Comprehensive details on the enrollment of firms in Ecuador
Here is a collection of valuable insights that is advised to peruse if you intend to establish a corporation in Ecuador:
- Ecuador extends permission for complete foreign ownership.
- The smallest count of equity holders mandated is two (2), and they may consist of individuals and/or juridical bodies.
- Every juridical entity in Ecuador necessitates a president or CEO, who must either be Ecuadorian citizens or foreigners possessing a valid visa.
- Limited and unrestricted liability corporations constitute the most prevalent categories of juridical entities in Ecuador.
- The minimum capital requisite stands at 400 USD for Limited Liability Companies (LLCs) and 800 USD for corporations.
- Every registered juridical entity in this nation must possess a designated fiscal residence.
- The recognized currency is the United States dollar (abbreviated as USD).
- No currency regulation or exchange controls are in effect in Ecuador.
Why invest in Ecuador?
Numerous justifications exist for contemplating investment in Ecuador, attracting the attention of many entrepreneurs. One rationale lies in the country's positioning in the northeastern region of South America, affording trade connectivity to the entirety of Latin America, East Asia, and the western shores of the United States. Furthermore, access to the Panama Canal, Europe, the Middle East, and the broader Asian region is readily available.
Ecuador also benefits from preferential entry for its merchandise into Colombia, Venezuela, Peru, and Bolivia. Moreover, pursuant to an agreement with Mercosur nations, roughly 4,000 products can be exported to Brazil and Argentina without duty charges.
Ecuador offers investment prospects in diverse sectors, encompassing oil, mining, agriculture, agribusiness, tourism, manufacturing, and real estate within Ecuadorian territories. Additionally, one sector that is beginning to gather momentum is telecommunications and public services.
Procedures to enroll a corporation in Ecuador
The Ecuadorian administration has implemented myriad measures to stimulate monetary expansion. The alterations have generated various benefits for international enterprises commencing operations in Ecuador, encompassing:
- Simplification and digitalisation of company start-up processes.
- Reduction of procedures and tax requirements for registering a legal entity.
Anyone thinking of starting a business in Ecuador should take the following considerations into account:
- Select the appropriate corporate form. You must ascertain which juridical structure of enterprise will befit your requirements. Observe that there exist numerous categories of corporations in Ecuador, including joint stock corporation (Sociedad Anónima), limited liability enterprise (Sociedad de Responsabilidad Limitada), and simplified joint stock corporation (Sociedad Anónima Simplificada), partnership, branch office.
- Nominate a lawful proxy (Ecuadorian inhabitant) to act as the agent for the enterprise in front of the regional authorities and endorse juridical instruments on behalf of the enterprise.
- Enroll with the Internal Revenue Service (SRI) and safeguard your intellectual assets.
The primary phases of enterprise enrollment in Ecuador:
- Sanction of the corporate appellation.
- Formulating incorporation manuscripts encompassing all requisite particulars (Constitutional Articles, fiscal/lawful domicile, particulars about the CEO and stakeholders, encompassing their interest in the enterprise).
- Commencing a venture financial institution account and depositing a minimal fund sum.
- Settlement of authorization charges and acquisition of a commercial permit.
Enrollment of an enterprise in Ecuador: Restricted Liability Corporation (SRL, equivalent to LLC)
LLCs in Ecuador epitomize the supremely flexible guise of juridical entity. For the establishment of such an entity, a minimum of 3 stakeholders. Stakeholders may encompass Ecuadorian denizens, aliens, or juridical entities. The minimum capital prerequisite is 400 USD. The lawful representation of the enterprise is executed by a chief executive nominated by the collective gathering of stakeholders. Enrolling an SRL in Ecuador with assets surpassing 1 million USD mandates the appointment of an auditor and the dissemination of scrutinized fiscal reports on an annual basis.
SA registration in Ecuador
Corporations are overseen and regulated by the Superintendencia de Compañías (Superintendency of Companies). Joint Stock Corporations are recorded with at least 1 director and 2 stakeholders, who can be of any citizenship. This commercial arrangement is commonly elected if there is an intention to amass funds from the public. The minimal capital stipulated is 800 USD. The lawful representation of the enterprise is conducted by a chief executive designated by the collective meeting of stakeholders. If the intention is to list the company's shares on the local stock exchange, it is requisite to enroll with the Stock Market Registry (RVM).
Simplified Joint Stock Company (SAS)
In March 2020, Ecuador endorsed a novel category of enterprise, the simplified joint stock company (SAS). Its primary benefit lies in its adaptability when contrasted with alternative corporate configurations. The specifics are expounded upon below:
- This corporation is barred from issuing shares to the public.
