ECUADOR Trends and Developments Contributed by: Félix Reyes, Lorena Barrazueta, Jorge Sicouret Zea and Karla Condo, Coronel & Pérez
contracts executed within the free-trade zone. One of these benefits is the 0% income tax rate during the first five years counted from the dec - laration of the free-trade zone as such. After this time, operators and users will have a flat rate of 15% for as long as the declaration of the zone is in effect. Additionally, they are exempted from value added tax (VAT), foreign currency outflow tax and all foreign trade taxes. Tax benefits for investors also include exemp - tion from income tax on dividends received as shareholders of a company operating in a free- trade zone. Growing emphasis on data protection In the Ecuadorean business environment, the establishment of internal company policies on data processing and protection is becoming increasingly relevant. In fact, the Constitution of Ecuador expressly recognises the right of indi - viduals to personal data protection. In May 2021, the Organic Law for Personal Data Protection came into effect. For the first time in Ecuador, a specific regulation was established on how the personal data of third parties should be processed and protected by those who have access to it. This law established a sanctioning regime that did not enter into force immediately, since data controllers were given a period of two years to implement the necessary measures following the regulation. As of May 2023, the sanctioning regime came into effect, and in March 2024, the first Super - intendent of Personal Data Protection was appointed. This authority is responsible for enforcing sanctions related to personal data protection. As a result, there is now increased
scrutiny of compliance with data protection reg - ulations in the country. Additionally, since tak - ing office, the Superintendent has begun issuing supplementary regulations. As a result, personal data protection has become more important in M&A transactions, and an additional point of analysis in the due diligence phase is that target companies are following the law on data protection. Increased relevance of ESG-related regulations In recent years, Ecuador has placed greater emphasis on environmental protection and equality policies. For this reason, a series of incentives and programmes have been put in place so that companies can access tax and economic benefits for the implementation of “green” and equality measures. The growing interest of Ecuadorean companies in implement - ing these measures to access the various incen - tives makes them attractive targets for foreign investors seeking to acquire an established busi - ness in Ecuador through M&A operations. One of the recently established tax benefits is the possibility of deducting an additional 100% of the cost of investments in environmental pro - jects related to the protection, conservation, res - toration and repair of water resources. In addition, there are many environmental tax incentives and benefits that have been in place for a longer period. The assessment of the appli - cability of these benefits is a distinguishing cri - terion for companies. Furthermore, with the Organic Law to Promote the Violet Economy, several incentives have been put in place to promote gender equality in the labour field. One of the most noteworthy is
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