On October 2019 the city of Muisne issued three tax titles on Sinohydro Corporation Limited for the amount of USD 1 994 898.29. The titles where based on tax determinations made by the city of Muisne for Sinohydro’s alleged economic activity in the city, which would have provoked a business permission tax, a tax on revenue and a construction permission tax regardless of the fact that Sinohydro have never had economic activity in Muisne.

 

This happens in the context of a broader scheme in which certain municipalities in Ecuador are making tax determinations to corporations not having economic activity in their cities, then claiming the funds through coactive enforcement procedures, and –when the tax determinations are overruled by courts– returning credit titles for the amount instead of the funds themselves provoking enormous losses.1 Most tax determinations along this scheme have already been declared illegal and overruled by the courts, though most parties have suffered economic loss regardless.

 

Sinohydro challenged the titles before Muisne’s tax authority on the basis that it had no economic activity in the city. The tax authority –without explanation– refused Sinohydro’s challenge and declared the titles to be valid. As a consequence, the city was enabled to start –at any time– a coactive enforcement procedure to claim the funds. Such a procedure could have had the consequence of Sinohydro never been able to reclaim the funds.

 

Carmigniani Pérez represented Sinohydro in a recourse filed on the 21 of November in the judiciary, challenging Muisne’s tax authority’s decision and the tax titles themselves. The challenge was based on the absence of motivation of the decision and on Sinohydro’s lack of activity in Muisne. As a consequence, Sinohydro was able to suspend the effects of the titles and prevent the coactive enforcement procedure to start. This prevents the city of Muisne of claiming the funds before a court rules on wether the tax determinations are legar or not –averting a situation in which Sinohydro would not be able to reclaim them—.

 

Before, Carmigniani Pérez has successfully represented Holcim in cases of the sort, also preventing economic losses to the company.

Counsel for Sinohydro Corporation Limited

 

Carmigniani Pérez Abogados

 

Partners:

 Eduardo Carmigniani and Hugo García

Senior Associate:

 Roberto Carmigniani

Associates:

 Esteban Pérez and  Daniel Caicedo