Following publication in December 2015, the Law on Incentives for Public-Private Partnerships and Foreign Investment took effect on January 1. The law created the Inter-Agency Committee for Public-Private Partnerships (PPP).
The Committee consists of representatives of the Ministry for Coordination of Production, Employment and Competitiveness (MCPEC), the National Secretariat of Planning and Development (SENPLADES) and the Ministry for Coordination of Economic Policy (MCPE). It held session for the first time on February 18.
The Committee’s powers include involvement in the regulations established by the President of the Ecuador, prioritizing PPP projects, granting the law’s tax benefits, and defining guidelines for its application. Policies, rules for tenders and model bidding conditions are being developed with the support of Inter-American Development Bank (IADB) consultants.
Given the lack of secondary regulations, thus far the “Regulations for the public-private collaboration regime” (Executive Decree 582, published March 6, 2015) have been applied subsidiarily. Under the current regulations the Manta Port Authority has received a private initiative project for delegation of the Manta Port. The pre-project was declared to be in the public interest on January 15, and since then additional studies are being conducted to determine the project’s legal, technical and economic viability. A public tender is expected to be called as a PPP within six months.
The benefits of the PPP law include:
1. Tax stability for the term of effectiveness of the investment agreement.
2. Investment agreements for PPP projects will have the same term as the delegated management agreement.
3. Exemption on imports for direct use in project execution, provided the total amount of imports is in line with the criteria set by the Inter-Agency Committee on Public-Private Partnerships for each prioritized sector.
4. Exemption on income deriving from securities representing obligations at 360 calendar days or more and on transactions conducted in connection with such securities.
5. Exoneration from payment of income tax for ten years as of the first tax cycle in which operating income is generated on activities included in the PPP’s purpose.
6. Exoneration from the Foreign Exchange Exit Tax on: payments abroad for imported goods; acquisitions of services; payments to project financers; payments by the company as distribution of dividends or earnings to beneficiaries; and acquisition of shares, rights or participations.
7. Companies created to undertake these projects will act as withholding agents for the Value Added Tax under the same conditions and the same percentages as government corporations.
8. Expenses incurred to obtain, maintain and improve nonexempt income will be deductible.
9. Expenses incurred abroad that are necessary for obtaining income will be deductible.
Additionally, the Ministry of Transport and Public works is continuing its project for roadway delegations. The period for receiving expressions of interest will be open until February 26 for the following PPP projects:
• Vía Santo Domingo – Quevedo
• Vía Quevedo – Jujan
In the coming weeks the texts of policies and regulations for application of the Law on PPP and Foreign Investment Incentives should be available.