LAW FOR FINANCIAL RELIEF AND ECONOMIC STRENGTHENING OF THE GENERATIONS OF ECUADOR

On December 9, 2024, the Law of Financial Relief and Economic Strengthening of the Generations of Ecuador was published in the Official Gazette. The main objective of this law is to generate financial relief from the inconveniences derived from energy rationing through financial incentives that help economic progress, generate greater labor insertion and stimulate entrepreneurship.

Important considerations of this law:

• Unemployment insurance: IESS (Ecuadorian Institute of Social Security) affiliates who register an exit notice in November and December 2024, and January and February 2025, will be able to access unemployment insurance if they meet certain requirements, such as having contributed a minimum of 24 months, 6 of which must be consecutive prior to the contingency.
  
  
• Delay in IESS contributions: Employers will be able to delay the payment of IESS contributions for November and December 2024 without penalty, provided they are paid within a maximum term of 90 days. Workers will maintain IESS and BIESS (IESS’s bank) services during this period.
  
  
• Crossing of debts with IESS: Debtors of IESS may request until February 2025 the crossing of their debts with the balance of their reserve funds, without the need to comply with the requirements for repayment established in the Social Security Law.
  
  
• Deferral of financial obligations: Public and private financial institutions and those of the popular and solidarity sector may establish temporary deferral programs for their debtors’ obligations, without the application of interest in arrears, surcharges or fines.
  
  
• Refinancing of BIESS mortgage loans: BIESS may refinance once again the restructured mortgage loans until September 2024, granting a grace period of 90 days without moratorium interest or additional costs. The debtor must pay the insurance contracted.
  
  
• Tax Credit for the Payment of Income Tax for Fiscal Year 2024: Employers that have not dismissed their employees from their payroll during the months of October, November and December, and that maintain them with the same or better working conditions than initially, will enjoy a tax credit for the liquidation of the Income Tax for fiscal year 2024. This credit may not exceed the value of the tax caused and will be equivalent to a percentage of the employer’s contribution to social security of the remunerations of such period, which will depend on the type of institution and its gross income in the years 2022 and 2023.
  
  
• Exceptional payment plan of the Internal Revenue Service (IRS): The IRS may accept an exceptional payment plan for up to 12 months for taxpayers in arrears as of October 31, 2024, with respect to taxes withheld or collected. The request for access to this plan must be submitted within 60 calendar days after the entry into force of the Law.
  
  
• The payment plan will be in equal monthly installments except for the last one, which will include the recalculation of interest and future interest rates. Its application is conditioned to the strict compliance with the total payment of each of the installments, since noncompliance will cause the termination of the plan. Exceptionally, collection actions and statute of limitations periods will be suspended once the plan is accepted and granted, and orders may be issued only to cease or replace the precautionary measures established to guarantee payment of the obligation.
  
  
• Extinguishment of tax obligations: The General Director of the IRS, as well as the local tax authorities (prefects and mayors), may extinguish the tax obligations of taxpayers, provided they do not exceed the value of a unified basic salary, including interest and fines. The remission applies only if the obligation is in arrears for one year or more and if it is demonstrated that the Tax Administration has already attempted any collection or coercive action. This provision may also apply to non-tax debts owed by Decentralized Autonomous Governments.
  
  
• Amendments to the Internal Tax Regime Law (LRTI): Article 9, paragraph 14 of the LRTI is amended and an exemption is established for the calculation of income tax on income generated by the occasional alienation of real estate of legal entities or individuals. Occasional alienation is considered as that which does not correspond to the ordinary line of business of the taxpayer.
  
  
• Suspension of increases in lease contracts: The application of automatic increase clauses in lease contracts will be suspended, both for renewals and new contracts, between private parties or between private parties and the State.
  
  

© TobarZVS 

This publication contains information of general interest and does not constitute legal opinion on specific issues. Any analysis will require legal advice from the Firm.