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Bill encourages new and existing investments
Posted On 13 Mar 2018
Ecuadornews:
The proposed Organic Law of Attraction of Investments includes the exemption of Income Tax in the sectors of fresh food, petrochemical, pharmaceutical, tourism, among others. In February, the Minister of Foreign Trade and Investment, Pablo Campana, presented to the Executive the draft Organic Law of Attraction of Investments.
This newspaper had access to the document that contains 168 articles and modifies legal bodies such as the Organic Law of the Internal Tax Regime (Lorti) and the Organic Code of Production, Trade and Investment (Copci) and the Securities Markets Law.
The bill proposes a series of incentives to strengthen private production and investment, including tax reductions, incentives to invest in productive technology, shorter tax-exempt periods on bank deposit certificates, among others. Within the reforms of the tax system, the exemption from the payment of Income Tax for the development of new and productive investments for 10 years stands out. This measure is currently only applied for five years to investments outside of Quito and Guayaquil. Geographical discrimination would also be eliminated.
The benefit applies to investments in the production of fresh, frozen and industrialized foods; forest and agroforestry chain and their processed products; metalworking; petrochemistry; pharmaceutical; tourism; renewable energy; foreign trade logistics services; applied biotechnology and software; exportation of services.
On the other hand, companies that are already in operation and that invest in Ecuador for an amount exceeding $ 50 million, in areas considered as priority, by the Copci or in sectors of strategic substitution of imports, may obtain a reduction of 15 percentage points of the Income Tax rate for a term of five years from the signing of the contract.
The project also includes incentives to reduce Foreign Currency Exit Tax (ISD) payments. For example, foreign payments made by the new companies that are set up for the development of private investment projects, in the prioritized sectors, whose amount is more than $ 100 million, that meet the requirements set out in this document, would be exempt from this tax. The Copci and that they sign contracts in a term not greater than five years.
The proposal also establishes the right to exporters to return the payments made for the concept of ISD in the importation of raw materials, inputs and capital goods, with the aim of being incorporated into productive processes of export goods or services. Productive guilds support this proposal. Mónica Maldonado, of the Ecuadorian Chamber of Tuna Industrialists and Processors, said that the bill benefits and is an incentive to boost the competitiveness of the sector.
Also Enrique Pita, president of the Chamber of Construction, considers the law positive because it stimulates and allows the entrepreneur to have a level of confidence to invest in the country. Lenín Parreño, senior executive of the Development Bank of Latin America (CAF), mentioned that “after the oil boom, what the country needs is investment.” He argued that this should be convenient, that it includes and generates equity among the poorest, that it is not an elite investment and that it benefits a small group.
More incentives
Special development zone
In the case of approval of the bill, the administrators or operators of a special economic development zone will be exempt from the payment of Income Tax (IR) for the first 20 years.
16 legal bodies would be modified with the draft Organic Law of Attraction of Investments.
Tourism investments
Hotels or restaurants that are made in national cultural heritage goods may be exempted from IR for 10 years. (I)
