The Constitutional Court declared the unconstitutionality of the Environmental Promotion and State Revenue Optimization Law (hereinafter referred to as the Environmental Promotion Law) due to its form by means of Ruling No. 58-11-IN/22 of January 12, 2022. The reforms introduced by the Environmental Promotion Law will become ineffective as of December 31, 2023.

1. Some reforms in the law declared unconstitutional which will therefore be void as of December 31, 2023:

Tax matters:

  • Se incrementó la tarifa del Impuesto a la Salida de Divisas (ISD) del 2 al 5%.
  • The rate of the International Money Transfer Tax (ISD) was increased from 2% to 5%.
  • The presumptive ISD was created for payments made abroad or values paid for exports that are not remitted to Ecuador.
  • It was established that the ISD paid on raw materials, inputs, and capital goods imports for their incorporation in productive processes is an Income Tax tax credit.
  • The Single Income Tax was created for banana sector activities.
  • The right to the tax credit for VAT paid on the domestic acquisition of chassis and bodywork by taxpayers whose economic activity is the public transportation of passengers by land in urban service buses was clarified.
  • A specific rate and an ad valorem rate of the Excise Tax (ICE) was created for the domestic manufacture or imports of certain goods and services subject to this tax.
  • The Environmental Tax on Non-Returnable Plastic Bottles (IRBP) was created.
  • The Rural Land Tax tax credit was created for the current fiscal year for payments made for afforestation or reforestation programs.
  • The Tax Policy Committee and its rules were created.

Labor matters:

  • The limitation of 3% of the percentage of profits for workers in the mining and hydrocarbon sectors was established.


2. Relevant implications of Ruling No. 58-11-IN/22 and accumulated rulings of the Constitutional Court of Ecuador

The ruling provides for the repeal of the Environmental Promotion Law to take effect as of fiscal year 2023. Therefore, until that date, the legislative reforms that will fill the regulatory gaps that the repeal will clearly generate are expected to be approved and enacted.

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