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  1. 1. Econ. Rafael Correa DelgadoPresident of the Republic of Ecuador Registro Oficial™ Quito, wednesday, december 29th, 2010 # 351
  2. 2. SUPPLEMENT Supplement # 351.
  3. 3. Code of Production Code of Production Code of Production Code of Production SUMMARY: NATIONAL ASSEMBLY That Article 283 of The Constitution of the Republic That Article 320 of our Constitution establishes of Ecuador establishes that the economic system is that production in any of its forms will be subject NATIONAL ASSEMBLY CERTIFICATION. social and supportive; recognises a human being to principles and quality standards, sustainability, In my condition of Secretary General of the National as the individual and the aim; tends towards a systemic production, to giving value to work and CODE: Assembly, I certify that the the Project of Law- dynamic and balanced relationship between society, economic and social efficiency; ORGANIC CODE OF PRODUCTION, COMMERCE State and market, in harmony with Nature; and - Organic Code of Production, Commerce and AND INVESTMENT, was discussed and approved has as objective guaranteeing the production and That in Article 334 of the Constitution of the Republic Investment. in the following dates: reproduction of the pertinent conditions that make of Ecuador dictates that the State should promote possible the well-living; equitable access to the components of production, NATIONAL ASSEMBLY FIRST DEBATE: 04-Nov-2010 evading concentration or stockpiling of elements SECOND DEBATE: 16-Nov-2010 That Article 284, of The Constitution of the Republic of and resources for and of production, redistribution Of. No. SAN-010-2038 PARTIAL OBJECTION: 16-Dic-2010 Ecuador establishes the objectives of the economic and suppression of privileges or inequalities of December 22nd, 2010 policy, amongst which are included the stimulation access to them; Quito, December 21st, 2010 of national production, systemic productivity and Engineer Dr. Francisco Vergara O., Secretary General. competitiveness, the accumulation of scientific and That Article 335 of the Constitution of the Republic Hugo Del Pozo technological knowledge, the strategic insertion determines that the State shall regulate, control DIRECTOR OF THE OFFICIAL REGISTRY in the world’s economy and the complementary and intervene whenever needed, in interchanges In your office. COMPLETE NATIONAL ASSEMBLY productive activities in regional integration; and economic transactions; and will sanction exploitation, usury, stockpiling, speculative Mr. President: THE PLENARY That numerals 1, 2 and 3 of Article 285 of The simulation, intervention of goods and services, Constitution of the Republic of Ecuador prescribe as well as any form of detriment to the economic The NATIONAL ASSEMBLY, in accordance to the Bearing in mind: as objects of fiscal policy: 1) the financing of rights and to the public and communal goods. Also attributions that the Constitution of the Republic of services, investments and public properties; 2) the determines that the State shall define a price policy Ecuador and the Organic Law of the Legislature, That numerals 2, 15, 16, 17, 26 and 27 of Article redistribution of income through transferences, directed to the protection of national production; discussed and approved the Project of the 66 of The Constitution of the Republic of Ecuador, duties and adequate subsidies; 3) the generation shall establish the mechanisms for punishment to ORGANIC CODE OF PRODUCTION, COMMERCE establish Constitutional guarantees for persons, of incentives for investment in different sectors of prevent the practice of private monopoly or oligopoly, AND INVESTMENT. said guarantees require a normative that regulates the economy, and for the production of sociably or of abuse of market dominance and other disloyal its practice; desirable and environmentally responsible goods competition practices; In the session of 16th of December 2010, the and services; Plenum of the National Assembly was aware of and That, in accordance with numeral 2 of Article 133 That Article 336 of the Constitution of the Republic pronounced itself on the partial objection presented of The Constitution of the Republic of Ecuador, the That Article 304 of The Constitution of the Republic of Ecuador imposes on the State the duty of by the Constitutional President of the Republic of organic laws have to regulate the exercise of the of Ecuador establishes the objectives of the encouraging and keeping vigilance for fair trade as Ecuador. Constitutional rights and guarantees as the ones commercial policy; amongst which are included a means of accessing to quality goods and services, determined on the above item; developing, strengthening and making dynamic promoting the reduction of intermediation distortions By what has been stated, and as determined the internal markets of the strategic objective and promoting its sustainability, thus assuring Article 138 of the Organic Law of the Legislature, That numeral 2 of Article 276 of The Constitution established in the National Development Plan; market transparency and efficiency, through the we submit the original and certified copy of the of the Republic of Ecuador establishes that the encouragement of competition in equality of text of the approved Project of Law, as well as the economic system has among its objectives the That article 306 of The Constitution of the Republic circumstances and opportunities; certification of the dates of its discussion for its building of a fair, democratic, productive, supportive of Ecuador mandates the State’s obligation for publication on the Official Registry. and sustainable economic system, based on the promoting environmentally responsible exports, That article 304, numeral 6, of the Constitution equitable distribution of the benefits of progress, preferring those that generate more employment of the Republic of Ecuador establishes that the Respectfully, signed) Dr. Francisco Vergara O., of the means for production and the creation of and added value, and in particular those exports economic policy shall have as its goal the avoidance Secretary General. dignified and stable work; from small and intermediate producers and from of monopoly and oligopoly practices, especially in the artisan sector; the private sector, and any others that might affect That numeral 5 of Article 281 of The Constitution the functioning of the markets; of the Republic of Ecuador, establishes the That Article 319 of the Magna Carta recognises responsibilities of the State in order to attain diverse production organisation forms in the economy, That in virtue of the faculties conferred under alimentary sovereignty, responsibilities among amongst others the community, cooperative, public Executive Decree 103, published in the Official which it is included the establishment of preferential or private enterprise, associative, family, domestic, Registry Supplement No. 26 from February financing mechanisms for the small and mid-size autonomous and mixed, so that it will encourage 22nd, 2007, and the Secretary for National producers, aiding them in the acquisition of means the production that will satisfy internal demand and Planning has made and set in motion the for production; guarantee an active participation of Ecuador in the National Plan for Well-Living which considers that, international context;4 5
