[BUYING AND SELLING REAL ESTATE IN ECUADOR]
116
property. This contribution is payable by the beneficiaries of the revaluation of the property. The amount to be paid is determined by law and by the reports of the valuation and cadastre unit of the City Hall. d) Provincial Council, Notary and Property Registry Fees: Finally, there are two registration fees: i) the registration tax before the Land Registry, and ii) the registration fee before the Provincial Council, which must be paid by the buyer of the property, unless otherwise agreed. Furthermore, our legal system contemplates a wide range of tax benefits , exemptions and incentives that are important to consider when investing in the country, since they encourage and promote international investment, and are as follows: a) Tax Benefits: There are tax benefits in the purchase of certain construction materials regarding to the Value Added Tax ( Impuesto al Valor Agregado ), decreasing the rate from 15% to 5%. b) Tax incentives: There are a series of economic sectors in which the Ecuadorian State gives special treatment for activities dedicated to tourism, construction, industry, commerce, productive, educational, sports, charitable activities, among others. This means that it will be possible to reduce up to fifty percent of the values that must be paid by the different taxpayers of certain taxes, such as those mentioned in this section of the article. It is very important to mention that these tax incentives will apply in the case of individuals or legal entities that make new investments in the aforementioned activities.
FINANCING
OPTIONS
FOR
PROJECT
DEVELOPERS 1. Mortgage:
A mortgage is a guarantee by which the owner of the property (debtor) offers their property as collateral to secure the fulfillment of a debt, usually in exchange for a loan. For its perfection, a mortage must be executed before Notary Public and registered in the local registry. 2. Guarantee Trust: The guarantee trust is not a form of financing but rather a more efficient and effective security mechanism for investors who finance or lend to real estate projects. This trust operates as follows: the loan applicant establishes a trust by transferring a movable or immovable asset equivalent to the loan amount plus interest. The fiduciary instructions dictate that if the borrower fails to meet the payment obligation within the agreed timeframe, the trustee will transfer the specified asset to the beneficiary, typically the investor or financial institution. No judicial authorization is required to enforce the guarantee, and the complex legal processes typically associated with such operations are avoided. As a result, the guarantee trust is far more attractive to investors, offering a more secure and streamlined method with reduced risk of resource loss in the event of default. Consequently, real estate projects are increasingly using this type of guarantee to secure loans or financing. 3. Direct Financing: Direct financing refers to funds obtained from a source without the involvement of intermediaries. This type of financing is established through agreements between the developer and the financier, bypassing conventional financial institutions.
ILN Real Estate Group – Buying and Selling Real Estate Series
Made with FlippingBook Online newsletter