ECUADOR Law and Practice Contributed by: Randy Arévalo, Diego F. Amen, Darío Vicuña and Sandra Touma Faytong, VIVANCO & VIVANCO
5.2 Main Features and Tax Implications of the Constitution of Each Type of Entity SAS This can be constituted through a private document registered with the Superintendence of Companies ( Superintendencia de Compañías, Valores y Seguros – SCVS). It allows for personalised by-laws, different classes of shares and a simplified management struc - ture. SA and Limited Liability Company (Compañía Limitada – Cía Ltda) These require a public deed granted before a notary public and subsequent registration in the Mercantile Registry. Their by-laws are more standardised and governed strictly by the Companies Law. Mercantile Trust This is constituted via public deed. The settlor trans - fers the title of the real estate to the trust. The trust is governed by a trust agreement, which defines the specific purpose (eg, construction, management or guarantee) and the rights of the beneficiaries. Standard Companies These pay 25% corporate income tax on profits. Divi - dends distributed to local individuals are taxed, but distributions to foreign entities in non-tax haven juris - dictions may benefit from double taxation treaties. Tax Transparency in Trusts Mercantile trusts are generally tax-transparent. If the trust is for administration or guarantee, the tax obliga - tion resides with the beneficiaries. For construction trusts, the vehicle itself pays income tax, but it can act as a shield for project-specific accounting. VAT Benefits Real estate developers (often operating through trusts or companies) are eligible for a VAT refund on pur - chases of goods and services used in the construction of housing projects. Incentives New investments in specific sectors may qualify for income tax reductions or exemptions under the Organic Law for Economic Efficiency.
go Orgánico de Organización Territorial, Autonomía y Descentralización – COOTAD), municipal acts can be challenged through an administrative appeal or, if exhausted, through judicial review before contentious- administrative courts, which may suspend or annul non-compliant permits. Enforcement is driven by the municipality’s power of “administrative self-protection”. Authorities con - duct inspections to ensure adherence to approved licences. Violations empower the municipality to take immediate corrective actions, including the sealing of construction sites, the imposition of monetary fines based on the infraction’s scale and the potential revo - cation of the building licence. 5. Investment Vehicles 5.1 Types of Entities Available to Investors to Hold Real Estate Assets The Ecuadorian legal system offers diverse struc - tures for real estate investment, with the simplified stock company ( sociedad por acciones simplificada – SAS) emerging as the preferred vehicle for acquisi - tions since 2020. Its popularity stems from high flex - ibility, including the ability to be formed by a single shareholder via private documents and the absence of a minimum capital requirement. While the SAS is ideal for private equity-backed developments, tradi - tional corporations ( sociedad anónima – SA) remain the choice for entities planning to list on local stock exchanges. For institutional-grade and large-scale commercial projects, the real estate mercantile trust is the most sophisticated tool. It creates an autonomous patri - mony that ensures bankruptcy remoteness, shield - ing assets from the individual liabilities of the parties involved. Additionally, for stabilised, rent-generating assets, investors utilise securitisation trusts, which function as a local REIT equivalent by issuing par - ticipation certificates traded in the capital markets, providing high liquidity and professional oversight.
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