Ecuador Tax Regime

Ecuador applies a worldwide corporate income tax regime with a general 25% rate, layered incentive rates as low as 22%, and a punitive 28% rate reserved for structures involving tax-haven shareholders alongside a resident individual owner. The system is notable for special single-tax regimes calculated on gross revenue for the banana, agro-agricultural and sports-betting sectors, an annual advance levy on undistributed profits, and a dollarised economy (the US dollar is legal tender) that removes currency risk from cross-border tax planning. Ecuador is a civil-law jurisdiction whose tax code (Código Tributario) and Internal Tax Regime Law (Ley de Régimen Tributario Interno, LORTI) are administered by the Internal Revenue Service (Servicio de Rentas Internas, SRI). The regime continues to tighten disclosure of beneficial ownership and tax-haven exposure, and incentives for new investment remain a central plank of corporate tax policy.

1.1 Sources

Primary legislation includes the Internal Tax Regime Law (Ley Orgánica de Régimen Tributario Interno), its Regulations (Reglamento para la Aplicación de la LORTI), the Tax Code (Código Tributario) and the Organic Law for Economic Development and Fiscal Sustainability.

1.2 Recent developments

Ecuador has progressively formalised reduced CIT rates (22%/25%) tied to shareholder residence and transparency of ownership disclosure, with the 28% rate applying where non-resident tax-haven shareholders coexist with an Ecuadorian individual in the chain, or where ownership is not properly disclosed to the SRI. A dedicated single income tax regime for resident and non-resident sports-betting operators took effect from July 2024 at 15% of net revenue. The advance tax on undistributed profits ('pago en cuenta'), assessed on retained earnings as of 31 July each year at progressive rates of 0%–2.5%, has been maintained with clarified crediting and refund mechanics; for the 2025 fiscal year, payment was split into November and December instalments. Reduced CIT rates of 3–5 percentage points below standard continue to be available for qualifying new investment under the investment promotion framework.

Headline statutory corporate income tax rate for a resident company. Where sub-national (state, provincial, cantonal or municipal) corporate taxes apply, the combined rate reported by the OECD is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

Top marginal statutory personal income tax rate on employment income for a resident individual. Where sub-national (state, provincial, cantonal or municipal) income taxes are a standard part of the system, the combined top rate is shown. Projected 2026–2028 rates carry the current rate forward unless a change is already enacted or officially scheduled. As-of 2026.

2.1 Rates and residence

Companies incorporated in Ecuador, and branches of foreign companies, are resident and taxed on the applicable base under the LORTI. Ecuadorian companies owned by residents, or by non-residents located in non-tax-haven jurisdictions, are subject to a 22% or 25% CIT rate on distributed or undistributed profits; the general rate is 25%. A 28% rate applies where non-resident shareholders are located in a jurisdiction the SRI treats as a tax haven or preferential regime and there is also an Ecuadorian individual shareholder in the ownership chain, and the same increase applies where the ownership structure has not been properly disclosed to the tax authorities. Non-resident entities without a permanent establishment are taxed only on Ecuadorian-source income, generally through final withholding. Beyond that CIT charge, a permanent establishment's remittances to its head office are treated as a distributed dividend and taxed under article 39.2 of the LORTI, as described in section 2.11.

A reduced CIT rate — a 3 to 5 percentage point benefit below the otherwise applicable rate — is available for new investment that meets conditions set under Ecuador's investment promotion rules, typically tied to sector, location and job-creation commitments negotiated with the competent investment authority.

2.2 Dividends and participation

Dividends and profits distributed by resident companies and by permanent establishments in Ecuador bear a single income tax under article 39.2 of the LORTI, charged in the fiscal year of the distribution on the amount distributed at a headline rate of 12%. Article 9 numeral 1 exempts dividends and profits, calculated after payment of income tax, distributed by companies resident in Ecuador in favour of other national companies, and article 39.2 numeral 1 excludes from its own charge any distribution made to a company resident in Ecuador or to an Ecuadorian permanent establishment of a non-resident company; between them profits are not taxed again as they move up a domestic corporate chain, and it is numeral 1 rather than article 9 that reaches the permanent-establishment case. Numeral 4 then varies the rate by recipient — 10% where the distribution is to a non-resident, 12% where the beneficial owner of the distributing company is an Ecuadorian tax resident, and 14% only where a low-tax-jurisdiction link at any level of the ownership chain coincides with an Ecuadorian-resident beneficial owner of the dividend — while numeral 5 imposes 14% on the dividends affected by a failure to report the ownership composition. Under numeral 2 the distributing company withholds the whole of the tax at the moment of distribution, whatever the date of actual payment, and under numeral 7 a recipient who is an Ecuadorian-resident individual has an exempt band of three unified basic salaries in respect of each distributing company within the same fiscal period. Article 39.2 in its present form was substituted by the Disposición Reformatoria cuarta, lit. b) of the law published in Registro Oficial Suplemento 112 of 28 August 2025. Under the article as it stands a distribution is not grossed up and the shareholder takes no credit for the corporate tax the company has already paid, but that is not what the 2025 substitution changed: the reglamento's credit for dividends distributed to resident individuals, RALRTI article 137, was derogated by article 41 of Decreto Ejecutivo 1114, published in Registro Oficial Suplemento 260 of 4 August 2020, so the credit had already been gone for five years when article 39.2 was next substituted. Capital gains on the transfer of shares or other equity rights in Ecuadorian-domiciled companies are subject to a 10% capital gains tax, applicable regardless of whether the transferor is resident or non-resident.

