Few expats owe taxes in Ecuador and there’s no double taxation, experts say

By Garry Vatcher

An article posted on this site earlier in the week has stirred up a lot of questions about tax filing requirements in Ecuador. The article was based on the advice of a Cuenca accountant but, as many of us have learned, if you ask five professionals about any issue in Ecuador, you’re likely to get five different answers.

My staff and I met with accountants, lawyers and tax office (SRI) officials this week to come up with a consensus position on tax requirements that I believe to be correct. I present it here in simplified form.

Many countries, like the U.S. and Ecuador, require that you report world income annually to the tax authorities. Here in Ecuador, the tax authority is the Servicio de Rentas Internas, or SRI for short. In March of each year the tax return must be filed. In May there is also another return that has to be filed called the Declaration Patrimonial for those holding more than $220,000 in assets.

This reporting requirement is an attempt by the government to give them tools to crack down on those living in Ecuador who receive income but do not report it. This is in no way an attempt to target expats as most of them will not be required to pay taxes. Those who receive an Ecuadorian visa, are considered Ecuadorians, therefore the same reporting requirement apply. It is important to note that this is not a change in the law. It has always been the case but is not enforced.

Article 10 of the income tax act states that “Any natural person or company resident in Ecuador that obtains income abroad, which has been subject to tax in another State, must register this exempt income in its Income Tax return.” In other words, if your income is taxed in another country, you have to report it but it is not subject to Ecuadorian tax.

Only those who have been living in Ecuador for more than six months have to file this return.

There are basic exemptions allowed:

Personal Exemption                                             $11,722.00
Tercera edad exemption (over 65)                       $11,989.92
Personal Expenses deduction                             $   5,352.97

Total Personal Exemptions (for those over 65)   $29,064.89

There are also other exemptions for families, including for a spouse and children.

It is important to understand that you do not pay a double tax — in other words, if you pay tax in another country you are not taxed again in Ecuador on the same income. Many expats have U.S. Social Security income. Although you should report this as well as other retiree pensions, it is deducted from other income and not taxed.

Each situation is unique; however, we do not believe Ecuadorian tax requirements will impact many expats. Only those who have substantial income in Ecuador or have foreign income that is not reported in another country will have to report and possibly pay taxes on it.

What do you need to do?
You need to register with the SRI office and receive a password to file your return. Expats who have an IVA refund filing already have an account and password and do not need to register again. Then you file your return.

We can do all of this for you at the Expat Services Center. We will take you to the SRI office and help you register if necessary. We will review your information and file it for you or give it to our accountant to file.

There is no charge to consult with us about your potential tax obligations. For us to file the return for you, there is a $40 charge for those who already use our IVA refund service or donate monthly to the Hogar de Esperanza Foundation, and $50 for those who do not.

The Expat Services Center is a service of Foundation Hogar de Esperanza. We provide a variety of supports, bill payments and other services to the expat community. To contact us, email Fernando at: services@hogaresperanza.org Tel/WhatsApp: 099-094-7611. We are located at Juan Montalvo 8-28 and Mariscal Sucre in the historic district.

To find out more about the work of Hogar de Esperanza or to support our work: https://hogaresperanza.org/en/donations/
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Garry Vatcher is president and founder of Foundation Hogar de Esperanza. He has been coming to Ecuador since 1987 and permanently moved to Cuenca 10 years ago. The foundation provides emergency assistance to thousands of people each year. With his guidance, the foundation has forged alliances with some of Ecuador’s major institutions including hospitals, the National Police, Amazon communities, universities, and governments. The foundation has received numerous awards and recognition for its’ work from local and international bodies.