Expat Taxes in Ecuador
Expat taxes in Ecuador are simple as long as all of your income originates outside of Ecuador. You will need to pay the IVA on purchases, and U.S citizens have special considerations.
Disclaimer: We are not tax experts. This is for informational purposes only based on our current understanding at the time of this writing. Please consult a qualified tax accountant in Ecuador for help on filing taxes.
Ecuador Expat Income Taxes
If you work online for companies/clients outside Ecuador, or you’re retired and living on a pension or social security, you may or may not need to pay income tax in Ecuador.
Prior to 2021, Ecuador was a Territorial Tax country, meaning they only charged taxes on income earned inside Ecuador. However, a new law was passed in 2021 that made Ecuador a pseudo-Territorial Tax country and the implementation has been very confusing.
Depending on who you ask, you’ll get a different answer so do your research and do what makes you comfortable. We know some expats who report and pay taxes on their global income; others do not. Ecuador doesn’t seem to care either way, but they will certainly take your money without asking any questions.
You will be required to pay income tax on money you earn from sources inside Ecuador, such as a job or a business you own in Ecuador.
If you do earn income from sources inside Ecuador, depending on your situation, you’ll need to file for a RUC or RISE (pronounced rook and ree-say), which will allow you to track and pay taxes.
Ecuador Capital Gains Taxes for Expats
If you have investment income, such as from a CD or home sale, you will need to pay capital gains tax on the profit. However, there is no long term capital gains tax on investments held for 1 year or more. That includes CDs for your investor visa since the CD must be 2 years, but you won’t pay taxes on the interest for a 12 month CD either.
Ecuador IVA (VAT or Sales Tax)
Ecuador also charges a 12% IVA or VAT (value added tax or sales tax) on certain products and services. You won’t pay the IVA on unprepared food such as produce and other food staples, but anything prepared or considered a luxury item will be taxed.
If you are 65 or older, you can file to be reimbursed for up to $92.64 per month. When they ask you if you want your receipt “con datos,” that will allow you to file for the refund.
United States Citizen Taxes in Ecuador
If you’re a United States citizen, you still need to file your taxes in the U.S. and claim ALL domestic and foreign income, including interest and capital gains.
You may qualify for a Foreign Earned Income Exemption ($107,600 for 2020, $108,700 for 2021, $112,000 for 2022, and $120,000 for 2023) if you meet the Physical Presence Test (you must be outside the U.S. for at least 335 full days during all or some portion of the tax year). This exemption applies to income earned inside and/or outside the U.S so it’s a massive tax savings that could more than cover your cost of moving abroad.
If you earn income and pay taxes on it in Ecuador, you may qualify for a Foreign Tax Credit.
The U.S. is one of only 2 countries in the world that taxes based on citizenship instead of residency. The only other country is a small island nation off the coast of Ethiopia called Eritrea that charges a modest 2% income tax to all citizens not living on the island, but very few actually pay it.
Please consult a qualified tax professional with expertise in expat taxes to help you file. We use and recommend Taxes For Expats.
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Hola todos! Welcome to my author bio page! Let's see. Where to begin... I grew up in the country on a lake outside a small Kansas farm town. As soon as I could, I got the hell outta there! Since then, I've lived and/or worked in Kansas City, Washington D.C., Denver, San Francisco, and Ecuador. I started and sold a dotcom, wrote a book about it, started a YouTube channel, and now I write a lot. Amelia and I have embraced the Unconventional Life and we want to help you do it, too!
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