2.3 Income determination and deductions

Ecuador requires all entities to prepare financial statements under International Financial Reporting Standards (IFRS), and the SRI has confirmed that CIT and related advance-payment calculations follow those IFRS-based figures as adjusted by tax law. Ordinary and necessary business expenses incurred to generate taxable income are deductible, subject to specific caps and disallowances — for example, limits on related-party interest deductibility, caps on certain management and technical service fees paid abroad, and restrictions on expenses connected with tax-haven counterparties absent adequate substance and pricing documentation. Depreciation follows statutory useful lives for buildings, machinery, vehicles and other asset classes, with accelerated depreciation available for specific environmental and efficiency investments.

2.4 Interest limitation

Interest paid to related parties, whether resident or non-resident, is subject to a thin-capitalisation-style limitation restricting deductibility where debt exceeds a prescribed debt-to-equity threshold relative to the paying entity's equity, with the excess treated as a non-deductible distribution-equivalent. Interest paid to unrelated non-residents is deductible subject to withholding and to the requirement that the rate not exceed the maximum rate authorised by the Central Bank of Ecuador for the relevant type of external credit, with any excess disallowed as a deduction and subject to additional withholding.

2.5 Losses

Tax losses may generally be carried forward for five consecutive years, subject to an annual cap limiting the amount of loss that can offset taxable income in a given year (broadly 25% of taxable income before the loss deduction in each of the carryforward years, though special-regime taxpayers computing tax on gross revenue do not benefit from loss carryforward in the same way). There is no loss carryback. Losses arising in single-tax regimes computed on gross sales (banana, agro-agricultural, sports betting) are not available for offset against income taxed under the general regime.

2.6 Group taxation

Ecuador does not operate a formal fiscal-consolidation or group relief regime; each company is assessed and files on a standalone basis, and losses of one group company cannot be offset against the profits of another. Related-party transactions within a domestic or multinational group remain subject to transfer pricing scrutiny, and restructurings involving related Ecuadorian entities should be evaluated against the capital gains tax on share transfers and applicable withholding on intra-group payments.

2.7 Anti-tax-haven and CFC-style rules

Rather than a conventional CFC attribution regime, Ecuador relies principally on its tax-haven list and related surcharge, deduction-denial and withholding-uplift mechanisms to counter the use of low-tax jurisdictions. Payments to parties resident, domiciled or incorporated in jurisdictions on the SRI's tax-haven and preferential-regime list face restricted deductibility, higher withholding rates, and — where an Ecuadorian individual is also present in the ownership chain of the paying company — the 28% CIT surcharge described in section 2.1. Ownership structures must be disclosed annually to the SRI; non-disclosure itself triggers the increased rate irrespective of the jurisdictions actually involved.

2.8 Transfer pricing

Ecuador applies OECD-aligned transfer pricing rules requiring related-party transactions to be priced at arm's length, supported by a transfer pricing annex and, above prescribed thresholds, a comprehensive transfer pricing report (informe integral). Country-by-country reporting obligations apply to Ecuadorian-parented multinational groups above the standard consolidated revenue threshold, consistent with OECD BEPS Action 13. Advance pricing arrangements may be requested from the SRI for related-party transactions, providing certainty over the pricing methodology for a defined future period.

2.9 Incentives

The Organic Law for Productive Development and other investment-promotion instruments offer income tax exemptions or reductions for new investments in priority sectors (agro-industry, tourism, renewable energy, export-oriented manufacturing, technology and others), typically for a period of years from the start of operations, together with exemptions from the advance tax on undistributed profits and customs duties on capital goods during the exemption period. The 3–5 percentage point CIT rate reduction referenced in section 2.1 operates alongside these sector-specific exemptions. Free-trade-zone operators benefit from further customs and tax simplifications for qualifying activities.