  4. 4. Code of Production Code of Production Code of Production Code of Production in face of the indicators of migration unemployment In the same manner, it shall be ruled by principles employment that contribute to value all forms o. The encouragement and diversification of and poverty, an economic revolution that leads that allow an international strategic linkup, through of work and that abide with the labour rights of exports; to a reactivation of production, generation of commercial policy, including its instruments for workers. employment becomes necessary, thus making us a application and those that facilitate external p. The expediting of foreign trade operations; society of owners and producers which overcomes commerce through a modern, transparent and e. The generation of an integral system for the present system of social exclusion; in face of efficient customs system. innovation and enterprise, so that science and q. The advancement of activities of popular, that, a proposal is made to democratise the means technology generate a change of the productive supportive and communitarian economy, as for production as “a necessary condition to promote Art. 2. - Productive Activity. - The Productive matrix, and in helping build a society of owners, well as the worldwide strategic insertion and equality and cohesion from the perspective of Activity shall be considered as the process through producers and entrepreneurs; promotion of its productive offer, in accordance integral territorial development, which promotes an which human activity transforms supplies into with the Constitution and the Law; economically social and supportive system”; licit goods and services, socially necessary and f. The guaranteeing of the exercise of rights of the environmentally sustainable, including commercial people to have access, use, and enjoyment of r. The incorporation in all production policies, as a That Objective number 11 of the National Plan for and any other activities that generate added value. the goods and services in equality, optimum transversal element, of the view of gender and Well-Living, published in the Supplement of the quality and in harmony with Nature; of the view of inclusion of economical activities Official Registry Nº 144 of March 5th, 2010, is “ Art.3. - Purpose. - The present code has as its of all people and nationalities; to establish an economic social system that has objective regulating the productive process on its g. The enticement and regulation of all forms solidarity and sustainability”; and, in conformity with stages of manufacture, distribution, interchange, of private investment in productive activities s. The boosting of mechanisms that shall allow fair the attributions and competence of the National trade, consuming, handling of externalities and and sociably desirable and environmentally trade and a transparent market; and, Assembly, and of exercising its Constitutional productive investments leaning towards the acceptable services; faculties issues the following: execution of the Plan for Well-Living. t. The encouragement and support for industrial This normative also seeks to generate and h. The regulation of productive investment in and scientific research, as well as for innovation De conformidad a las atribuciones y competencias consolidate the regulations that boost, move strategic sectors of the economy, in keeping and technological transfer. de la Asamblea Nacional, y en ejercicio de sus forward and incentivise production with more with the National Plan for Development; facultades constitucionales expide el siguiente: value added; seeks to establish the conditions for increasing productivity and for promoting the i. The promotion of technical and professional ORGANIC CODE OF PRODUCTION, transformation of the productive matrix; seeks labour and civil competences, which shall allow COMMERCE AND INVESTMENT to aid in the implementation of instruments for that everyone will obtain results of the change; productive, fair, ecologically efficient development PRELIMINARY TITLE and sustainable in the care of Nature. j. The strengthening of state control to assure that productive activities will not be affected by the Of the Objective and Scope of its Application Art. 4. - Ends. - This legislation has as its main abuse of market share, like monopolistic and ends the following: oligopolistic practices, and in general all those Art. 1. - Scope. - All natural persons, legal entities that will affect the functioning of the market; and other forms of association that perform a a. The Transformation of the Productive Matrix, productive activity, in any part of the National so that it shall have more added value, shall k. The stimulation of the country’s productive Territory, shall be guided by the present normative. boost services, shall be based on knowledge development through a view of systemic and innovation, as well as on sustainable and competitiveness, with an integral vision, ecologically efficient environs. which shall include territorial development and The scope of said normative shall include in its shall articulate in a coordinating fashion the application the productive process as a whole, b. The Democratization of access of the means macroeconomic targets, the basic principles starting with making good use of the elements for production, with special emphasis on micro, and patterns of society’s growth, the actions of for production, the productive transformation, small, and intermediate businesses, as well as the producers and enterprises, and the judicial- the distribution and commercial exchange, the the democratization of the actors of the popular institutional environs; consuming, the taking advantage of positive and supportive economy. externalities and policies that discourage negative l. The impulse of productive growth in zones of externalities. As well it shall encourage at the c. The Fostering of national production, trade and lesser economic expansion; national level all productive activities in all its levels sustainable spending of goods and services, of development; shall encourage the actors of with social and environmental responsibility, as m. The establishment of the fundamental principles the popular and supportive economy, as well as well as fostering its commercialisation and the and instruments for articulation of Ecuador’s encourage the production of goods and services use of new environmentally clean technologies international commercial policy; done by the various forms of association for and alternative energy. production in the economy, recognised by the n. The promotion of the strategic substitution of National Constitution. d. The Generation of quality and dignified imports;6 7
  6. 6. Code of Production Code of Production Code of Production Code of Production BOOK I e. The implementing of a political policy at the Chapter II TITLE II service of the development of all productive Institutionalise Productive Development PRODUCTION DEVELOPMENT, parties of the country in particular; of the parties The Productive Sector. MECHANISMS AND PUBLIC BODY OF of popular and supportive economies, and of Art. 6.- Sector Councils.- It belongs to the COMPETENCE the micro, small and mid size enterprises, and Executive the definition of the policies pertaining The Promotion of Dignified Productive Work guaranteeing food and energetic sovereignty to productive development and the promoting TITLE I as well as economies of scale, fair trade and its of investments through the Sector Council of Art. 8. - Honourable Salary. - The monthly Productive Development and its Institutionalise strategic establishing in the world; Production, which shall be constituted and shall Honourable Salary shall be that which will cover function according to what is established in the the basic needs of a worker as well as of his/her f. The deepening of access to financing al all Regulations of this Code, framing its directives family, and shall be according to the Basic Family Chapter I productive actors, through adequate incentives within the National System of Planning. Basket cost, divided by the number of recipients at The role of the State in the Production and the regulation of the private, public and the home. The cost of the Basic Family Basket and the Development popular and supportive financial system, as well This body shall have a Technical Secretary’s Office number of recipients at home, shall be determined as the encouragement and development of that shall be under the Ministry that presides over by the official ruling agency of Statistical and Art. 5.