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Ecuador Set to Announce New Tax-Free Zones for Exporters

Ecuador’s National Assembly is vigorously debating a legislative bill designed to create tax-free zones for goods and service exporters, with President Guillermo Lasso urging legislators to pass the bill before the end of this month.

After tabling the bill, Lasso said he is hopeful that the tax-free zones would attract at least US$30 billion in foreign investment over the next four years.

The pro-business president, who in 2021 reformed the country’s tax regime, looks set to separate special economic zones (SEZ) from duty-free zones.

The legislation will also lead to the creation of tax-free zones exclusively for fintech and software firms, according to local media reports.

Ecuador is not new to special economic zones. There are as many as 19 SEZs, but barely a few are active. Unfortunately, none have been able to attract as much foreign investment as the country had anticipated.

The proposed zones are strong enough to attract foreign companies, say analysts. Businesses that operate in the economic zones will be completely free of all kinds of duties, surcharges, and taxes.

In addition, businesses operating there may have no need to pay income tax for 10 years.

The new legislation looks somewhat unique.  Some reports say the proposed law will also allow foreign companies to buy land in Ecuador and build their facility before asking the government to exempt them from paying taxes.

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And the government would impose a 0% value-added tax on imports of goods and raw materials used by companies in duty-free zones.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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