2.10 Special single-tax regimes

Ecuador taxes several sectors on a presumptive, gross-revenue basis rather than net profit. The banana sector's single tax applies to production, commercialisation and export of bananas and other musaceae, computed on gross sales using an official box-equivalency system, with export operations taxed at rates of up to 1.25% and a floor set by official minimum export reference prices. The agro-agricultural single tax applies to producers and traders of unprocessed agricultural goods (excluding banana and forestry), taxed on gross sales under predefined rate tables differentiated for local and export transactions, provided no industrial transformation occurs. Resident and non-resident sports-betting operators are subject to a dedicated 15% single income tax, effective from July 2024, computed on total income (including commissions) net of prizes paid where withholding was applied on payment to the customer; operators in this regime must register with the SRI and face specific penalties for non-compliance.

2.11 Branch income and reorganisations

A branch of a foreign company is taxed on Ecuadorian-source income attributable to it at the standard CIT rates in section 2.1, and a second charge then falls on repatriation. Article 39.2 of the LORTI subjects dividends and profits distributed by resident companies and by permanent establishments in Ecuador to a single income tax, and numeral 3 of that article deems any surplus of a permanent establishment's remittances to its head office to be an effectively distributed dividend, valued annually in accordance with accounting technique and the arm's-length principle from the income, costs and expenses attributable to the Ecuadorian operation, after deducting the labour profit-share and the income tax due. Numeral 4 sets the rate at 10% where the recipient is a non-resident, 12% where the beneficial owner of the distributing company is an Ecuadorian tax resident, and 14% where a low-tax-jurisdiction link in the ownership chain coincides with an Ecuadorian-resident beneficial owner of the dividend, while numeral 5 imposes 14% where the ownership structure has not been reported; the payer withholds the whole of it at the moment of distribution. The currency exit tax described in section 6.2 applies to the outbound transfer on top. Domestic mergers and corporate reorganisations can generally be structured on a tax-deferred basis where statutory continuity requirements are met, though transfers of shares in Ecuadorian companies — including as part of a reorganisation — will generally trigger the 10% capital gains tax described in section 2.2 unless a specific exemption applies.

3.1 Residence and rates

Individuals are resident in Ecuador if present for more than 183 days (continuous or not) in a 12-month period, or if their vital centre of economic interests is in Ecuador. Residents are taxed on worldwide income; non-residents on Ecuadorian-source income only, generally via final withholding. Employment and business income of residents is taxed under a progressive annual schedule with a tax-free band followed by increasing marginal rates up to a top rate in the mid-30s percent range, adjusted annually for inflation by the SRI. Employment income is subject to monthly withholding by the employer, reconciled through the annual return.

3.2 Capital income and real estate

Capital gains realised by individuals on the sale of shares in Ecuadorian companies are taxed at the flat 10% capital gains tax described in section 2.2, applicable to both resident and non-resident sellers. Gains on real estate held by individuals outside a business activity are generally taxed under the ordinary progressive schedule, net of an inflation-adjustment mechanism, with municipal capital gains levies (plusvalía) also potentially applicable at the local level on urban property transfers. Dividends received by resident individuals from Ecuadorian companies bear the single dividend income tax of article 39.2 of the LORTI at 12% of the amount distributed, withheld in full by the distributing company at the moment of distribution; the dividend is not grossed up and no credit is available for the underlying corporate tax, and that credit was not removed by the 2025 substitution of article 39.2 — RALRTI article 137, the reglamento's tax credit for profits, dividends or benefits distributed to resident individuals, was derogated by article 41 of Decreto Ejecutivo 1114, published in Registro Oficial Suplemento 260 of 4 August 2020. Numeral 7 gives the individual an exempt band of three unified basic salaries in respect of each distributing company within the same fiscal period. Dividends received from abroad fall outside this regime under numeral 8: they consolidate with global income and are taxed under the progressive schedule, with a credit for the foreign tax capped at the Ecuadorian tax on the same income.

3.3 Social security and payroll

Employees and employers contribute to the Ecuadorian Social Security Institute (IESS); the standard employee contribution is 9.45% of gross salary and the standard employer contribution is approximately 11.15%, funding pensions, health and other social insurance branches. Employers must also fund statutory bonuses — the thirteenth (Christmas) and fourteenth (back-to-school) salary payments — which are exempt from income tax to the employee up to the amounts prescribed by law. Payroll withholding is calculated monthly by the employer based on projected annual income and reconciled at year end.

