New capital gains legislation goes to National Assembly, will exempt developers

Dec 2, 2016 | 0 comments

Revised capital gains legislation that went to the National Assembly Thursday will not affect developers and commercial builders, according to President Rafael Correa.

An earlier capital gains proposal introduced in 2015 and then withdrawn by Correa did not include the exemption and was blamed, in part, for a 70% drop nationwide in permit applications for new residential and commercial construction projects.

President Rafael Correa

President Rafael Correa

“It is not our intent to harm the development industry,” Correa said in announcing the new bill. “We want want to strengthen that sector of the economy so it is important that it understands they are not affected by new taxes.”

The main object of the legislation, Correa said, is to stop real estate speculation that drives the cost of real estate out of the reach of average Ecuadorians. “We will tax illicit gains made on property due, for example, by government funded infrastructure projects, such as new roads and hospitals,” Correa said. He cited a case in Quito where real estate buyers near the new Union of South American Nations (UNASUR) turned 600% profits within two years of purchasing property. He said are many other such examples near the new Quito airport. “This is what we want to stop.”

Correa said that sales of most residential property will not be affected by tax increases and said property purchased before the law takes effect will also be exempt.

Extra money from the new capital gains law will go to municipal governments. “This legislation is part of a national plan to eradicate poverty, promote sustainable development and equitable distribution of resources through economic, tax and fiscal policies.”


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