property or productive activities in Ecuador of at least USD150,000 or receive monthly foreign income of USD2,510.
Income subject to tax. Individuals residing in Ecuador, who perceive income from abroad subject to income tax in another country, have the right to use the tax paid in that country over said income, as a tax credit of the income tax triggered in Ecuador (up to the amount that corresponds to the attributable tax to said income in Ecuador).
The taxation of various types of income is described below.
Employment income. Taxable income includes income from services rendered under a verbal or written contract of employment, regardless of whether the income is received in cash, in services or in kind.
In general, all employees receive the following annual bonuses, which are exempt from income tax:
• Christmas bonus, known as the thirteenth salary, which equals approximately one-twelfth of their annual compensation.
• Education bonus, known as the fourteenth salary, which equals one Unified Basic Remuneration (USD460 for 2024).
• Retirement funds, which equal one-twelfth of the year’s remuneration (8.33% of annual remuneration). This amount is payable from the second year of employment for the same employer.
Compensation for industrial accidents and death, payments for out-timed dismissal (dismissal without legal notice or legal cause), severance payments and amounts received from pension and retirement funds are also exempt from tax.
Self-employment and business income. Individuals are subject to tax on income from business activities conducted within Ecuador and on income arising from goods and assets located in Ecuador.
Business income includes the income of individuals who are sole proprietors or active members of a partnership in a business in which they have invested capital. Income is taxed at the rates set forth in Rates
Investment income. Dividends are subject to a 10% withholding tax. In addition, this income needed to be incorporated in the global income of the individual for the purposes of applying the progressive tax rates of 0% to 37%, which are applied to taxable income (see Rates).
Royalties received from investments in Ecuador are treated as ordinary income.
Interest paid to residents is added to the taxpayer’s taxable income and taxed at the rates set forth in Rates. Interest paid to residents is subject to withholding tax at a rate of 2%, which is credited against the taxpayer’s annual tax due.
Taxation of employer-provided stock options. In general, benefits derived from stock options are taxed as other income (income that is different from salary or professional wages). Each case must be analyzed separately.
Capital gains derived from sales of shares by individuals and companies duly domiciled in Ecuador are subject to a 10% withholding tax.
Deductions
Deductible expenses. Social security contributions paid by employees are deductible for income tax purposes.
Personal deductions and allowances. As of 2024, individuals are entitled to a discount on their income tax triggered due to their personal expenses (up to the established limits) according to the following rule: An individual may apply a 18% discount over the income tax triggered based on the number of the family dependents and measured with basic basket unit (USD789.57). The following are the maximum amounts. Number of
dependents
2,842.45
Family dependents. Family dependents include spouses, children under 21 years old, persons with any type of disability of any age and parents provided that they all do not receive any taxable income and are economically dependent on the individual.
To apply the deduction, individuals must have local receipts of expenses related to health, education, housing, clothing, food, tourism and pets.
For 2024, the maximum deduction for people with rare, catastrophic or orphan diseases (as defined by the Health Ministry) is 18% over a basic basket unit multiplied by 100.
Third age deduction. For 2024, individuals who are 65 or older can deduct one basic amount of USD11,902 for income tax purposes.
Disability deduction. For 2024, individuals can claim a deduction corresponding to their percentage of disability as shown in the following table (individuals who live in the Galápagos Islands are subject to a different regime).
Business deductions. The following business expenses are deductible for income tax purposes:
• Costs and expenses directly incurred in the generation of taxable income.
• Interest paid on business debts. The interest rate may not exceed the rate fixed by the Central Bank of Ecuador.
Decision 578 of the Andean Community, but this particular agreement has limited application.
F. Temporary visas
An application for a visa may be presented before the Ministry of Foreign Affairs in Ecuador or through its new virtual platform. Foreign nationals may apply at any of these offices for tourist visas and both temporary and permanent work residence visas.
Temporary resident visas are valid for two years and can be renewed multiple times.
G. Temporary visas for labor activities and self-employment
All foreign nationals must obtain temporary visas for labor activities to work legally in Ecuador. Temporary residence visas are valid for two years and can be renewed multiple times, at the discretion of the Ministry of Foreign Affairs.
Depending on the conditions of the assignment, foreign nationals can apply for the following visas:
• Temporary residence visa under labor contract: this type of visa allows expatriates to work in an Ecuadorian company by being part of the local payroll and signing a labor contract.
• Temporary residence visa for legal representation: this type of visa allows expatriates to perform temporary legal representation activities in an Ecuadorian company (for example, general managers, presidents and attorneys). The legal representative must be designated by an appointment or a power of attorney. It must meet the same corporate requirements listed above. However, the company is required to demonstrate a share capital over 100 times the Ecuadorian minimum wage (established at USD460 for 2024).
• Southern Common Market (Mercado Común del Sur, or MERCOSUR) countries temporary residence visa: this type of visa allows expatriates from MERCOSUR member countries, to carry out different legal activities within the country, one of these being labor activities and self-employment.
In addition, the government approved and modified different types of visas in March 2022. The Ministry of Foreign Affairs implemented the following new visas:
• Temporary residence visa for autonomous work, professional services, consulting or through a sponsorship letter: This type of visa allows expatriates to perform professional services for Ecuadorian individuals or companies. This visa has specific requirements.
• Temporary residence visa for remote work: This type of visa allows expatriates to perform work activities for foreign companies remotely. The government stated that this permit would require the applicant to demonstrate a stable labor relationship with a foreign company and remuneration over three times the Ecuadorian minimum wage (USD460 for 2024). This means that the applicant must earn at least USD1,380 monthly or 36 times the Ecuadorian minimum wage per year (USD16,560). However, the norm established that the Ministry of Foreign Affairs is entitled to establish additional requirements and to determine which foreign nationals would be allowed to request this specific type of visa.
A foreign national who wants to begin his or her own business in Ecuador must obtain a temporary residence visa. After 21 months as a temporary resident, he or she will be allowed to obtain a permanent residence visa.
Foreign nationals traveling temporarily in Ecuador may apply for a change of status during their stays in Ecuador without leaving the country under certain rules.
All foreign nationals holding one of the visas described above can obtain an Ecuadorian identification. If the foreign national holds a temporary residence visa, his or her Ecuadorian identification will be issued with a term similar to the duration of the visa.
H. Permanent residence visas
Permanent residence visas are valid for an indefinite period of time. This type of visa allows individuals to obtain an Ecuadorian identification, as well as to work or not work for an Ecuadorian company. In this regard, they are not required to change their migratory category if they are employed by a local company.
Foreign nationals can obtain permanent residence visas if they have stayed in Ecuador as a temporary resident for 21 months.
I. Family and personal considerations
Family members. Depending on the conditions of the expatriate’s assignment, family members can apply for visas as dependents. If the expatriate has a temporary residence visa as a dependent, the spouse is not allowed to work in Ecuador. If the spouse has a temporary residence visa as a holder, the spouse can perform any type of activity in Ecuador. Children can study if they have a temporary or permanent residence visa as a dependent. Such children are not required to obtain a student visa.
Marital property regime. Ecuadorian law provides for a marital property regime that applies to all couples legally married under Ecuadorian law and to foreign couples living in Ecuador who register their marital status with the Ecuadorian officials. Under the regime, all types of property interests arising during the marriage belong to the couple in common. Income earned on jointly held property is divided equally between spouses. Property acquired before the marriage remains separate, unless it is contributed to the marital community at the time of the marriage.
Driver’s permits. A foreign national may drive legally in Ecuador using his or her home country driver’s license. However, after a foreign national obtains a valid visa, he or she must obtain a corresponding Ecuadorian driver’s license.