Ecuador: Urgent Economic Bill of Law Project presented to National Assembly

In his report to the nation on May 24, 2018 the President of the Republic, Lenin Moreno, delivered to the National Assembly an urgent economic bill of law[1] titled Organic Law for Productive Development, Attraction of Investments, Job Creation and Fiscal Stability. The bill includes exemptions, eliminations and changes in a series of taxes, and reforms in the hydrocarbon and mining sectors. Among the reforms mentioned are:

Remission of Fines and Interest

The bill provides for another remission of 100% of interest and fines administered and collected by the Internal Revenue Service (SRI). Companies have up to 90 days from publication of the law to take advantage of this benefit. The SRI may grant payment facilities up to 1 year.

In addition, the bill reduces interest, fines and surcharges on employer Social Security obligations. These range from 50% to 99%, with terms of 90 days to 2 years. The reform does not include reserve funds, unsecured loans, and mortgage loans.

Hydrocarbons Sector

The bill proposes that in hydrocarbon exploration and participation contracts the percentage of the State's participation will be adjusted according to the reference price and production volumes. That is, as the reference price increases, so will the State’s participation, so as to control the contractor's profits from surplus sales prices.

Mining Sector

Mining concessionaires and beneficiary plants may pay a percentage of mineral sales ranging from 5% to 8% for medium- and large-scale mining projects. The criteria for calculation of the royalty will be established in the regulations to be issued for the purpose, in line with the principle of progressivity, production volumes, type of concession and price of minerals.

The reform implies the elimination of the windfall profit tax for the parties that sign and perform mining exploitation and services agreements.

[1] Art. 140. The President of the Republic may submit bills on economic matters qualified as urgent to the National Assembly. The Assembly must approve, modify or reject such bills within a maximum of thirty days from their receipt (Constitution of the Republic of Ecuador, Official Gazette 449 of 20-Oct-2008, Last modification: 14 Feb.2018).