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.
Ecuador Expat Income Taxes
If you work online for companies/clients outside Ecuador, or you’re retired living on a pension or social security, you don’t need to pay income tax in Ecuador.
You only need 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.
Please consult a qualified tax accountant in Ecuador for help on filing 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 and claim ALL foreign income, including interest and capital gains. You will get a foreign earned income tax credit, but you still need to report all your earnings or face a potential audit and fines.
After the foreign earned income tax credit is deducted, you’ll be taxed according to your marginal tax bracket as if you’re still living in the U.S. And all income earned inside the U.S. from your job or clients will still be taxed at the full rate.
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 that charges a modest 2% tax to all citizens not living on the island.
Please consult a qualified tax professional in the U.S. to help file your taxes.
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