Income tax in Ecuador

Taxation Researcher | July 30, 2019

INDIVIDUAL TAXATION

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

INCOME TAX

Income is classified according to the following categories: (1) business income, (2) employment income, and (3) income from assets or certain capital gains, rent and interest.

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 2019

TAXABLE INCOME, US$
TAX RATE
Up to US$11,310
0%
US$11,310 – US$14,410
5% on band over US$11,310
US$14,360 – US$18,010
10% on band over US$14,410
US$18,010 – US$21,630
12% on band over US$18,010
US$21,630 – US$43,250
15% on band over US$21,630
US$43,250 – US$64,860
20% on band over US$43,250
US$64,860 – US$86,480
25% on band over US$64,860
US$86,480 – US$115,290
30% on band over US$86,480
Over US$115,290
35% on all income over US$115,290
Source: Global Property Guide

INCOME TAX 2018

TAXABLE INCOME, US$
TAX RATE
Up to US$11,270
0%
US$11,270 – US$14,360
5% on band over US$11,270
US$14,360 – US$17,950
10% on band over US$14,360
US$17,950 – US$21,550
12% on band over US$17,950
US$21,550 – US$43,100
15% on band over US$21,550
US$43,100 – US$64,630
20% on band over US$43,100
US$64,630 – US$86,180
25% on band over US$64,630
US$86,180 – US$114,890
30% on band over US$86,180
Over US$114,890
35% on all income over US$114,890
Source: Global Property Guide

INCOME TAX 2017

TAXABLE INCOME, US$
TAX RATE
Up to US$11,290
0%
US$11,290 - US$14,390
5% on band over US$11,290
US$14,390 - US$17,990
10% on band over US$14,390
US$17,990 - US$21,600
12% on band over US$17,990
US$21,600 - US$43,190
15% on band over US$21,600
US$43,190 - US$64,770
20% on band over US$43,190
US$64,770 - US$86,370
25% on band over US$64,770
US$86,370 - US$115,140
30% on band over US$86,370
Over US$115,140
35% on all income over US$115,140
Source: Global Property Guide

INCOME TAX 2016

TAXABLE INCOME, US$
TAX RATE
Up to US$11,170
0%
US$11,170 - US$14,240
5% on band over US$11,170
US$14,240 - US$17,800
10% on band over US$14,240
US$17,800 - US$21,370
12% on band over US$17,800
US$21,370 - US$42,740
15% on band over US$21,370
US$42,740 - US$64,090
20% on band over US$42,740
US$64,090- US$85,470
25% on band over US$64,090
US$85,470- US$113,940
30% on band over US$85,470
Over US$113,940
35% on all income over US$113,940
Source: Global Property Guide

INCOME TAX 2015

TAXABLE INCOME, US$
TAX RATE
Up to US$10,800
0%
US$10,800- US$11,730
5% on band over US$10,800
US$11,730 - US$17,210
10% on band over US$11,730
US$17,210 - US$20,670
12% on band over US$17,210
US$20,670 - US$41,330
15% on band over US$20,670
US$41,330 - US$61,980
20% on band over US$41,330
US$61,980 - US$82,660
25% on band over US$61,980
US$82,660 - US$110,190
30% on band over US$82,660
Over US$110,190
35% on all income over US$110,190
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.

Ecuador vacation homes

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.

Municipal Tax on Royalty

Municipal tax on royalty is levied at 10% on the capital gains realized from the sale of urban properties. Tax base is calculated by deducting the following from the sales price or market value of the property: acquisition costs, improvement costs, 5% of the earnings realized for each year the property was held prior to the sale.

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 1%, 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.

CORPORATE TAXATION

INCOME TAX

All income and capital gains earned by companies are subject to corporate income tax at a flat rate of 25%. Income-generating expenses are all deductible to arrive at the taxable income.

Depending on the transaction type, income is liable to withholding taxes. Gross income from lease transactions is subject to 8% withholding tax, which is credited against income tax liability.

If the profits are capitalized (i.e. expansion of capital) before 31 December of the assessment year and with the condition that the capitalization of profits must be completed the following year, the corporate income tax is levied at the rate of 15% on the amount reinvested.

Comments

Olga | February 23, 2017

Just before Christmas 2016 new taxes have been passed in Ecuador... with Capital gains tax at 75%.. i am not sure at which level ($$) this starts or if it covers any amount of capital gains. There have been changes in most taxes including inheritance tax..at levels.. such that if this was in US they would have a revolution if they were not poisoned and drugged.

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