- Role of the State.- The State shall public banking destined to the developmental the Sector Council of Production and which duties National Census of the country, on an annual base, encourage productive development and change service of the country; shall be the ones established in this Code and in which shall help as the basis for determining of of the production matrix, through determining the rules. This Secretary’s Office shall have the the established Honourable Salary, decided by the of policies and defining and implementing g. The betterment of the productivity of all parties necessary technical areas for designing public Ministry of Labour Relations. instruments and incentives that shall leave behind of the common and supportive economy and policies and a policies program for productive the specialised pattern of dependency of primary of the micro, small and mid size enterprises, fostering and investment, amongst others linked to Art. 9.- Components of the Honourable Salary.- products of low added value. so as to participate in the internal market, the productive sector. The following components shall be added, only and eventually reach economies of scale and and exclusively for the purpose of calculation, to For the transformation of the production matrix, levels of quality production that will allow the Art. 7.- Inter-Sector Participation.- The Inter- determine if a worker gets the monthly Honourable the State shall encourage productive development internationalization of their productive offer; Sector Participation in the development of said Salary: through fostering: policies, shall be guaranteed by the Conductive h. The development of logistics and of infrastructure Council of Productive Development and Foreign a. The monthly salary; a. The economy’s systemic competitiveness, that boosts the productive transformation, for Trade; body strictly for the purposes of consultation by providing public goods such as education, which end the State shall generate the conditions and obligatory institutional summons by who b. The Thirteenth Salary divided by twelve, which health, infrastructure and by assuring the to promote the efficiency of maritime, air and presides the Production Sector Participation period of calculation and payment shall be provision of the necessary basic services, land transportation under an all encompassing Council, in the way dictated by the rules. coherent with that determined in Art. 111 of the such as to boost the productive vocation of focus and a multimodal operation; Code of Work; the territories and the human talent of the This Consultive Council shall be made up of, Ecuadoreans. i. The sustainable production through the amongst others, representatives of the private, c. The Fourteenth Salary divided by twelve, which implementation of technologies and practices mixed, popular and supportive productive period of calculation and payment shall be b. The establishing and use of a regulatory frame for clean production; and sectors, workers and autonomous decentralised coherent with that determined in Art. 113 of the that shall guarantee that no economic party governments. The Consultive Council shall have Code of Work; will abuse its market share, and this shall be j. The expansion through the national territory, ample and plural representation that reflects the established in the law for this matter; of public productive policies so as to eliminate different sectors, territories and sizes of production. d. The variable commissions that follow legitimate the territorial disequilibrium in the process of The Consultive Council shall not have public and usual market practices and which the c. The productive development of sectors with development. resources for its functioning, but the Technical employer pays the employee; strong, positive externalities, so as to add to the Secretary’s Office of the Sector Council for general level of productivity and the development Production, shall provide logistical support for its e. The worker’s amount of share in profits of the of the this Code faculties for innovation of all functioning and for the participation of its members. company, according to the law, divided by economies, through the strengthening of the twelve; establishment that this Code determines; The Consultive Council could propose or suggest technical positions for the creation of policies that f. The additional benefits received by the worker, d. The generation of an innovative, entrepreneurial shall be adopted by the entities responsible for acquired in money, due to collective contract, and associative ecosystem through the drafting policies of production development, investment and that do not constitute legal obligations, and and coordination of public, private, popular foreign trade. This Consultive Council’s integration the periodical voluntary contributions by the and supportive initiatives for innovation and and functioning shall be normed in the rules of this employer to his/her workers, made in currency; transferring of productive technology, and tying code, and in whatever not provisioned for in said and; of investigation to the productive activity; Rules, through a ruling of the Sector Council for Production. g. The Reserve Funds;10 11
  7. 7. Code of Production Code of Production In case a worker had done labour for a period less worker’s income tax, and shall strictly be temporary than one year, the calculation shall be proportional to in nature until the Honourable Salary is achieved. the time of employment. The above mentioned calculation, in no way means TITLE III the proportional monthly payment of the thirteenth and fourteenth salaries, and the workers’ share of Generating an Integral System for Innovation, profit, which amounts shall be paid in full and in the Technical Training, and Entrepreneurship dates assigned in accordance with the law. Art. 11.- System for Innovation, Technical Art. 10.- Economic Compensation for the Training and Entrepreneurship.- The Productive Honourable Salary.- From the start of fiscal year Sector Council shall annually design a plan for te- 2011, the employers mentioned below who have chnical training, which shall become a link in plan- not paid all of their workers an amount equal to or ning the system for innovation, technical training, above the monthly Honourable Salary shall calculate and entrepreneurship, as per the Productive Trans- an additional obligatory economic compensation formation Agenda and the National Development that will be paid to achieve the Honourable Salary Plan. to those workers who have made less than outlined in Art. 9. This system shall link the work of various public and private institutions, in their different stages of The economic compensation mentioned in the growth and with their different tools, in a One-Stop- above subsection, shall be compulsory for those Customer-Service virtual window, decentralized so employers who: it aids in disseminating information on: training for entrepreneurial initiative, financial instruments, risk a. Are persons or legal entities that are required to keep accounting; capital, development banking geared to the finan- ce of enterprises, the National Guarantees Fund, technical assistance and linking of decentralised, BOOK II THE DEVELOPMENT OF PRODUCTIVE INVESTMENT AND ITS INSTRUMENTS. b. At the end the fiscal year had any profits; and, autonomous governments, not-for –profit organi- zations, and universities, amongst others. c. In the fiscal year had paid anticipated income taxes. Art. 12.- Risk Capital.- The State may give funds for risk capital through legal and financial This calculation for the amount of the economic mechanisms. The temporary nature of investments compensation shall be based through the thirty first made by the State shall have been previously agreed of December of that fiscal year and it may be paid upon both for time and form; giving priority to the up until March, once a year, amongst those workers disinvestment of the State in companies where it that did not receive the Honourable Salary during is partial or total owner, in favour of the employees the previous fiscal year. If needed, for this economic and workers of said companies, as well as in favour compensation the employer shall destine an amount of the community where those companies work, equivalent of up to a hundred per cent of the profits within the conditions and times established for each of the fiscal year. project. In case the amount described before does not cover all of the Honourable Salary of all workers with rights to the Economic Compensation, the latter shall be proportionately divided amongst said workers, this compensation coming from the difference between the components of a Honourable Salary and the Honourable Salary as stated in Art. 8 of this Code. This Economic Compensation is additional, shall not be an integral part of the salary, does not constitute taxable income for Social Security nor for the12
  8. 8. Code of Production Code of Production Code of Production Code of Production e. Persons or legal Ecuadorean entities owners Chapter II Constitution prohibits all manners of confiscation. BOOK II that exercise control of an investment made Therefore, confiscation of national or foreign in Ecuadorean territory. Also included under General Principles investments shall not be decreed or executed. this concept are national citizens or legal THE DEVELOPMENT OF PRODUCTIVE Ecuadorean entities, or from the cooperative, Art. 17.- Non-Discriminatory Conduct.- National The State can declare, exceptionally and in INVESTMENT AND ITS INSTRUMENTS associative and community Ecuadorean sectors and foreign investors; societies, companies accordance with the Constitution, the expropriation made in Ecuadorean territory. The national or entities from the cooperative, popular, and of real state with the sole purpose of executing TITLE I Ecuadorean citizens that have dual citizenship, supportive economy, in which these partake as social development plans, environmental or expatriates residents of this country for the well as well as their legally established investments sustainable management, and collective well being, Promotion, Encouragement, and Regulation of purpose of this code, will be considered national in Ecuador, with the limitations provided by in the following the legally established procedures in a Productive Investments investors. Constitution of the Republic, shall have equality of non-discriminatory way, with previous assessment conditions with respect to administration operation, of value, and the payment of fair and adequate Chapter I It shall not be considered a national investment expansion, and transfer of their investments, and indemnification in compliance with the law. that made by a national or foreign company whose shall not be the subject of discriminatory or arbitrary Productive Investment shares, participation property or control, both total measures. Foreign investors and investments shall or majority, belongs to a national citizens or legal have full protection and equal protection of the law, Chapter III Art. 13.- Definitions.- The following definitions are Ecuadorean entity. in such way that they shall have the same protection for the purposes of the present regulation: that Ecuadorean nationals receive within the national The Rights of the Investors Art. 14.- Application.- The new investments shall territory. a. Productive Investment. - Productive Investment not require authorizations of any nature, with the Art. 19.- Rights of the Investors.- The following shall be understood, irrespective of the type of exception of those that the Law expressly determines The State in all its governmental levels, exercising rights shall be recognised to the investors: property, as the cash flow destined to produce and that are derived from the corresponding their public authority, could give differentiated goods and services, to enlarge productive territorial arrangement, having to comply with the treatment, as a way of incentives, in favour of new a. Freedom of production and commercialisation of capacity, and to generate employment sources requisites that this regulation demands to benefit and productive investments, which will be given in licit goods and services, socially desirable and in the national economy. from the incentives stated here. function of sectors, geographical location, or other environmentally sustainable, as well as freedom parameters which they will have to comply with, of pricing, with the exception of those goods and b. New Investment. - For the incentives to apply The benefits of this code shall not apply to those according to the terms provisioned in this Code and services which production and commercialisation to new investments, with the understanding investments by citizens or legal entities domiciled in its Regulations. are regulated by the law. that new investments are cash flow destined to tax havens. The Code shall regulate the parameters increment economic capital, it has to be through of incentive application for all and any sector that Foreign investments shall have a direct b. Access to administrative and control actions that effective investment in productive assets, which request it. complementary role in the strategic sectors of the the State establishes to avoid any speculative will enlarge future production capacity, generate economy that require investment and financing to practice of private monopoly or oligopoly, or a larger production of goods and services, or The benefits and guarantees recognised by this reach the objectives of the National Development abuse of market dominance and other disloyal generate new employment sources, in the Code shall be applied with no detriment to the plan, and subject to applicable legislation. In the competition practices; terms provisioned for in the regulations. The Constitution of the Republic and of other laws, as rest of the economy’s sectors, foreign investors can mere change of proprietorship of productive well to other international agreements duly ratified directly participate without the need of previous c. Freedom of import and export of goods and assets that are already in production, as well as by Ecuador. or additional authorisation provided for national services, with the exceptions of those limits the credit obtained to acquire said assets, under investors. established in the norm and in accordance with this Code does not constitute new investment. Art. 15.- Competent Law Body.- The Productive the international agreements in which Ecuador Sector Council will be the State’s supreme governing Governmental entities shall promote in a priority partakes; c. Foreign Investment. -Investment that is property organ in investment matters. way the attraction of direct foreign investment of foreign national citizens or that is run by according to the needs of, and priorities defined in, d. Free transfer abroad, in currency, of the periodical foreign legal entities domiciled abroad, or that Art. 16.- Manners for Investments.- The ways for the National Plan for Development, the Productive earnings or profits that come from registered implies money not generated in Ecuador. investments and its exceptions shall be established Transformation Agenda, as well as in the different private investment, once the duties concerning in the regulations of this norm. developmental plans of the decentralised the workers’ share, tax obligations, and others d. National Investment. - Investment that is autonomous governments. Additionally, the established in this code are complied with. property of Ecuadorean national citizens or investments made in other sectors of the economy that is run by legal Ecuadorean entities, or by will have the same benefits from State policies of e. Freedom to send resources that are obtained expatriates residents of Ecuador, unless they productive stimulus, in terms of the present norm. through total or partial liquidation of the demonstrate that it is capital not generated in companies in which the registered foreign Ecuador; and, Art. 18.- Ownership Rights.- The property of investment was made, or through the sale investors shall be protected in the terms established of shares, participations, or acquired rights in the Constitution and other pertinent laws. The because of investments made, once the14 15
  9. 9. Code of Production Code of Production Code of Production Code of Production tributary obligations as well as other pertaining a) Draw up plans and projects for the development TITLE III responsibilities, as established in legal norms; and national advancement of national, regional, 2. Sector and for fair regional development: For provincial and local production, in the frame Incentives for Productive Development sectors that contribute to the change of the energy f. Freedom to acquire, transfer or transfer ownership of the Intercultural and Plurinational State, matrix, strategic substitution of imports, fostering of shares participations or rights of ownership to guaranteeing the rights of persons, community Chapter I of exports, as well as for rural development in third parties, in the country or abroad, abiding by and nature; all of the country and urban zones, as specified the formalities provided in the law; General Rules about Incentives and Stimulus in the second corrective disposition (2.2), total b) Support and consolidate the Community for Economic Development exoneration, for five years, of Corporate Income g. Freedom of access to the national financial Productive Partner, for which it shall make Tax to new investment that might develop in these system and to the stock market, to obtain long, programmes and projects with public Art. 23.- Incentives.- The incentives of the sectors. mid- or, long term financial resources. financing to recuperation, support and tributary nature that this norm recognises shall be technological transfer, investigation, training incorporated as reforms to the pertinent tributary 3. For Economically Depressed Zones: besides h. Freedom of access to the mechanisms and commercialization and public purchases norms as stated in the Corrective Dispositions at the from these investments benefiting from the general for promotional, technical, cooperation, mechanisms, amongst others; end of this Code. and sector incentives afore mentioned, new technological assistance and other equivalents; investment in these zones shall be given priority, and, c) Promote equality of opportunities through the Art. 24.- Classification of the Incentives.- The giving, for five years, an additional tax benefit by giving of benefits, incentives and production tax incentives that this code establishes are of three deducting 100% of the cost of contracting new i. Access to the rest of general benefits and means; sorts: employees. incentives provided for in this Code, other laws and applicable normative. d) Promote Nourishment Insurance through 1. General: Those that apply to investments that are preferential financing mechanisms for the carried out in any part of national territory. Art. 25.- The Contents of Investment micro, small, mid-, and big ventures of the They consist of the following: Contracts.- Upon the investor’s initiative, Art. 20.- Tributary Regime.- In tax matters, communities, peoples, indigenous, Afro- investment contracts may be signed, which shall national and foreign investments shall be subject Ecuadorean and montubios nationalities; a. The progressive reduction of three percentage be held through a Public, in which shall appear the to the same Tributary Regime, with the exceptions points of Corporate Income Tax; treatment given to investment, under the scope of provided for in this Code. e) Finance productive projects of the communities, this Code and its Regulation. peoples, indigenous, Afro-Ecuadorean b. Those established for special growth zones, Art. 21.- Obligatory Standards.- National and montubios nationalities that propel the providing they comply with the criteria for their Investment contracts may give stability over tax and foreign investors and their investments, inn agricultural, livestock, artisan, fishing, mining, conformation; incentives, during the time the contract is valid, general shall be subject to observance and faithful industrial, tourist production and others of this as per the prerogatives of this Code. In the same compliance of the laws of this country, and especially segment. c. The additional deductions for calculating manner these investments contracts shall detail the ones relating to the labour, environmental, Corporate Income Tax, as mechanisms to the supervision and regulation mechanisms for the tributary and social security aspects in use. The Branches of the Ministries or national Secretary encourage the improvement of productivity, compliance of the investment parameters expected Offices that have competence to foster the popular, innovation, and eco-efficient production; in each contract. The Council for Sector Production TITLE II supportive and community economy, shall present shall establish the parameters that investments that at the end of the annual economic activity, to the d. The benefits for companies opening the social ask to be subjected to this regime, must comply Productive Development of the Popular, Ministry that presides over the Council for Sector capital in benefit of its workers; with. Supportive and Community Economy Production, reports on the money invested in programmes for the generation of aptitudes, e. The facilities of payment in foreign commerce Art. 22.- Specific Measures.- The Council innovation, entrepreneurship, technology, taxes; Art. 26.- Validity.- Investment contracts shall have of Sector Production shall establish policies for betterment of productivity, associativity, fostering and validity up to fifteen (15) years from the date of its boosting the popular, supportive and community promotion of exportable supply, commercialization, f. The deduction for calculating Corporate Income inception, and its validity shall not limit the authority economy, as well as democratic access the elements amongst others, with the objective of fostering this Tax from the additional compensation on of the State to exercise control and regulation, of production, without detriment to the competence segment of the economy. payment of the Honourable Salary; through its appropriate organisms. of decentralised, autonomous governments and the specific institutionalising created for the entire g. Exoneration of the Currency Transfer Tax for Upon request by the investor, and as long as the development of this segment, in accordance to operations with external financing; Council for Sector Production considers pertinent, what the law regulates on this matter. according to the type of investment that is evolving, h. Exoneration, for five years, of Anticipated investment contracts may be extended for one Additionally, to foster and strengthen the popular, Income Tax Payment for all new investment; time, up to the same originally awarded time period. supportive and community economy, the Productive Sector Council, shall execute the following actions: i. Reforms on calculation of the Anticipated income Tax Payment.16 17
  10. 10. Code of Production Code of Production Code of Production Code of Production Art. 27.- Solution of Conflicts.- In the investment The Technical Secretary Office, in conjunction with c. Non-compliance on the investor’s side to payment of taxes plus the corresponding interest, contract with foreign investors, arbitration clauses the Internal Revenue Service, may make controls execute the minimum conditions for the that would have had to be paid, had there not may be agreed upon to solve controversies that to verify compliance of the criteria that caused authorised investment within the provided time been access to the tax incentives acknowledged might happen between the State and the investors. the incentive, related to the investment made, period for the respective investment project; by this rulings, for the time period in which the be applied. The regulations shall establish the non-compliance took place; excepting fortuitous The controversies between a foreign investor and parameters for execution of this monitoring. d. Transfer of the investment, without abiding by circumstances or force majeure, properly the Ecuadorean State, which had been pursued the requisites and conditions provided for in the documented and accepted by the Council for and exhausted through administrative routes, shall If the beneficiary does not comply with what is regulations. Sector Production /Productive Sector Council. All of try to be resolved in an amicable manner, with direct required, the Technical Secretary Office shall put the above are without prejudice to the assessment dialogue within a period of sixty (60) days. If a direct into knowledge of the Council for Sector Production e. Deceitful non-compliance of labour regulations, rights of the Tax Administration, in compliance with solution between the parties is not arrived at, there /Productive Sector Council, a detailed report with Social Security taxes, or environmental laws of the law. shall be a compulsory mediation instance within the respect to the seriousness of the identified non- the country, verified by the competent authority; three (3) following months from the inception of the compliances, which were not fixed, as well as TÍTTLE IV formal beginning of direct negotiations. recommending the implementation of the pertinent f. Judicially proved deceit in the documents or punishment, depending on the gravity of said non- information provided, which served to obtain Special Economic Development Zones (ZEDE) If after this mediation instance the controversy still compliances. the incentives for investment; exists, the conflict may be subjected to national Chapter I or international arbitration, in accordance to the Art. 30.- Special Ineligibilities.- The President of g. Obstructing or hindering the verification by the valid treaties, of which Ecuador is a party. The the Republic, the Vice president of the Republic the State’s entities competent in this matter, or The Making up of and the Purpose of Special decisions of this Arbitration Tribunal shall be of law, Ministers and secretaries of the nation, and the public resorting to any means to induce these entities Economic Development Zones the applicable legislature shall be the Ecuadorean servants of the governing entity of the production or their public official to err, with the intent of one, and the binding judgment in arbitration, shall policy, neither directly nor through a third party, even benefiting from the benefits that the State Art. 34.- The National Government may authorise be definitive and binding to all parties. on partnership companies that have direct or indirect acknowledges; the establishing of Special Economic Development participation of its capital assets, as well as those who Zones (ZEDE), as a customs destination, in If after six (6) months the administrative route has had had direct or indirect connection in any stage of h. Bribery or intention of bribery of public officials in especially determined spaces within the national been exhausted, the parties have not arrived to the process of access to the incentives, or that may charge of control and supervision of the benefits territory, for setting up new investment, with the an amicable agreement, neither have subjected have a degree of responsibility in the procedure, and acknowledged by this rulings, upon conviction incentives that are detailed in the present norm, to arbitrational jurisdiction for the solution of their for whose activities or functions, it may be reasonably by the competent judicial authority, without which shall be conditioned to the compliance of the conflicts, the controversy shall be shall be brought presumed that they have privileged information detriment to the penal actions that might ensue; specific objective of this Code, in compliance with to the attention of the Ordinary National Justice. Tax of these processes, as well as the spouses of and, the parameters set by the regulations and those issues shall not be subject of arbitration. the dignitaries, public official and employees provisioned for in the Plan of Territorial Order. aforementioned, and anyone not up to date with their i. Benefit from the incentives of those who have Art. 28.- The application of incentives.- The tax , labour, environmental and Social Security duties. been forbidden by law. Art. 35.- Location.- Special Economic Technical Secretary Office of the Council for Sector Development Zones (ZEDE) shall be located in Production /Productive Sector Council, shall Chapter II especially determined spaces within the national coordinate with the pertinent control bodies, the Art. 32.- Revocation.- - Without detriment to the territory, taking into account conditions such as appropriate execution of the benefits recognised Infringements of and sanctions for the civil or penal actions that might ensue performing environmental preservation, territoriality, potential for each investment project, not being able to investors any of the causals provided for in the previous of each site, road infrastructure, basic services, demand from the investors other requisites asides Article, shall generate the revocation of the connectivity to other parts of the country, amongst from the ones established in this legislation. Art. 31.- Infringements.- The following shall granted benefits. The revocation provided for in others, previously determined by the ruling constitute causal of infringements by investors who this chapter, shall be decided through a resolution body in productive development matters, and in Art. 29.- Monitoring.- The monitoring of the benefit from the incentives provisioned by this ruling: motioned by the Technical Secretary Office of the coordination with the body in charge of National duties taken on by the investors, be them legal or Council for Sector Production /Productive Sector Planning, and shall be the subject of special contractual, shall be in charge of Secretary Office a. Non-compliance on the side of the investors, of Council. The investor, upon whom sanctions were treatment in regards to foreign trade, tax and of the Council for Sector Production /Productive making timely contributions or acquisitions to imposed, can present an administrative appeal financial reporting. Sector Council. which they have committed themselves, within before this Council, following the procedures the planned period of time for the respective established in the Statute of the Executive’s Judicial Art. 36.- Types.- Special Economic Development The Internal Revenue Service shall send to the investment project; and Administrative System. Zones (ZEDE) may be the following types: Technical Secretary Office, a quarterly list of the new companies that have applied for the incentives, so b. Total or partial withdrawal of the investment, as Art. 33.- If the grounds for revoking are any of a. For carrying on activities for transfer and that the latter entity shall make an electronic registry long as this implies non-compliance of legal or the established in literals e, f, g, h, I, of Art. 31, disaggregation of technology and innovation. with this information. contractual obligations; it shall be additionally determined what are the In these zones all types of ventures and reimbursements of the given incentives, and the projects for technological development,18 19
  11. 11. Code of Production Code of Production Code of Production Code of Production electronic innovation, biodiversity, sustainable sector that is taking place in the authorised zone, d. Resolve the queries that might arise with respect the interested party may ask, under the initiative environmental or energy improvements; and that the ZEDE has, within its constituent to the application of this code in regards to the of public sector institutions or of decentralised, instrument, the authorisation to operate under the Special Economic Development Zones; autonomous governments. b. For executing operations of industrial typology that corresponds to the activity that may Investment used for the growth in these zones can diversification, that may be of all types of be installed. e. Impose sanctions set in this regulation to those be public, private, or mixed. Also, the managing innovative industrial enterprises, especially administrators and operators that do not company as well as the operators that set up in directed towards the export of goods with the Art. 37.- Customs Controls.- The people and comply with the convened upon dispositions for said zones can be private individuals or legal use of quality employment. In these zones, it is transportation means that go in or out of a ZEDE, its functioning; entities, private, public, mixed, national, or foreign. allowed to carry on all types of active perfecting its boundaries, and the entry and exit points of In order to evaluate the convenience of authorising activities like: transformation of, manufacturing the ZEDE, shall be under vigilance of Customs f. Provide the general and specific requirements, the set up of a Special Economic Development of (including assembly, and adaptation to Administration. Custom control may be carried out including those of national origin and value Zones (ZEDE), a general description shall other merchandise) and repair of merchandise, before entering, during the stay of the merchandise added, so that transformed manufactured be required, which will include the requisites (including its restoration or conversion) in the zone, or after its exit. goods (including assembly, joining and established in the rules of this norm. especially of all types of goods for export and adaptations to other merchandise) or repaired A ZEDE shall not be created in spaces that are the strategic substitution of imports; and; The procedures for control that shall be established (including its restoration or conditioning) part of the National System for Protected Areas, Customs Administration, shall not constitute an within Special Economic Development Zones or of National Forestry Heritage, or that have been c. For developing logistical services, such obstacle for the flow of productive processes (ZEDE) may be nationalised, with or without declared Protected Woods or Protected Vegetation as: storing of cargo with consolidation and taking place in the ZEDE, and shall be simplified for total payment or partial payment of duties. To or that are fragile ecosystems. deconsolidation, classification, labelling, the entering and exiting of the merchandises from the effect of establishing this procedure, the In the license to operate the ZEDE, there may be packaging, repackaging, refrigeration, inventory these territories. customs value of the merchandise that may be an itemization of the incentives that apply to each management, dry ports management or inside nationalised shall be taken into account, having particular case, both for managers as well as for cargo terminals, coordination of national and Art. 38.- Administrative Statute for Settlement.- to subtract the national added value and/or the operators. international distribution of merchandise, as well The Special Economic Development Zones (ZEDE), value of national or nationalised goods that have as maintenance or repair of vessels, airplanes shall be created through authorization from the been incorporated to the production process of Chapter II and land transportation vehicles for the Council for Sector Production /Productive Sector the good to be nationalised, the compliance to transport of merchandise. Preferably these type Council, taking into account the potential economic the regulations on origin of national products for Managers and Operators of the Special of zones shall be set up inside of or adjacent growth of the territories where the especial zones export, amongst other, should it be appropriate. Economic Development Zones (ZEDE) to seaports and airports, or near border zones. are set up, the objectives, plans and strategies of These procedures will be exclusively for the Exclusive storage of cargo or stocking shall not the National Development Plan, the Productive calculation of tariff rights. To the effect of Art. 41.- Managers of ZEDE.- The legal entities be authorised within this type of zones. The Transformation Agenda, and any other regional plans, payment and collection of Value Added Tax private, public, or of mixed economy, national logistical services shall be directed to promote based on the requirements and formalities that shall (VAT), the IRS’s established procedures shall be or foreign, that may make a request for it, may the physical facilities of seaports, airports and be determined in the regulations of this code. followed; constitute themselves in managers of Special border crossings, that shall serve to further Economic Development Zones (ZEDE), as long as the positive net value of foreign trade and Authorization shall be granted for a period of twenty g. Verify, in coordination with the environmental they obtain permission to do one of the activities local supplying under allowed parameters, in (20) years, which can be extended, subject to the entity in charge, that the management in the described in Art. 36 of the present Code. Its function compliance with the requirements established evaluation established in the Regulations, and may Special Economic Development Zones (ZEDE) shall be the growth, management and operational on the Regulations of this Code. only be revoked before the time period convened are not creating environmental impacts that control of the ZEDE, in congruence with the duties upon by having verified any infringements that as a gravely affect the region; of the by-laws of this Code and the ones that shall The goods that shall be part of these processes, result revoke the authorization. be determined by the Productive Sector Council. shall serve to diversify the supply of exports; h. The rest that the Regulation of this Code however, its nationalization shall be authorised Art. 39.- Public Jurisdiction.- The following shall establishes. The responsibilities and control processes with for consumption within the country in those be the attributions of Council for Sector Production which the managers shall comply, shall be percentages of production that the ruling of the /Productive Sector Council, for the establishment of To carry on supervision and operative controls of established by the Productive Sector Council present Code determines. These limits shall not ZEDE: the running and compliance with the objectives of apply to the goods obtained from the processes of the Special Economic Development Zones (ZEDE), Art. 42.- Operators of ZEDE.- Operators of transfer and innovation of technology. a. Dictate the general policies for functioning and the Ministry responsible for industrial fostering, ZEDE are individuals or legal entities, public, supervision of the ZEDE; shall provide an executive authority of the policies private or mixed, national or foreign proposed by Private individuals or legal entities that establish that may be established by the Council for Sector the ZEDE’s managing company and authorised by themselves in the special zones, may operate b. Authorise the set up of Special Economic Production /Productive Sector Council, in relation the Productive Sector Council, which may perform exclusively in one of the aforementioned ways, Development Zones (ZEDE) that comply with to the ZEDE. authorised activities in these zones of national or may diversify their operations within the same the provided legal requirements; territory, for which boundaries have been set. territory, as long as the variations of activities befit c. Qualify and authorise administrators and Art. 40.- Request for ZEDE.- To set up a the expedition of productive linking of the economic operators of ZEDE; Special Economic Development Zone (ZEDE),20 21
