Production Incentives

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Production Incentives

  1. 1. Eco-Center of theWorld<br />
  2. 2. Anethicaleconomy<br />Ethical management of our economy, thisis the way in which the National Government has decided to reinforce the rights of our society and of the environment, through innovative and clear regulations that foster efficient entrepreneurial activities that guarantee respect for the environment, laborers and our society in general. <br />
  3. 3. NECESSARY REFORM OF THE STATE<br />
  4. 4. MODEL OF DEVELOPMENT AND ROLE OF THE STATE<br /><ul><li>The Code of Production defines a new and modern legal framework that encourages private investment.
  5. 5. The Code portrays in a concrete way the Government’s model of productive development and economic development.
  6. 6. Dollarizacion is a monetary scheme kept
  7. 7. Promote sustitution of imports
  8. 8. To complement the dollarization model, the Code encourages:
  9. 9. Private domestic investment
  10. 10. Foreign investments that boost Ecuador’s export capacity. </li></li></ul><li>PROTECTION FOR PRIVATE INVESTMENT<br />ECUADORIAN LAWS ALLOW FOR THE PROTECTION OF PRIVATE INVESTMENTS WITH ALL THESE LEGAL INSTRUMENTS<br />
  11. 11. 6<br />ECUADOR: AN INTELLIGENT INVESTMENT<br />7 STRATEGIC REASONS:<br /> COUNTRY WITH THE GREATEST MEGADIVERSITY IN THE WORLD (BY KM2)<br /> GROWING AND STABLE ECONOMY<br /> STRATEGIC LOCATION AND CLIMATE<br /> HUMAN CAPITAL AND SOCIAL INVESTMENT<br /> ACCESS TO INTERNATIONAL MARKETS<br />6. INCENTIVES FOR INVESTMENT WITHIN A CLEAR LEGAL FRAMEWORK<br />7. DOLLARIZED ECONOMY<br />
  12. 12. INCENTIVE<br />OBJECTIVE<br />AFFECTING TAX<br />Exemption from income tax on dividends and profits earned or distributed to companies (except tax havens) or non- residents of Ecuador.<br />Seeks to encourage investment<br />Income Tax<br />Exemption from income generated from the occasional sale of property, shares or units.<br />Seeks to encourage the capital market and access to housing<br />Income Tax<br />Exemption from capital gains, profits or income distributed by mutual funds, pension funds and commercial trusts.<br />Seeks to avoid double taxation<br />Income Tax<br />Exemption from income from certificates of deposits of one year or more.<br />Encourage savings<br />Income Tax<br />Aditional deduction for annual net increase in employment.<br />Encourage employment<br />IRS<br />Deduction of lease payments for international trade of capital goods.<br />Encourage production<br />Income Tax<br />Reduction of 10 percent of the income tax rate on reinvestment equipment and machinery<br />Encourage investment<br />IRS<br />IRS<br />Encourage investment<br />Accelerated depreciation (by request) on durable goods.<br />Zero tax on electricity produced and sold.<br />Exoneration<br />VAT<br />CURRENT INVESTMENT INCENTIVES<br />
  13. 13. INCENTIVES FOR PRIVATE INVESTMENT<br />
  14. 14. GENERAL INCENTIVES FOR INVESTMENTS<br /><ul><li>Reduction of the income tax from 25% to 22%. The reduction will be 1% each year following the approval of the code.
  15. 15. The following are exempt from the minimum tax: the increased expenditures for new jobs or wage increases; acquisition of new assets for the improvement of productivity and technology; cleaner production; and all the incentives in this code.
  16. 16. For new companies: exemption from the payment of the minimum tax during the first 5 years.
  17. 17. Exemption from the tax on foreign exchange outflow for payments going abroad for credits with a deadline of more than one year, and a rate not higher than that authorized by the Central Bank of Ecuador.</li></li></ul><li>GENERAL INCENTIVES FOR INVESTMENTS<br /><ul><li>Additional deductions from the income tax, as mechanisms to encourage the improvement of productivity, innovation and eco-efficient production.
  18. 18. Benefits for the opening of capital, such as deferment of income tax payment for companies that open up capital abroad.
