Taxes In Ecuador

Ecuador experienced an oil boom from 2005 to 2014, resulting in ambitious infrastructure projects and multibillion-dollar initiatives to improve health and education and reduce crime and poverty.

The initiative transformed a once-struggling country into one of Latin America’s highest-ranking countries for standard of living.

Most importantly, expats have caught on to this country’s incredible natural beauty and high quality of life, with thousands of North Americans and Canadians already calling Ecuador home.

Sales Tax

One tax everyone pays is the Value Added Tax. This is known throughout Latin America by its Spanish acronym IVA (and always pronounced EE-vah).

In plain English, this is a sales tax. As in most countries outside the US, the marked price includes tax, and is never added on at the register.

The tax rate in Ecuador is 12%, which is the second-lowest in South America. Elsewhere IVA rates range from 10% (Paraguay) to 22% (Uruguay).

Capital Outflow Tax

You’ll also be subject to a “capital outflow” tax of 5% on all outbound transfers. The threshold for this is transactions that exceed three times the minimum wage (US$1,260 for 2020).

You can avoid this when you sell your home. This is entirely legal, if you take payment outside of Ecuador.

The sale of property has a capital gains tax. It’s calculated as 0.5% on the change in municipal value (rather than the actual gain). It’s usually negligible.

Income Tax

Ecuador has a graduated income tax on Ecuadorian-source income, ranging from 10% to 35%. The current tax law actually says it applies to “all income”.

This is slightly misleading.

Above all, there is no regulation to collect tax on personal income generated from outside Ecuador, so expats don’t pay it. This makes Ecuador a great place to work as a Digital Nomad or some other online venture.

Property Tax

Property taxes are among the lowest in the world. Even on a large house, it’s unusual to see an annual tax bill higher than US$200 per year.
And, if you are older than 65 and have a property worth less than U.S.$190,000 you are exempt from paying property tax.