Ecuador: Living There - Tax Issues
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Living There
INDIVIDUAL TAXATION
Individual income tax is levied on each individual’s income from all sources worldwide. 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.
Tax reforms in late 2007 brought about major changes in the personal income tax table. Income tax rates for 2008 are as follows:
2008 INCOME TAX RATES |
|
| TAXABLE INCOME, US$ | MARGINAL 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 the ordinary progressive income tax rates. However, the 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.
Capital Gains
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.
Ecuador - more data and information
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