  19. 19. Those established for Special Economic Development Zones, as long as they fulfill the criteria for their approval.</li></li></ul><li>INCENTIVES FOR NEW INVESTMENTS IN PRIORITIZED SECTORS<br /><ul><li>Total exemption of the income tax for 5 years and its down payment for new investments in the prioritized sectors of the economy:
  20. 20. Fresh and processed foods
  21. 21. Forestry products
  22. 22. Metalworking/metal processing
  23. 23. Petro chemistry
  24. 24. Pharmaceutical
  25. 25. Tourism
  26. 26. Renewable energies
  27. 27. Logistical services
  28. 28. Biotechnology and applied software
  29. 29. Sectors of strategic substitution of imports and promotion of exports as determined by the President of the Republic</li></li></ul><li>INCENTIVES FOR SMALL AND MEDIUM ENTERPRISE AND THE POPULAR AND SOLIDARY ECONOMY (EPS)<br /><ul><li>Obligation of inclusive purchasing for the government for these sectors.
  30. 30. Prioritized public investment and specialized programs.
  31. 31. EPS law will be codified as part of the production code when it is sent to and approved by the legislative assembly.</li></li></ul><li>INCENTIVES FOR MICRO AND SMALL ENTERPRISES<br /><ul><li>National Fund of Guarantees: System of guarantees according to their situation (amount and types of collateral).
  32. 32. Regime for entering into the stock market.
  33. 33. Government programs of co-financing for the improvement of productivity, innovation, quality, exportable products and their promotion.
  34. 34. Co-financing programs for entrepreneurship and innovation. </li></li></ul><li>INCENTIVES FOR MEDIUM ENTERPRISES <br /><ul><li>Additional deductions of the income tax, for expenditures and investments in the following areas:</li></ul>Technical training aimed at research, development and technological innovation (up to 1% of the expenditure of annual salaries).<br />Expenditures for the improvement of productivity of the company (up to 1% of the sales). <br />Expenses of international promotion of the company and its products (up to 50% of the promotion and publicity expenses). <br />
  35. 35. INCENTIVES FOR REDUCTION<br />Of theCost of Credit<br /><ul><li>Elimination of the mandatory withholding of income tax, for interest payments going abroad due to credits that have been awarded by or through international financial institutions.
  36. 36. The benefit will not be conceded when the credits are awarded by or through institutions based in tax havens.
  37. 37. Reduction of costs through the elimination of the foreign exchange outflow taxes for financing. </li></li></ul><li>INCENTIVES FOR GREEN PRODUCTION<br /><ul><li>Regarding the income tax, there will be an additional deduction of 100% of expenditures for the purchase of machinery and equipment for a more clean production, and for the implementation of renewable energy systems (solar, wind and other similar ones) or for the mitigation of environmental impact.</li></li></ul><li>INCENTIVES FOR DEPRESSED ZONES<br /><ul><li>The companies that carry out investments in depressed zones will be able to benefit from the additional deduction of 100% of expenses of new jobs generated in that zone for 5 years.
  38. 38. Prioritization of productive investment.
  39. 39. Depressed zones will be determined by indicators such as lower economic, social and human development. </li></li></ul><li><ul><li>Additional reduction of 5% of the income tax for the administrators and operators of the ZEDEs to 17%. If they are in a preferential sector and it is a new investment, the rate of 0% income tax for 5 years applies.
  40. 40. The importation of goods will have a Value Added Tax (VAT) rate of 0%.
  41. 41. Foreign goods will benefit from the exemption of the payment of customs duties while they remain in the ZEDE.
  42. 42. The administrators and operators will have a tax credit for the VAT associated with local purchasing (services, goods and prime/raw materials for productive processes).
  43. 43. Exemption of taxes on foreign exchange outflows in the payment of imports and in the payments going abroad for foreign financing. </li></ul>INCENTIVES FOR ZEDEs (SPECIAL ECONOMIC DEVELOPMENT ZONES)<br />
  44. 44. INCENTIVES FOR PRIVATE COMPANIES TO OPEN UP CAPITAL<br /><ul><li>Companies that decide to open up their capital and sell stock to their employees will enjoy the following benefits:</li></ul>Defer down payment and income tax for 5 years.<br />In case companies opt for a financing credit for purchasing stock, the interests will be exempt from the income tax. <br />
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