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Whether you’re a digital nomad or retiree, there are plenty of reasons to move to Ecuador. This country boasts lush rainforests and snow-capped mountains, a high quality of life at a low cost of living, and both bustling cities and charming small towns. Before you decide to move there, though, you’ll want to consider practical matters, like taxes in Ecuador.
It’s not always easy to find reliable information on foreign countries’ tax systems — but as a tax firm dedicated specifically to US expats, we’re here to help. Below, we’ve put together a thorough but easy-to-read guide on tax implications for Americans who live in Ecuador.
Read on to learn about who has to file a tax return in Ecuador, what Ecuador’s tax rates are, how an international move affects your US tax obligations, and more.
Snapshot of taxes in Ecuador
- Primary tax form(s): Formularios 101 (businesses), 102 (self-employed), 102A (employees)
- Tax deadline: March 10th-28th (individuals), April 9th-28th (businesses)
- Note: Deadlines vary by year
- Reporting website: Servicios de Rentas Internas online portal
- Administrative language(s): Spanish
- US-Ecuador tax treaty? No
- US-Ecuador totalization agreement? No
Understanding Ecuador’s tax system and deadlines
Ecuador’s governing tax body is the Servicio de Rentas Internas (SRI), which is responsible for developing tax policies, educating and assisting taxpayers, collecting taxes, and enforcing tax law.
There are a few different groups who must file a tax return in Ecuador:
- Tax residents whose income exceeds $11,902 in 2024
- Non-tax residents with Ecuador-sourced income
- Businesses registered or operating in Ecuador
Employers file tax returns on their employees’ behalf, so those with no income other than employment income generally do not need to file tax returns.
Tax residents are subject to taxation on their worldwide income, although they can receive Ecuadorian tax credits for any foreign income taxes they pay. Non-tax residents, on the other hand, pay taxes only on their Ecuador-sourced income — aka income derived from activity within Ecuador.
Tax deadlines vary from year to year. Tax returns for 2024 were originally March 10th to the 28th for individuals and April 9th to the 28th for businesses. However, the government announced an extension for certain taxpayers from March 30th to April 5th. You can file your return using the SRI portal or complete, print, and file the relevant paper forms yourself.
Determining Ecuador tax residency
Ecuador’s tax residency definition is simple: Anyone who lives in the country for more than 183 days in a fiscal year — or a 12-month period overlapping two fiscal years — is a tax resident. Foreign nationals with residence visas are also subject to Ecuadorian taxes, no matter how many days they spend outside of the country.
Taxation of income in Ecuador
Like many countries, Ecuador levies personal income taxes at a progressive rate — meaning the more you earn, the higher your tax rates are. The tax system is also marginal, meaning different tax rates apply to different portions (bands) of your income.
Personal income tax (PIT) rates in Ecuador for tax year 2024
For the 2024 tax year, Ecuador tax residents will pay income taxes at the following rates:
| Income (USD) | Tax rate |
| $0 – $11,902 | 0% |
| $11,903 – $15,159 | 5% |
| $15,160 – 19,682 | 10% |
| $19683 – $26,031 | 12% |
| $26,032 – $34,255 | 15% |
| $34,256 – $45,407 | 20% |
| $45,408 – $60,450 | 25% |
| $60,451 – $80,605 | 30% |
| $80,606 – $107,199 | 35% |
| $107,200+ | 37% |
Non-tax residents, on the other hand, pay taxes at a flat rate of 25% on any Ecuador-sourced income — which should be automatically withheld at the source. Note that those who only occasionally work in Ecuador are not subject to Ecuadorian income taxes on the income they receive from services performed there.
Deductions & allowances
Besides making the first $11,902 of your income tax-free, Ecuador offers taxpayers a few different tax breaks.
Employees may deduct their social security contributions from employment-related income, while any education bonuses or holiday bonuses they receive are exempt from taxation. Self-employed individuals, on the other hand, can deduct business expenses.
Other taxes in Ecuador
Capital gains taxes
Capital gains in Ecuador are generally subject to the same tax rates as ordinary income, with a few exceptions:
- Gains from the sale of equity/shares are generally subject to a 10% tax
- Gains from Ecuador’s stock market are generally exempt from taxation if the investments were held for more than 180 days
- Real estate sale gains are subject to a 10% tax, unless the property was held for personal use during 20 years or more
- Interest income is tax-free
Social security taxes
In Ecuador, employees generally pay social security taxes at a rate of 9.45%, with employers contributing an additional 12.15%. Certain taxpayers voluntarily increase their contributions to at least 17.6% in order to receive higher pensions and more robust healthcare.
