Ecuador: Living There - Tax Issues

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Last Updated: Feb 18, 2009

Living There

INDIVIDUAL TAXATION

Residents are taxed on their worldwide income. Married couples are taxed separately.

INCOME TAX

Income is taxed at progressive rates. Expenses and costs incurred in obtaining, maintaining, and preserving the revenues subject to the tax are deductible.

INCOME TAX
TAXABLE INCOME, US$	TAX RATE
Up to US$7,850	nil
US$7,850 - US$10,000	5% on band over US$7,850
US$10,000 - US$12,500	10% on band over US$10,000
US$12,500 - US$15,000	12% on band over US$12,500
US$15,000 - US$30,000	15% on band over US$15,000
US$30,000 - US$45,000	20% on band over US$30,000
US$45,000 - US$60,000	25% on band over US$45,000
US$60,000 - US$80,000	30% on band over US$60,000
Over US$80,000	55% on all income over US$80,000
Source: Global Property Guide

There are no special deductions with regards to the number of children, marital status, age, etc.

Exemptions are applicable to individuals receiving salaries. These exemptions include: dividends, additional benefits, and profit sharing.

RENTAL INCOME
Rental income earned by residents is taxed at progressive income tax rates. Taxable income is computed by deducting the following from the gross rent: interest expense, insurance premiums, taxes and fees charged on the property, depreciation allowance calculated on the property’s cadastral value and 1% of the property’s cadastral value as estimated maintenance expenses.

Itemized extraordinary expenses are deductible only if with permission from the tax authorities.

CAPITAL GAINS
Capital gains on the occasional sale of real property are exempt from income tax.

PROPERTY TAX

Municipal Property Tax (impuesto de propiedad de bienes inmuebles or impuesto a los predios urbanos)

Municipal property tax is levied on land and buildings based on official appraisals reflecting the property’s commercial sale value or the cadastral value. The tax rates are progressive from 0.025% to 0.5%, varying annually in order to cope with inflation.

Allowable deductions are mortgage loans for the acquisition, construction or improvement of the property between 20% and 40% of the principal but it must not be more than 50% of the property’s cadastral value. This deduction is available upon request.

Property taxes are deductible for business income tax purposes.

Ecuador - more data and information

Lawyers (attorneys) with property law practices in Ecuador