chamber and the amount of capital of the company. In the case of the Commerce Chamber the costs would be of US$134. In the case of the Industries Chamber the costs would be of US$84.58.
Procedure 8. The General Stockholders' Meeting inscribes the charter and resolutions in the Mercantile Registry; register the names of the legal representatives in the Mercantile Registry
Time to complete: 5 days
Cost to complete: USD 80
Comment: The Mercantile Registry and the Superintendency of Companies are located in different buildings.
Procedure 9. Apply for Registro Unico de Contribuyentes (RUC) from the Superintendency of Companies
Time to complete: 4 days
Cost to complete: USD 5 per form
Comment: The RUC must be obtained once the constitution procedure is completed, and after the company has appointed its legal representatives, and registered such appointments in the Register of Commerce. The procedure of application for the RUC is made in the Superintendency of Companies, because of an agreement signed by this institution with the Servicio de Rentas Internas (SRI), an entity which depends of the Ministry of Economy, and takes 48 hours, once you have presented all the necessary documents (the registered deed, the registered appointments and the certification of publication). This procedure does not have any cost. VAT, or Impuesto al Valor Agregado (IVA), goes by the same number, so there is no need for separate registration.
Procedure 10. Print invoices and VAT forms at an authorized printing shop
Time to complete: 1 day
Cost to complete: USD 40
Comment: With the RUC, companies will need to buy invoices from companies authorized to sell them by SRI, and state monthly VAT declarations, in special forms. The cost to print a 100-page book of invoices (1 original and 2 copies) is approximately US$40.
Procedure 11. Sign up for Instituto Ecuatoriano de Seguridad Social (IESS, social security institute) to get employer's ID number and obtain approval of payroll forms at IESS
Time to complete: 10 days
Cost to complete: no charge
Comment: The company must present a petition in order to get the "cédula patronal". The social security payments, which are obligatory for employers, cover health, pension, accident and work-related illness.
Procedure 12. Inscribe all employee contracts with the Ministry of Labor (Inspectoria de Trabajo)
Time to complete: 2 days
Cost to complete: no charge
Procedure 13. Inspection from the Municipality
Time to complete: 29 days
Cost to complete: no charge
Procedure 14. Obtain a "tasa de habilitacion" and a commercial patent from the competent municipality
Time to complete: 1 day
Cost to complete: USD 50
Comment: Tasa de Habilitación was phased out on December 31th, 2004. However, the permit is still required in practice. The cost for getting the Permit varies depending on the type of company and the type and size of the facilities in which the company is going to operate. The Municipal operation permit is obtained after the payment of the ability and control of establishments Tax ("tasa de habilitación y control de establecimientos"). All payments to the Municipality can only be done in the building where the Municipality operates. Usually, the obtaining of any permit requires a previous inspection to be made by the officers of the different institutions. Because of that, the average time to obtain such permits is a month. The required permits are the Health permit, granted by the Ministry of Public Health through the General Direction of Health, the Municipal permit of function and the "annual patent"; and the Fire Department permit.
TAXATION
Corporate tax
Main rate: 25%
Resident companies are taxed on their worldwide income; non-resident companies are taxed on income sourced in Ecuador only. A company is resident if it is organised and incorporated under the laws of Ecuador. The tax of 25% is applied to aggregate income, with the exception of a few items, such as dividends received and certain capital gains that are not subject to tax. Companies are entitled to a 15% reduced tax if profits are reinvested.
Individual tax
Progressive rates up to 25%
Resident individuals are subject to tax on their worldwide income with a credit for foreign tax paid; non-residents are taxed on income sourced in Ecuador only. A person is considered to be a tax resident if living in Ecuador for at least six months in a particular calendar year. Tax is charged at progressive rates, rising to 25% on income over US$58,800. Dividends and other profit distributions received, and interest on savings deposits, are tax-exempt. Work-related travel and meal allowances are also exempt.
Capital gains
Taxed as income
Capital gains of companies and individuals are generally taxed as income. Individuals are exempt from gains from the occasional (non-business) transfer of immovable property, shares and similar interests, and gains distributed by investment funds.
Indirect tax
Standard rate: 12%, exports are zero-rated
Value-added tax (VAT) applies to most transactions at the standard rate of 12%. Registration is compulsory for businesses. Exports are zero-rated. Exemptions include housing, financial and investment services, education and health.
Tax administration and compliance
Tax year:
Corporations: corporate year; Individuals: calendar year
Companies make an advance payment of one-half the previous year’s tax liability in July and September, and the final payment of tax is due with the submission of the self-assessment tax return between April 2nd and April 10th of the following year. Employment income of individuals is taxed by withholding. Individuals submit a self-assessment tax return between April 12th and April 30th following the tax year, and any balance of tax payable is due with the return.
Additional tax information
Withholding taxes: Payments abroad are generally subject to a 25% withholding tax, except for dividends, interest on foreign loans registered at the central bank and imports. Rates may be reduced by tax treaty.
Tax treaties: Ecuador has more than ten double-tax treaties.
Dividends: Dividends are exempt.
Revenue protection: Transfer-pricing rules came into effect as of January 1st 2005.
Groups: There is group consolidation for financial but not for tax purposes.
Incentives: Reduced income-tax rate of 15% if profits are reinvested. Tax relief is available for petrochemicals, refining and hydroelectric projects.
Other taxes: Excise taxes, Municipal property transfer tax, Import duty, Municipal business net worth tax, Immovable property tax, Tax on credits, transfers and remittances, Real estate transfer tax, Inheritance tax. |
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