Overview of Ecuador's investment environment
Located in northwestern South America, Ecuador is the only country in Latin America to use the US dollar as its official currency. This unique advantage eliminates exchange rate risk and provides a stable monetary environment for foreign investors. With its abundant natural resources, strategic location, and continuously improving business environment, Ecuador is an ideal gateway for Chinese companies to enter the South American market.
Key Benefits
- Dollarized economy: using the US dollar since 2000, eliminating exchange rate risks
- Strategic location: pacific coast, a hub connecting North and South America
- Rich in resources: a major exporter of oil, minerals, and agricultural products
- Tax incentives: new investments can enjoy tax breaks for up to 12 years
- New Company Law: SAS Simplified Joint Stock Company will be launched in 2020, with registered capital of only US$1
China-Ecuador economic and trade relations
China is Ecuador's second-largest trading partner. The two countries enjoy close cooperation in energy, infrastructure, mining, and other sectors. Ecuador was the first South American country to sign a free trade agreement with China, providing preferential market access for Chinese companies. With the implementation of the free trade agreement, an increasing number of Chinese companies are choosing to establish regional headquarters in Ecuador.
Comparison of Company Types
Ecuador offers a variety of corporate forms for foreign investors. The new SAS company, approved in March 2020, is popular for its flexibility and low barriers to entry:
| Compare Projects | SAS Simplified AG | Limited Liability Company (Ltda.) | Joint Stock Company (SA) |
|---|---|---|---|
| Minimum number of shareholders | 1 person (can be a one-person company) | 2-15 people | More than 2 people |
| Minimum registered capital | $1 | $400 | $800 |
| Management structure | Flexible (no board of directors required) | General Manager Management | Board Governance |
| Share transfer | Free transfer | Requires consent from other shareholders | Free transfer |
| Establishment time | 10-15 days | 15-20 days | 20-25 days |
| Applicable situations | Startups, SMEs | Traditional small and medium-sized enterprises | Large enterprises, listed |
Recommendations
For most Chinese investors, we strongly recommend the SAS (Simplified Stock Company) form. This is a new type of company introduced by the Ecuadorian government in March 2020. It combines the flexibility of a limited liability company with the advantages of a stock company, making it particularly suitable for foreign investors and startups.
Registration requirements
Basic Requirements
- Company name: the name must be reserved with the Company Regulatory Authority to ensure uniqueness
- Registered address: must have a physical office address in Ecuador
- Legal representative: can be a foreigner, but must have an Ecuadorian tax number
- Shareholder requirements: SAS allows 100% foreign investment and can be solely owned by one person
- Business scope: all business activities must be clearly listed
Special Documents for Foreign Investors
Foreign shareholders need to prepare the following documents to establish a company in Ecuador:
- Copy of passport (notarized and certified required)
- Criminal record certificate (required in some cases)
- Power of attorney (if not applying in person)
- Proof of source of funds
- Parent company registration certificate (if the shareholder is a company)
- Letter of Intent
Note: All foreign documents must be apostille or legalized by a consular authority and translated into Spanish. We can assist with all legalization procedures.
Registration Process
Company name reservation (1-2 days)
Book a unique company name with the Ecuadorian Superintendent of Companies
Preparation of legal documents (2-3 days)
Drafting necessary documents such as company articles of association and shareholders' agreement
Open a bank account (1-2 days)
Open a company account in an Ecuadorian bank and deposit the registered capital
Business registration (3-5 days)
Complete the company registration at the Commercial Registry and obtain the registration certificate
Tax registration RUC (2-3 days)
Register with the tax bureau to obtain a unified taxpayer registration number
Municipal permit (3-5 days)
Apply for the corresponding municipal business license according to the business type
Time and cost
Registration Time
- SAS simplified joint stock company: 10-15 working days
- Limited Liability Company: 15-20 working days
- Joint Stock Company SA: 20-25 working days
Cost Structure
Ecuador company registration fees mainly include:
- Government fees: approximately $500-1,000
- Notarization fee: approximately US$300-500
- Registered capital: SAS only needs $1, Ltda needs $400, SA needs $800
- Certified translation: approximately US$200-400 per copy
- Legal fees: determined by scope of services and company type
Dollarization Advantages
Ecuador uses the US dollar as its official currency, meaning your investments are protected from exchange rate fluctuations. All business transactions, bank accounts, and financial statements are denominated in US dollars, greatly simplifying international business operations and making it particularly suitable for businesses engaged in import and export trade.
Post-registration matters
After the company is successfully registered, the following important matters need to be completed:
1. Accounting compliance requirements
- Establishing an accounting record system that complies with IFRS standards
- Monthly tax returns
- Maintain complete financial records
- Annual financial statement submission
2. Compliance with labor laws and regulations
- Register with the Social Security System (IESS)
- Pay social insurance for employees
- Comply with Ecuadorian labor laws
- Develop labor contracts that comply with local laws
3. Annual obligations
- Submit annual financial statements
- Update company information
- Renewal of business license
- Archiving of shareholder meeting minutes
4. Foreign exchange management
- Understanding the 5% Capital Outflow Tax (ISD)
- Reasonable planning of cash flow
- Optimizing taxation through tax treaties
- Maintaining compliant foreign exchange operation records
Taxation Points
Main taxes
- Corporate income tax: 25% (standard rate)
- Value Added Tax (IVA): 12% (standard rate, 0% for exports)
- Capital outflow tax (ISD): 5% (for overseas remittances)
- Withholding tax: 0% on dividend distributions (residents), 25% (non-residents)
- Municipal tax: depending on the regulations of each city, usually 0.1-0.3% of turnover
Tax incentives
Ecuador offers a wealth of tax incentives for new investments:
- New investment incentives: qualified new investments can enjoy income tax exemptions for up to 12 years
- Priority industries: agriculture, manufacturing, tourism, etc. enjoy special preferential treatment
- Export incentives: 0% VAT on exported products%
- Reinvestment tax exemption: 10% income tax exemption for profit reinvestment
- Special Economic Zones: investing in specific economic zones enjoys additional benefits
Capital Outflow Tax (ISD) Planning
Ecuador imposes a 5% capital outflow tax on remittances. However, certain exemptions are available, such as payments for imported raw materials and equipment. Businesses are advised to plan their capital flows appropriately and take advantage of these exemptions. Our tax team can provide expert advice.