Published legislation and draft legislation - Ecuador

Economic Recapitalization Organic Law

Official Register Nº 150

On January 1st the Organic Law came into force, to recapitalize the economy and strengthen the dollarization and modernization of financial management in order to generate economic development in conditions of efficiency, competitiveness, productivity and justice. To do this, as its preamble makes clear, entrepreneurship must be promoted, with particular emphasis on micro-enterprises* and a Solidarity-based Economy for the People.

To achieve these goals, the Law amends the following regulations, among others: the Domestic Tax System Law, the Organic Code for Production, Trade and Investment, the Tax Code, the Corporate Enterprises Act, the Organic Monetary & Financial Code, the Organic Law on the People’s Solidarity-based Economy and the Organic Law for the Prevention, Detection and Eradication of the Crime of Money Laundering and the Financing of Crimes.

The main changes affecting the microfinance sector are as follows:

  • Exemption from Income Tax: the categories of beneficiary have been extended. Thus, financial institutions working with social and solidarity-based undertakings that are in sectors other than those already covered by the regulation** will also benefit from the exemption. In addition, new micro-enterprises that start operating from January 1st, 2018 onwards can sign up for exemptions for three years.
  • Obligatory Accounting: above annual revenues of USD 300,000, natural persons must maintain accounting.
  • Amendment to tax rates: the tax rates on micro- and small enterprises and regular exporters has been cut by three percentage points.
  • Electronic payment systems: the Law incentivizes their use, and in particular requires public overland transport cooperatives and certain institutions that have journey charging systems to use this type of payment system.

* Executive Decree 2086, from September 2004, defines micro-enterprise as follows “an economic unit operated by natural, legal or de facto persons, whether these are formal or informal, of the following characteristics:

-Production, trade or services activities, sub-categories of food, ceramics, dressmaking, […] and similar.

-Self-employed activities with up to 10 co-workers

-Activities with working capital of up to USD 20,000 not including immovable goods or vehicles for work use

** Institutions of religious worship, charitable uses, promotion and development of women, art, education, research, among others.