Ecuador

Ecuador

Adopts PPP regime, SEZ regime and several new investment incentives

20 Dec 2023

On 20 December 2023, Ecuador published the Law on Economic Efficiency and Employment Generation in the Official Gazette, which contains various tax reform measures, including:

  1. New Temporary Tax Residence Regime for Individuals: This regime applies to qualifying individuals who will only pay income tax on income sourced within Ecuador for up to five years. Eligibility requires that individuals have not been previously tax residents in Ecuador, including prior to the law's enactment. Qualification criteria include either an investment of at least $150,000 in real estate or productive activities in Ecuador for a minimum of five years, or proven income of at least $2,500 per month not sourced from Ecuador, coupled with enrolment in social security (IESS) during their stay in Ecuador.

    1. New Free Trade Zone Regime with Tax Benefits: This regime includes a zero per cent income tax rate for the first five years for qualified users, followed by a 15 per cent rate thereafter. It also offers exemptions from value-added tax (VAT), remittance tax, foreign trade taxes, and other taxes on transactions within free trade zones. Additionally, there are VAT refunds for purchases from suppliers outside the free trade zones in Ecuador.

    2. Income Tax Exemption for Renewable Energy Investments: New investments in renewable energy projects, as well as the production, industrialization, transportation, supply, and marketing of natural gas and green hydrogen, are exempt from income tax for ten years.

    3. Income Tax Exemption for Tourism Investments: New investments of at least $100,000 in tourism are exempt from income tax for seven years, provided that at least 10 per cent of the investment is allocated to rural tourism.

    4. New Public-Private Projects Regime: This applies to public investment projects related to infrastructure, public services, and strategic services. The regime allows for a maximum contract term of up to 30 years, with a possible extension of 10 years, and a minimum term of five years.

Nature of measure:
  • Promotion
  • Incentives
Type:
  • Entry and establishment (Ownership and control)
  • Promotion and facilitation (Investment incentives, Special economic zones)
Industry:
  • Services (Electricity, gas, steam and air conditioning supply, Water supply, sewerage, waste management and remediation activities, Construction, Transportation and storage, Accommodation and food service activities, Telecommunications)
Inward FDI:
No
Outward FDI:
No
Sources: