The Regulations for the Humanitarian Support Law have been Created

By Decree 1165, the President of Ecuador approved the Regulations to the Organic COVID-19 Humanitarian Support Law. Its main provisions are:

Solidarity measures for social welfare and productive reactivation

• Education Fees: Those who require a reduction in education fees must submit a document to the education institution which justifies the need for a reduction due to a decrease in income. Those who can justify that they have lost their job will be given a discount of up to 25%. Those who can justify a reduction in income will be given a discount in proportion to the reduction up to a maximum of 25%. The discount will be applied during the 5-month period in which the Status of Emergency due to the COVID-19 health emergency has ended. Education institutions can grant discounts at their discretion if they deem this appropriate.
• Tenancy: To prevent evictions from leased properties, the lessee must pay at least 20% of the pending rent. For commercial leases, documents will also be provided to show that income fell by an average of at least 30% during the state of emergency. This minimum payment is not a forgiveness of the obligations owed.
• Utilities: The prohibition on increasing amounts, rates or fees for utilities, including for telecommunications and internet services, corresponds to the basic monthly charge or unit prices of the service. It excludes increases for increased consumption, for additional services brought or default interest generated.
  For the payment of amounts past due and generated during the state of emergency, a mandatory automatic deferral scheme will apply with 12 equal monthly installments with no interest, from July 22, 2020. In case of default, the provisions for default set out in the contract for services will apply, which will also generate default interest. The parties may mutually agree on different payment terms.

• Private Medical Care and Health Insurance: Private medical care companies and health insurance companies will not cancel or suspend coverage under the contracts while the state of emergency for the health emergency ordered in Executive Decree No. 1017 on March 16, 2020 is in effect, including its renewal. Unpaid installments must be prorated for the duration of the contract and under the payment facilities and contractual and financing terms that the parties have accepted by mutual agreement. The member can avail of this benefit once and only during the duration of the state of emergency generated by the COVID-19 health emergency ordered in Executive Decree No. 1017 on March 16, 2020, including its renewal.
• Life Insurance: The rescheduling of life insurance, general insurance and bond installments granted as part of the National Public Procurement System will apply for the duration of the state of emergency for the health emergency ordered in Executive Decree No. 1017 on March 16, 2020, including its renewal. The installments must be rescheduled for up to 6 months and within the period for which the contract is valid.
• Productive Credits: Foundations and civil corporations whose main purpose is the granting of credits will also have access to lines of credit established by the State, aimed at sectors of the popular and solidarity economy.
  
  

Measures to support job stability

• Agreements: The agreements reached by workers and employers will be respected, save for what implies a reduction in the basic wage, a waiver or limitation of the right to a mandatory rest period, minimum occupational health and safety conditions and statutory social security contributions. Any provision that violates the limitations established here will be void.
• Compensation: If the employee to whom the agreement applies is dismissed within the first year that this law is in effect, the corresponding compensation will be calculated with the last remuneration received before the agreement.
• Emergency Special Contract: This can be entered into for full-time or part-time work. The employer must register it in the Work System (Sistema Único de Trabajo) with a clear indication of the duration and reason for which it is executed. If at the end of its duration the employment relationship continues, the contract will be considered to be indefinite. Upon termination of the contract, whether due to completion of the term or its renewal, whether by unilateral decision of the employer or the worker before the agreed term or its renewal, the remunerations and statutory benefits will be paid calculated up to the day on which the contract ends and the severance bonus calculated in accordance with the Work Code.
• Emergency Reduction of Working Hours: The employer must give notice of the reduced working hours that will apply, the period of application and the list of staff to whom the measure will apply. For the duration of the measure, the percentage of the reduction can vary, always within the limits. The social security contribution will be paid according to the remuneration received by the worker while the reduced working hours are in effect. The statutory benefits will be paid applying ‘the proportionality’ in relation to the remuneration that corresponds to the full working hours or in relation to working time.
• Telework: Within 15 days from the publication of the Regulations in the Official Register, the employers who maintain telework must register the corresponding contracts or addendums in the Work System (Sistema Único de Trabajo).
   

Exceptional Agreement with Creditors and Measures for the Management of Obligations

• Exceptional Agreements with Creditors: The agreements can establish the conditions, duration and reduction, capitalization or restructuring of outstanding obligations, regardless of their nature or origin. If the agreement provides for the capitalization of debt, the lending financial entities can, in its place, grant a subordinated credit for a period of no less than 3 years, at a benchmark borrowing rate, with the principal payable upon the due date of the obligation, and the credit will be registered as part of the debtor’s equity.
  • The agreements will be discussed and agreed in mediation.
  • Once the start of the “mediación preconcursal” has been requested, the debtor can continue with its work, business or professional activity. The debtor will refrain from performing any act of administration and provision which exceeds the acts or operations of the ordinary course of business. The creditors will refrain from beginning or continuing any judicial or extrajudicial enforcement against the equity or assets of the debtor while the “acuerdo preconcursal en mediación” is negotiated and will refrain from performing any act aimed at improving the situation they find themselves in with respect to the other creditors.
  • If an agreement is reached with the creditors who represent at least 51% of the debt, the mediation act will be signed which contains the agreement and it will be recorded in a notarial record book, excluding the obligations with related parties. If this debt comprises entities of the private financial system subject to the control of the Superintendency of Banks or the Superintendency of the Popular and Solidarity Economy, at least 51% of the value of the debt must ‘be had’ to reach the agreement.
  • Related parties of the debtor are considered the individuals, companies or legal entities of any kind, in which one of them participates directly or indirectly in the management, administration, control or capital of the debtor; or in which a third party, whether an individual or company domiciled or not in Ecuador, participates directly or indirectly in the management, administration, control or capital of these. If the debtor is an individual, their spouse and relatives up to the fourth degree of consanguinity and second degree of affinity are related parties.
  • The “acuerdo preconcursal” will be binding for both the creditors who execute the mediation act and the dissenting creditors, for those “no concurrentes” and for related parties, excluding institutions of the financial system or under the control of the Superintendency of Banks and Superintendency of the Popular and Solidarity Economy that have as their exclusive course of business the deposit of money of accountholders in the national territory.
  • The agreement will be notified to the public, financial and non-financial institutions, to the dissident creditors, “no concurrentes” and the related parties.
  • The financial obligations and installments or any of the installments that fall due during the mediation process for an “acuerdo preconcursal” will not incur default interest, expenses, contributions, surcharges or fines during the time the mediation process lasts. Nor will they be reported as past due operations in the record of credit data by the entities during this period, provided that the corresponding mediation act is executed.
  • The enforced collection proceedings that have been introduced or are being carried out or in progress are suspended for the duration of the health emergency and for an additional 180 days. This suspension will be maintained for the entire duration of the mediation process initiated with the aim to reach an “acuerdo preconcursal”.

    The legal representative of a legal entity that has availed of one of the exceptional proceedings will not be jointly and severally liable for the obligations arising from its management, save in the cases in which there has been any kind of fraud by the legal representative or administrator to the detriment of one or various creditors.

• Exceptions of the exceptional agreement with creditors: The provisions of the exceptional agreement with creditors and the measures for the management of obligations, established in the law, will not apply in respect of tax obligations that correspond to taxes received or withheld.
  The exceptional proceedings will be applicable within the 3 years counted from the publication of the law in the Official Register.
  
  

Other provisions:

• Tourism as a deductible expense: In the income tax return for fiscal years 2020 and 2021, individuals can deduct payments for domestic tourism as a personal expense, up to 50% of the taxpayer’s total taxable income, but not more than 1.3 times the income tax-free basic allowance for individuals; this item cannot exceed 0.325 times the respective income tax-free basic allowance. The following shall be considered as tourism expenses, among others:
  • Tourist accommodation
  • Passenger transport, including air, sea, river, land transport and the rental of hired vehicles or used for domestic tourism.
  • Tourism operation, packages, tours and others.
  • Tourism intermediation, tourism service agency and organization of events, congresses and conventions.
  • Food and non-alcoholic beverage services purchased by individuals during their tourism activities.
• Interest for the advance payment: On voluntary advance payments of income tax effectively paid and made in accordance with the law, interest will be recognized pursuant to the rate set forth in the Tax Code. In these cases, the interest will be recognized from the date of payment until the date the respective return is filed, but never past the income tax return filing deadline. The interest provided for will be used exclusively for the payment of income tax for the fiscal year corresponding to the voluntary advance payment. If there is an outstanding balance to offset, it can be used in the payment of income tax generated in the previous fiscal years and up to within 3 years. Unused amounts will not be refunded.