All about taxes for expats in Ecuador

From the Expat website Escape Artist (escapeartist.com)...

"Ecuador offers excellent tax benefits to Expats...

"For example, foreign income is not taxed in Ecuador.  So payment from sources such as social security benefits (SSA), IRA payments ... and private/public pension funds are received tax-free from the Ecuador side of the equation."

USA Expats above a certain income threshold (updated annually at irs.gov) are required to file a tax return each year with the IRS and have a USA tax obligation for income earned worldwide, including Ecuador.  However, this is offset by an available deduction that exceeds $100,000. This deduction is specifically for earned income in Ecuador.

cccmedia near the Ecuador-Colombia border

For income received from source(s) within Ecuador, an Expat should consult an Ecuador-based accountant or tax expert.

Most of the accounting firms that advertise to Expats have expertise in filing with the IRS (for USA citizens) or its equivalent in other home countries, but may lack the capability for reporting Ecuador-generated income to the Ecuadorian authorities.

cccmedia

So unlike Colombia (Which loves to tax people, especially the poor) in Ecuador there is no tax on foreign income?  That includes Social Security?  This has been my understanding all along and it seems that my favorite contributor to this forum (CCCMedia) is confirming what I have understood all the while.

I sat down with a Colombian based accountant (Rather than use his name, I'll just call him sloth) and EVENTUALLY he told me that basically Colombia would take about 8-9 percent of my SS income, which is basically giving up one check per year.  Now were that alone sufficient to buy me into the Colombian Health Care system, I'd consider it, but it seems that alone won't do it.  I'm STILL trying to get some straight answers here, but keep hearing from everyone I ask (it's not my dept., go bother someone else).. in Spanish of course. 

Writing from Manizales Colombia where cold, wet, damp, rainy and overcast are a way of life.

cccmedia wrote:

foreign income is not taxed in Ecuador

That's new to me. Care to share any official sources? I'm Ecuadorian, all my income comes from online jobs and, after several consultations with my contador, we decided I have to report all of my income to the Ecuadorian SRI.

gantorig wrote:

cccmedia wrote:

foreign income is not taxed in Ecuador

That's new to me. Care to share any official sources? I'm Ecuadorian, all my income comes from online jobs and, after several consultations with my contador, we decided I have to report all of my income to the Ecuadorian SRI.

I believe your contador is correct, you should file and pay taxes on your income.  The first sentence, below (my bolding), makes this clear, from this link:
https://taxsummaries.pwc.com/ecuador/in … nal-income
"Ecuador currently taxes its citizens and foreigners mostly on their Ecuador-source income, which is defined as any income derived from activities executed in Ecuador, regardless of where the income is received or paid.

Income generated abroad by Ecuador-resident individuals, local or foreign, is tax exempt provided that an income tax has been paid abroad; income received from low-tax jurisdictions countries is not excluded."

But, for instance, the recipients of USA Social Security pensions are not taxed on their pensions.
From a Deloitte PDF:
https://www2.deloitte.com/content/dam/D … s-2019.pdf
"Foreign income that has been subject to tax in another jursidiction is not taxed in Ecuador."
This page in Spanish also affirms that if income is from Ecuadorian sources it may be taxed, but not if from foreign sources:
https://ecuadorconsultar.com/impuestos/ … a-ecuador/
"Impuestos en ecuador para expatriados
En la actualidad, Ecuador grava a sus ciudadanos y a los extranjeros principalmente por sus ingresos de fuente ecuatoriana, que se definen como cualquier ingreso derivado de actividades ejecutadas en Ecuador, independientemente del lugar donde se reciba o pague el ingreso.

Los ingresos generados en el extranjero por personas físicas residentes en Ecuador, locales o extranjeras, están exentos de impuestos siempre que se haya pagado un impuesto sobre la renta en el extranjero; no se excluyen los ingresos recibidos de países con jurisdicciones de baja imposición."

Another thing that has to be taken into account is whether there is a tax agreement between your original country and Ecuador.   For example, there is no Tax Agreement with the USA but there is with Canada.  Further to consider is the rate of taxes similar to what you historically paid or different?  That can make another significant difference.  As mine is mainly pension incomes, therefore lower incomes, the rate is 15%, below what Canada might normally tax.  At times this can result in a rebate to my Canadian taxes.  Paying taxes is always something to be considered and understood.

My specific situation is that I work remotely from the US, but reside here in Ecuador. I will be paying taxes to the US when I file my income tax. Does this mean I am exempted from paying Ecuadorian taxes, if I am reading it right?

Damon.

Dagretto wrote:

Does this mean I am exempted from paying Ecuadorian taxes, if I am reading it right?
Damon.

It's best to find a local CPA (Contador público autorizado) who speaks English, just to be safe. At the very least, you can ask in a local internet café, as internet cafés are places where there are people who do taxes for you. Especially internet cafés near government buildings.

There is a lot of wrong information here. U.S. expats must pay Ecuador a tax on U.S. income beginning Jan 1 2021. The tax is quite high compared to U,.S. tax. I will be filing for 2021 2022 2023 and 2024. There will be big fines and interest compounded.

And I expect they'll tax SS 100%.

Also, beginning Jan 1 2021 Americans are required to file a complete list of global assets. I don't know the penalty for not listing global assets, but I expect they'll let me know. They have not yet demanded to receive the 1,.5% tax on all global assets, but I expect they will commerce this year.

I'm concerned These tax collectors are not competent and will charge a lot more than is right. For example, how is income defined? Will it include Roth withdrawals? I'm sure they have no understanding Roth. And what about capital losses that are limited to $3000 and the rest carried forward?

When they begin collecting global asset tax they will effectively taxing your Roth account even without withdrawals. These people are not sophisticated and will screw you.

Here my immigration attorney explained it all, sort of, in a webinar three years after the new taxes went into effect. https://www.youtube.com/watch?v=iDeM00S … amp;t=896s Listen to the accountant's smarmy, condescending attitude, "So if you some money or a bank account or a home in the U.S. we need to know about that."

The manner in which this was put into effect can be perceived only as an extortion racket. It's no surprise considering.,.,.well, I don't want to be imprisoned or tortured.  And if you come to Ecuador then you can use this handy app to see if you will be allowed to leave https://www.ecuadorlegalonline.com/cons … s-ecuador/

@Dagretto

You posted this two years ago. It looks like you'll be paying back taxes and penalties. There are a lot oof other problems here too. Of course there are even more problems in the U.S. [link moderated].

Your post about taxes was made on October 1, 2021 and your information was already outdated by nine months. The change in the law was made January 1, 20221, and your information is now outdated by more than three years,

We expats agree with you that "Taxation is an important subject, especially when you are an expatriate in Ecuador." and so is timely reporting.