Since self-employed individuals have no employer to contribute social security taxes, they must pay the full rate of 21.6%.
B!T note: Ecuador does not have a totalization agreement with the US, so Americans living there generally need to pay social security taxes in both countries.
Corporate taxes
Businesses in Ecuador pay taxes at a rate of 22%, 25%, or 28%, depending on their corporate structure and location. New businesses may be able to decrease their rate by 3% to 5% if they meet certain conditions.
Anyone required to keep public accounting records (businesses, self-employed individuals, those earning more than $300,000 of non-employment income per year) must pay a municipal assets tax of .15%.
Property taxes
Ecuador has some of the lowest property tax rates in Latin America. Besides the aforementioned capital gains tax on real estate, property taxes in Ecuador include:
- Municipal property tax: .025% to .5% of a property’s value
- Notary fees, registration fees, & other administrative taxes: Typically 1% to 2% of purchase price
VAT
Ecuador’s value-added tax (VAT) — aka the tax added to the sale of most goods and services — is typically 15%. However, some items are subject to a 0% VAT, including (among others):
- Staple foods & most unprocessed foods
- Medicine
- Paper & books
- Diapers & menstrual products
- Residential rent
- Personal transportation (besides air travel)
- Utilities
- Education
Small business owners must charge VAT to their clients/customers and remit the proceeds to tax authorities each quarter.
Gift, inheritance, & estate taxes
Ecuador levies gift, inheritance, and estate taxes at the same rates as the standard PIT rates: 0% to 37%, depending on the recipient’s overall taxable income.
US taxes for expats in Ecuador
Due to the US’s citizenship-based taxation system, all American citizens and permanent residents are subject to US taxes. Anyone whose income exceeds a certain threshold must file — and potentially pay — federal taxes. In some situations, expats may even need to file a state tax return.
Americans abroad have a tax deadline of June 15th, vs. the standard deadline of April 15th. You can push that back to October 15th upon request. You may be able to extend this even further to December 15th by writing to the IRS. Regardless of when you submit your tax return, though, you must make an estimated tax payment by April 15th.
If you’re also subject to taxes in Ecuador, you risk paying taxes on the same income to two different countries. The good news? The US offers a couple of tax breaks specifically for US expats, including the:
Foreign Tax Credit (FTC)
The FTC gives US expats dollar-for-dollar US tax credits for any foreign taxes that are:
- Legal
- Based on income
- Paid or accrued
- Charged in their name specifically
If you pay taxes at a high rate in Ecuador, this can significantly reduce — or even eliminate — your US tax burden. It may even give you excess US tax credits which you can apply to future tax bills up to ten years after. To claim the FTC, you’ll file Form 1116.
Foreign Earned Income Exclusion (FEIE)
The FEIE, meanwhile, allows qualifying Americans to exclude a certain amount of their foreign-earned income from US taxes. This covers earned income like salary, wages, commission, and bonuses — although it doesn’t cover passive income like dividends, retirement account distributions, or rental income.
For tax year 2023, you could exclude up to $120,000 under the FEIE; for 2024, that figure increases to $126,500 due to inflation. To qualify for the FEIE, you’ll need to meet one of the following tests:
- Physical Presence Test: Stay outside of the US for at least 330 days in a 365-day period overlapping the tax year
- Bona Fide Residence Test: Have lived outside of the US for at least a year and be able to prove it through official documentation if needed (e.g. rental contract, residence card, utility bills, etc.)
As a bonus, passing either of these tests qualifies you for the Foreign Housing Exclusion as well, which helps offset qualifying foreign housing costs (e.g. rent, utilities, parking fees).
To claim the FEIE, you must file Form 2555.
Reporting obligations
While international living comes with some tax perks, it can also add to or change your US reporting obligations. Two of the most common reports expats must file include the:
- Foreign Bank Account Report (FBAR): Required of those with over $10,000 across foreign financial accounts at any point in the year
- Statement of Specified Foreign Assets (Form 8938): Required of those whose foreign assets exceed $200,000 on the last day of the tax year, or $300,000 at any point during the tax year
- Note: Reporting thresholds are different for married couples filing jointly and US-based filers
Resources:
- Ecuador – Overview
- Ecuador – Individual – Tax administration
- Ecuador – Individual – Residence
- Ecuador – Individual – Taxes on personal income
- Ecuador – Individual – Deductions
- Ecuador – Individual – Income determination
- Ecuador – Individual – Other taxes
- Ecuador – Corporate – Taxes on corporate income
- Real Estate Law in Ecuador: A Comprehensive Guide
- Ecuador – Corporate – Other taxes
