Almost $ 500 more investment is needed to start a business in the country compared to establishing an off shore call or company outside of Ecuador.
The whole process of starting a business in Ecuador, which not only includes the constitution procedures, It has a minimum cost of $ 1,629.5, according to the ‘Doing Business’ report prepared by the World Bank.
In total, nine steps must be completed, each with its respective requirements, to complete the entire formal start-up scheme. This without taking into account the problem of financing, especially for micro and small companies trying to start operations.
In comparison, constituting a society in a tax haven it is relatively cheap. Thus, for example, buying a pre-existing company that has a good reputation and corporate history costs around $ 1,162; that is, almost $ 500 less than create a company in Ecuador.
Also, the entire boot process can take a few hours in a tax haven; while in the country, even the most agile modalities such as Simplified Stock Company (SAS) need up to 5 days to become a reality.
If you add up all the costs related to the starting a business (procedures, structure and financing), the initial investment in Ecuador averages more than $ 8,200.
In other countries in the region, such as Peru, Chile and Uruguay, this cost on average is equivalent to between 30% and 35% of what it costs in Ecuador.
In the case of tax havens, even with the hiring of the famous specialized law firms or firms, the process of creating a completely new company can cost between $ 4,200 and $ 5,320.
Previously, these companies did not reveal the name of the owner, but for a few years, anti-money laundering laws have required the legal owner to be listed. However, there is also the possibility that, through corporate governance figures, the law firm appears as the manager of the business.
It is important to remember that having, participating in or belonging to a company that are in tax havens it is not illegal unless several components come together.
Then, according to Ecuadorian law, if the money generates profits or profits abroad, the owner must continue to pay income tax on those profits.
The theme of tax havens returned to public debate after the reports related to the so-called ‘Pandora Papers’. President Guillermo Lasso has been questioned by the offshore companies he had before coming to power; There are even two investigations underway by the State Comptroller General’s Office in this regard.
Hernán Medina, corporate lawyer, explained that, leaving aside the issues of evasion, one of the main reasons for create companies or transferring assets out of the country is shielding oneself from political and economic instability; in addition to Avoid heavy red tape and paperwork.
Business creation rebounded in 2021
Between 2014 and 2020, an average of 8,929 companies were created per year in Ecuador. The lowest level was in 2016 with fewer than 7,250 new businesses. However, during 2021, in the midst of a projection of economic growth that could exceed 3.5% of the Gross Domestic Product (GDP); 13,580 companies have already been created with a cut to October.
In other words, this year there has been an upturn, driven above all by the increasing use of the Simplified Stock Company (SAS) figure. This figure reduces time and eliminates the bulk of face-to-face procedures.
Thus, of the 13,580 Business created, 58% (7,853) are SAS. This means a growth of more than 161% compared to the 3,008 businesses that were constituted electronically during 2020. (JS)
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