3.4 Inbound individuals

There is no separate net wealth tax or general inheritance and gift tax exemption threshold-free regime; inheritances, legacies and gifts are taxed under a specific progressive schedule with allowances varying by degree of kinship. Ecuador does not operate a special inbound-expatriate tax regime comparable to those found in some European jurisdictions; foreign employees and assignees are generally taxed under the ordinary residence rules from the point residence is established, with treaty relief available where a double tax treaty covers the home jurisdiction. Foreign tax credits are available for foreign-source income taxed abroad, limited to the Ecuadorian tax otherwise due on the same income.

Ecuador applies domestic withholding to a wide range of outbound payments, including dividends, interest, royalties and technical, administrative and consultancy service fees, with materially higher rates applying to payments made to parties in tax-haven or preferential-tax jurisdictions — though dividends follow the article 39.2 ladder set out in section 2.2 rather than a haven uplift, so that a recipient in a listed jurisdiction still pays the ordinary 10% unless an Ecuadorian-resident beneficial owner stands behind the dividend. Ecuador's treaty network is more limited than in many comparator jurisdictions, comprising conventions with a number of Latin American, European and other trading-partner countries, and Ecuador is also a party to the Andean Community (Decision 578) multilateral framework allocating taxing rights among Bolivia, Colombia, Ecuador and Peru. Treaty relief requires a valid residence certificate and compliance with beneficial-ownership and substance requirements under domestic anti-abuse rules.

Because the tax-haven surcharge mechanism operates through denial of deductions, elevated withholding and the 28% CIT rate rather than a single published schedule, taxpayers with cross-border payment flows should confirm the current SRI tax-haven and preferential-regime list and the specific withholding percentages applicable to each payment type before remitting. Relief-at-source under a treaty requires advance filing of the relevant forms and a residence certificate from the counterparty's tax administration; absent that documentation, domestic rates apply and any excess withheld must be recovered by refund claim.

5.1 General anti-abuse and substance requirements

Ecuador's Tax Code contains a general anti-abuse principle allowing the SRI to recharacterise transactions and structures lacking economic substance or entered into principally to obtain a tax advantage, alongside specific substance-over-form doctrines applied in transfer pricing and tax-haven contexts. Beneficial-ownership disclosure is mandatory for corporate taxpayers, and the tax-haven surcharge applies automatically where disclosure is incomplete, creating a strong compliance incentive independent of the underlying jurisdictions involved.

5.2 Tax-haven list and cross-border scrutiny

The SRI maintains and periodically updates a list of jurisdictions treated as tax havens or preferential tax regimes for Ecuadorian tax purposes; transactions with counterparties in listed jurisdictions face heightened documentation requirements, restricted deductibility of related expenses, and increased withholding as summarised in section 4. Related-party transactions, wherever located, remain subject to transfer pricing documentation obligations under section 2.8, and the SRI has increased information-exchange activity under bilateral and multilateral exchange-of-information arrangements to verify beneficial ownership and substance claims.

6.1 VAT

Value added tax (Impuesto al Valor Agregado, IVA) applies at a standard rate of 15% on the sale of goods and provision of services in Ecuador and on imports, with a 0% rate for a defined basket of essential goods and services (basic foodstuffs, certain agricultural inputs, exports, and specified health and education services). Registration is mandatory for entities carrying on taxable activities; monthly VAT returns and payment are generally required, with input VAT credit available against output VAT subject to standard recovery rules. Reverse-charge withholding applies to a range of domestic business-to-business payments, with the purchaser required to withhold a percentage of the VAT charged and remit it directly to the SRI.

6.2 Transaction and other taxes

Ecuador levies an outbound currency exit tax (Impuesto a la Salida de Divisas, ISD) on transfers of currency out of the country, generally at 5%, applicable to most dividend, interest, royalty and service remittances abroad and creditable against CIT in specified circumstances for productive-sector remittances. Municipal capital gains tax (plusvalía) and real estate transfer taxes (alcabalas) apply at the local level on urban property transfers, at rates set by each municipality within statutory bands. Excise tax (Impuesto a los Consumos Especiales, ICE) applies to alcohol, tobacco, vehicles, and other specified goods and services. There is no net wealth tax, though a specific one-off wealth-based contribution has previously been legislated during fiscal-consolidation episodes and could recur.