- It is viable to enroll an SAS in Ecuador with at least 1 stakeholder, devoid of limitations regarding nationality.
- There exists no minimal capital obligation.
Building partnerships in Ecuador
A cooperation can be organized in two different forms: as a general partnership in which all partners are collectively and individually accountable for all actions taken by any partner on behalf of the firm, or as a limited partnership in which there are comprehensive associates and limited partners. Silent partners do not participate in management. In this arrangement, silent partners refrain from engaging in governance.
Levies in Ecuador
If you aspire to institute a firm in Ecuador, it's imperative to recognize that resident entities are subject to taxation on their global earnings, whereas non-resident entities are solely taxed on earnings acquired from a source within Ecuador.
- Enterprises incorporated in Ecuador, along with subsidiaries and enduring establishments of foreign corporations, employ a prevailing rate of 25% to assessable earnings. Nevertheless, this universal rate might undergo the subsequent adjustments.
- A rate reduction of three percentage points (22%) for micro and small companies, as well as for permanent exporters who maintain or increase employment in the fiscal year.
- An increase of three percentage points (28%) if the company does not fulfil its obligation to report its corporate composition up to the last level of ownership or if there are intermediaries in tax havens whose beneficial owners are Ecuadorian residents in the shareholding chain.
- Value Added Tax (VAT) is imposed at rates of 12% or 0% on the conveyance of goods, importation of goods, and the provision of services, as well as on services provided domestically or on imports. Royalties and intangible assets imported or domestically compensated are also subject to a 12% VAT. Starting from 2020, digital services imports are subject to a 12% VAT.
- Interest payments generally do not undergo withholding tax. This implies that interest disbursements to non-residents are not subject to taxation unless the interest rate surpasses the rate established by the Central Bank. Any surplus is subjected to a withholding tax at a rate of 22%, unless mitigated by a bilateral tax treaty. In case the interest is disbursed to a tax haven dweller, the rate escalates to 25%. Dividends, for the most part, do not incur withholding tax. However, if the recipient is a tax haven resident, a 10% withholding tax on dividends may be applicable. Royalties are subject to a withholding tax at a rate of 22%, unless the rate is curtailed under a Double Taxation Agreement. Royalties disbursed to tax haven inhabitants may be taxed at an elevated rate of 25%.
- Imports of the majority of consumer commodities are levied at a rate of 25%, while intermediary goods are typically imported at a rate of 10% or 15%. Municipalities impose net worth taxes on persons and enterprises. Conveyance levy also exist.
New productive investments
If you contemplate the establishment of a corporation in Ecuador, it's important to acknowledge that domestic legislation furnishes a range of tax inducements for worthwhile new investments in particular economic domains within the nation and in distinct territorial jurisdictions. These incentives encompass income tax immunities - extending to eight years in Quito and Guayaquil and 12 years in other regions of the national expanse - for investments in the subsequent priority sectors:
- Forestry and Agroforestry
- Metal and Mechanical Industry
- Tourism and Film Industry
- Renewable Energy Sources, including Bioenergy or Biomass Energy
- Foreign Economic Logistics Services
- Biotechnology and Software Applications
- Export of Services in Accordance with National Legislation
- Software Development, Manufacturing, and Development of Technological Equipment, Digital Infrastructure, IT Security, Digital Products and Content, and Online Services
- Energy Efficiency Service Firms
- Construction Industry and Sustainable Building Technologies
- Industrial and Agro-Industrial Sectors in Accordance with National Legislation
- Strategic Import Substitution and Export Promotion Sectors as Defined by the President of Ecuador through Executive Decree
- Educational Services
- Cultural and Artistic Services, as Specified by National Legislation
Ecuadorian investment visa
Investing in Ecuador bestows the benefit of procuring a residency permit linked to a distinct investment threshold. Should you choose to invest 25,000 USD or beyond in immovable property in Ecuador or 30,000 USD or higher in an industry, you qualify for an investment visa in Ecuador, conferring upon you provisional residency. Possessing this visa for a duration of three years or more can potentially lead to citizenship. Attaining an Ecuadorian passport also grants you visa-free access to all South American countries.
Ecuador, despite its relatively small geographical footprint, presents numerous prospects for global investors. On the corporate and economic front, the government has enacted significant legislation, including an amendment to the Ecuadorian Company Law, aimed at streamlining the process of registering companies.