  12. 12. Code of Production Code of Production Code of Production Code of Production Operators of ZEDE may exclusively perform the imposed for infractions made, according to this the deed or omission done, without prejudice of e. Not compliance of established procedures for activities for which they were authorised in their Code and its Applicable Regulations. civil and penal actions that take place. entry and exit of merchandise of the Special corresponding qualification, under the terms of Economic Development Zones (ZEDE); this Code, its by-laws, in the befitting customs Art. 46.- Customs and Foreign Trade Art. 50.- Minor Infringements.- The following legislation and the norm passed by the Productive Treatment. Because it is an exceptional judicial are considered minor infringements punished with f. For non-compliance of the chronograms Sector Council. structure, Special Economic Development written reprimand or fine. regarding work, equipment and investment, Zones (ZEDE) both for managers as well as for which shall be carried out in the times In the same manner, they shall ascertain that operators, shall receive the Customs treatment a. The non-compliance of duties of the manager, determined in the documents that were the base their activities comply with the parameters that that the legal Customs Regime grants them, which shall be in the authorisation and that do for qualifying a Special Economic Development the labour and environmental norm, national and exempting duty payments on foreign merchandise not constitute serious infringements; Zones’ (ZEDE’s) Operator, or for the granting of international, through licensed environmental that enter said zones for the performance of the authorisation as Manager; processes if needed, technology transfers and local authorised processes. The procedures for entry b. When the Operator does not inform the Manager personnel training. and exit of ZEDE’s merchandise, as well as the of entry, use, and exit of goods and products g. The non-compliance of any other regulation not usage of waste, shrinkage and surplus, their to be manufactured, transformed, processed, provided for as a serious infringement. Art. 43.- Prohibited Links.- The managers shall possible nationalisation, re-export or destruction of commercialised, or used, as well as the use of not have simultaneously the license of operator, deteriorated merchandise, shall be regulated by the labour and sale of currency that are made in the Art. 51.- Serious Infringements.- Serious neither shall they have any economic or company rules of this Code. country, within the time period provided for in infringements shall be those behaviors that imply a links with the rest of ZEDE’s operators, under the Regulations. performance inexcusably lacking in thoroughness penalty of revocation. To the effect of operations, this Code shall establish and carefulness, or those in which there is a the parameters in which the entry of merchandise c. For not presenting the Internal Regulations relapsing of a minor infringement. Art. 44.- Support Services.- Any individuals to Special Economic Development Zones (ZEDE), for the operation of each Special Economic or legal entities, public or private, that want to shall be considered an export, and also for when Development Zones (ZEDE) within the stipulated The following are serious infringements punished set up a Special Economic Development Zones goods coming from Special Economic Development time period; with interruption, cancellation of qualification as (ZEDE), to provide support services, or support Zones (ZEDE) enter the national customs territory, operator, or the revocation of authorisation: to the operators set up in the authorised zone, shall be considered an import d. When the Administrators do not keep the shall present the request to the respective following information through organized, a. Non-compliance of any of the objectives management company, which will approve or deny Art. 47.- Entry to another regime.- Capital assets computerised systems, on line with the indicated in the authorization for Special the request upon a previous favourable ruling from entering the country through a temporary or free Internal Revenue System, the Ecuadorean Economic Development Zones (ZEDE), within the Technical-Operational Unit, responsible for zone of foreign trade may finish its regime with Customs Service, and the Special Economic the stipulated time period; exercising supervision and control of the ZEDE. the re-export of the assets to a Special Economic Development Zones (ZEDE): Development Zones (ZEDE), as long as the operator b. The non-compliance with the prohibition of non The companies that want to set up support services has requested its respective entry for use in 1. Entry and exit of merchandise of Special linkage provided for Managers and Operators; for the operators of Special Economic Development authorised activities. Economic Development Zones (ZEDE) with Zones (ZEDE) shall comply with all security and origin and destination identification; c. When the Managers do not verify and control control regulations that are a by-product of this Art. 48.- Valuation of Capital Assets.- The assets the activities of their Operators, using the Code, its regulations, as well as the directives that of foreign origin used in an authorised zone, for 2. The charts of contents of raw materials established legal mechanisms in this Code, Sector Productive Council shall issue. In the case of nationalization effects, shall be valued considering that shall be converted into intermediate its Regulation and the other norms applicable, private financial institutions, national or foreign, they the state in which they are at the moment of or final products in the Special Economic informing of infringements to the pertinent shall obtain authorisation from the Superintendent registering documents for the Statement of Use. Development Zones (ZEDE), bodies, such as to adopt pertinent administrative of Banks, which shall set the requirements with and legal measures; which these companies must abide. Chapter III 3. The partial processing operations to which the Norm refers; d. Refusal to, admit entry to, verification of, or Infringements and Sanctions for Special audits of Special Economic Development Art. 45.- Responsibilities- The operators and Economic Development Zones (ZEDE) 4. The authorised change of regime; Zones (ZEDE) by its appropriate administrative managers of Special Economic Development bodies, or by the agreements for each case, or Zones (ZEDE), with regards to income, possession, Art. 49.- Infringements.- Infringements for non- 5. The inventories of its Operators; obstruction of these practises; maintenance and final destination of all merchandise compliance of provisions for Special Economic introduced or processed within the authorised Development Zones (ZEDE) shall be classified 6. The tax-free transactions made; and e. The entry into Special Economic Development zones, shall have solidarity responsibility and shall as minor or serious. The punishments provided Zones (ZEDE) of merchandises such as: arms, legally be held accountable for the adequate and for shall be applied by the controlling Technical 7. Sales made within de territory of Special explosives and ammunition, illegal drugs of any legal use and destination of said merchandise. The Operative Unit of special zones or by the Productive Economic Development Zones (ZEDE), with nature, or products that are against health, established solidarity responsibility applies to unmet Sector Council in accordance to their competence the buyers’ identification. environment, and public safety, or morals, Customs Tax duties, and the monetary punishments and considering the gravity and consequences of that do not have express authorisation from22 23