Companies can establish labor or civil relationships with their Legal Representatives

Attention to Companies in Ecuador!

We want to keep you informed about the latest legal updates that directly affect your business. Starting from July 20, 2023, the Department of Norms and Consultations of the General Directorate of the Internal Revenue Service issued a key communication (Letter No. 917012023OCON001932) in response to a relevant query (No. 1170120230744808).

What does this mean for your company? Pay attention:

Employment or Civil Relationship with Legal Representatives:

It is now possible to establish an employment or civil relationship with the Legal Representative of your company, according to the Labor Code and Circular No. NAC-DGECCGC22-00000004 issued by the Tax Administration.

Deductibility of Compensation in Employment Relationships:

If your Legal Representative is in an employment relationship with the company, the amounts designated for salaries, wages, and other compensations are deductible. But there's an important detail! You must ensure that the payment of employer contributions to the Ecuadorian Social Security Institute related to these items is justified.

Deductible Fees in Civil Relationships:

If your Legal Representative has a civil relationship with the company, the fees they receive are also deductible. However, it's crucial that these fees are backed by invoices issued according to tax regulations. In this case, there's no need to make payments for employer contributions to the Ecuadorian Social Security Institute.

This legal update has a direct impact on your business and can influence how you manage your relationships with Legal Representatives. We're here to help you understand and implement these regulations effectively. Our legal team is ready to answer your questions, provide guidance, and ensure that your company complies with these new guidelines.

At Meythaler & Zambrano, we are committed to keeping you informed and providing specialized advice in this complex legal environment. Don't hesitate to contact us for personalized and clear assistance in this ever-changing legal and tax landscape.

Need help exploring Labor or Civil Relationships with Legal Representatives? Contact us: [email protected]