7.1 Filing, assessment and audit

The tax year is the calendar year. Corporate income tax returns are filed electronically with the SRI, with the filing deadline determined by the ninth digit of the taxpayer's identification number, generally falling within the first three weeks of April of the following year; VAT and withholding returns are filed monthly on a similarly staggered schedule. The SRI conducts risk-based audits (determinación) and may issue assessments (actas de determinación) following an audit process with defined stages for taxpayer response. The general statute of limitations for assessment is three years from the filing deadline where a return was filed, extended to six years where no return was filed or where fraud is alleged.

7.2 Rulings, appeals and penalties

Taxpayers may request binding rulings (absolución de consultas) from the SRI on the tax treatment of specific transactions, including transfer pricing matters through advance pricing arrangements. Administrative appeals against SRI assessments are heard first within the SRI itself and, if unsuccessful, may be escalated to the Tax Litigation Chambers of the National Court of Justice. Penalties for late filing, late payment and understatement can be substantial, calculated as a percentage of the tax due plus statutory interest, with voluntary disclosure before an audit notification generally reducing exposure to penalties.

Because filing dates are staggered by the ninth digit of the taxpayer identification number (RUC for entities, cédula for individuals), each taxpayer should confirm its specific due date against the SRI's published calendar for the relevant fiscal year rather than relying on a single date for the whole taxpayer population.

9.1 Entity choice

The Sociedad Anónima (S.A.) and the Compañía de Responsabilidad Limitada (Cía. Ltda.) are the principal corporate vehicles, broadly comparable to a stock corporation and a limited liability company respectively; both are subject to standard CIT treatment. Branches of foreign companies are permitted and taxed on Ecuadorian-source attributable income, with remittances to head office treated as a distributed dividend under article 39.2 of the LORTI as described in section 2.11, and the currency exit tax applying to the outbound transfer on top. Simplified stock corporations and other newer vehicle types have been introduced in recent years to ease incorporation formalities for smaller businesses.

9.2 Structuring and incentives

Investors should map ownership structures carefully against the tax-haven list and disclosure rules in sections 2.1 and 5.2, since inadvertent non-disclosure or an overlooked tax-haven link in the chain can trigger the 28% CIT rate regardless of the substance of the investment. New investment in priority sectors should be evaluated against the sector-specific exemptions and the 3–5 percentage point rate reduction described in section 2.9, alongside free-trade-zone options for export-oriented operations. Financing structures should be tested against the thin-capitalisation and Central Bank maximum-rate limitations in section 2.4, and outbound flows should be modelled net of the currency exit tax.

9.3 Worked effective-rate illustration

An Ecuadorian S.A. wholly owned by Ecuadorian residents (no tax-haven exposure) earns EBITDA of USD 1,800,000, books depreciation of USD 250,000 and net third-party interest expense of USD 150,000, all within permitted limits. Taxable profit is 1,800,000 − 250,000 − 150,000 = USD 1,400,000. At the general 25% CIT rate, tax payable is USD 350,000. If USD 600,000 of after-tax profit is retained (not distributed or capitalised) as of 31 July of the following year, the advance tax on undistributed profits applies on that balance at the applicable progressive rate; assuming a 1.0% rate at this level, the advance tax is USD 6,000, creditable against CIT if the profit is later distributed or capitalised within two years. The effective corporate burden before any advance-tax credit interaction is 350,000 / 1,400,000 = 25.0%; distributing the remaining after-tax profit of USD 450,000 (1,050,000 profit less 600,000 retained) to resident individual shareholders attracts the single dividend income tax of article 39.2 of the LORTI at 12% of the amount distributed, i.e. USD 54,000, which the company withholds in full at the moment of distribution so that USD 396,000 reaches the shareholders. The distribution is not grossed up and no credit is given for the corporate tax already paid, so the two layers stack: the USD 450,000 distributed is what remains of USD 600,000 of pre-tax profit, which has borne USD 150,000 of CIT and then USD 54,000 of dividend tax, a combined burden of 204,000 / 600,000 = 34.0% — equivalently 25% + (12% × 75%). The exempt band of three unified basic salaries each resident individual shareholder enjoys under numeral 7 is immaterial at this scale and is ignored in these figures.

9.4 Compliance

Expect monthly VAT and withholding compliance, staggered filing dates keyed to taxpayer identification numbers, annual transfer pricing documentation above the applicable thresholds, mandatory beneficial-ownership disclosure with the CIT return, and careful tracking of the 31 July measurement date for the advance tax on undistributed profits. Businesses in the banana, agro-agricultural or sports-betting sectors should confirm eligibility for — and compliance obligations under — the relevant single-tax regime, since these operate on gross revenue rather than net profit and interact differently with loss carryforwards and other general-regime mechanics.