Ecuador Taxation

[Jingthing]

Taxation: Taxes have been subject to frequent change. The main taxes in Ecuador are an income tax levied at a rate of up to 25%, and a value-added tax (VAT) levied at 12%, but there are proposals to cut the VAT rate by 2 percentage points and increase the ceiling for income tax to 35%. Private firms must distribute 15% of profits among their employees.

The Economist

I have a few backup country ideas in case my Thailand adventure sours (actually only two now, Phlippines and Ecuador).

Does anyone know about the tax situation in Ecuador? I know they have a flat 25 percent tax on residents. If you become a resident (very easy to do!) would they levy tax on your out of Ecudor income such as investment profits, dividend and interest income, pension income, etc.? If so, that is a deal killer.

[sayitaintso]

i'm in the tax business and have never heard of anyone going to ecuador for tax reasons. just go up north of there a bit to C.A. and stay in belize. no individual income tax, no capital gains tax, no corporate tax etc. best watersports and diving in the western hemisphere and there is plenty of cheap crack as well. stay away from belize city and find yourself a nice fenced in compound away from the guatemalan border and you'll be ok.

[Jingthing]

Thanks, sayit, I am not talking about going there for tax reasons. I am just concerned that they might tax outside Ecuador income/assets. Belize has a pension requirement, as I don't have a pension, it's out for me:

.

Qualified Retired Persons

To be designated a Qualified Retired Person under the program, applicants must receive a monthly income of not less than US $2,000 through a pension or annuity that has been generated outside of Belize.

[sayitaintso]

Thanks, sayit, I am not talking about going there for tax reasons. I am just concerned that they might tax outside Ecuador income/assets. Belize has a pension requirement, as I don't have a pension, it's out for me:

.

Qualified Retired Persons

To be designated a Qualified Retired Person under the program, applicants must receive a monthly income of not less than US $2,000 through a pension or annuity that has been generated outside of Belize.

well, unless you are american, taxation is based on residency not citizenship. that 2k per month number you posted is only for qualified retired person status, you don't have to have that to live there, in fact you can establish belizean residency simply by being in the country for one full year. i believe you can also bypass the 2k per month by having 25k to invest also. anyway, just saying you don't need 2k per month to live in belize although it is probably the country with the highest cost of living in central america.

btw, to answer your original question, most countries where you are not a citizen but a resident will not tax you directly on non (insert country here) derived income. only on in-country income.

not trying to knock ecuador but i would run away from, rather than towards, any country that had a flat tax of 25%.

[Jingthing]

If I did ever move to Ecuador, I would become a resident of Ecuador, because that is easy to do and allows you to live there. I am skeptical of your info on Belize and the ease of establishing rsidency because I remember reading they have cracked down on that. A tax of 25 percent wouldn't bother me at all if it was only a tax on Ecuador income because I won't have any Ecuador income. I suppose if I ever visit there I will have to visit a lawyer. My personal priorities are lower cost, some desirable amenities, and an easy legal way to live there without a pension. That severely limits my choices. If Ecuador did tax outside Ecuador income and assets 25 percent that would be totally unacceptable; I doubt they actually do that but they might so am trying to find out for sure.

Some of those SA countries have some wacky rules. For example if you become a resident of Argentina you are technically required to declare all your world assets and you are taxed on both your world income AND assets. Many people lie but I don't like lying to any government.

Edited January 26, 2008 by Jingthing

[sayitaintso]

If I did ever move to Ecuador, I would become a resident of Ecuador, because that is easy to do and allows you to live there. I am skeptical of your info on Belize and the ease of establishing rsidency because I remember reading they have cracked down on that. A tax of 25 percent wouldn't bother me at all if it was only a tax on Ecuador income because I won't have any Ecuador income. I suppose if I ever visit there I will have to visit a lawyer. My personal priorities are lower cost, some desirable amenities, and an easy legal way to live there without a pension. That severely limits my choices. If Ecuador did tax outside Ecuador income and assets 25 percent that would be totally unacceptable; I doubt they actually do that but they might so am trying to find out for sure.

Some of those SA countries have some wacky rules. For example if you become a resident of Argentina you are technically required to declare all your world assets and you are taxed on both your world income AND assets. Many people lie but I don't like lying to any government.

lowtax.com is a pretty useful source for some up to date tax info on each country. i am sure you are well aware of the difference between residency and citizenship. there are only 3 countries in the world that tax based on citizenship, with the u.s. being the biggest and only country of any significance whatsoever.

if you are a u.s. citizen and looking to gain residency in a country for tax purposes, you only need to be out of the u.s. and it's possessions for a specific number of days each year, not actually physically establish official residency in any particular country.

i have never seen that about argentina before and i would have to actually see the particular tax code that allowed for that as it

is highly unusual and puts them into the category of taxation based on citizenship rather than residency.

anyway, good luck with your search. i think you will be ok in ecuador from a taxation perspective, safety and security are entirely different matters.