ECUADOR Law and Practice Contributed by: Diego Almeida-Guzmán, Andrés Álvarez-Toapanta, Guillermo García-Mendoza and Ignacio Jijón-Chiriboga, Almeida Guzmán & Asociados
sells the goods or provides the services. VAT is paid on a monthly basis. Businesses are allowed to deduct (tax credit) the VAT paid when acquiring goods and using services in the ordinary course of business. The VAT rate levied on the provision of tourism ser - vices may be reduced to 8% whenever the services are rendered during certain national holidays or spe - cific weekends defined by the President through an Excise tax is levied on specific imported or domestic goods (generally luxury or demerit goods). For exam - ple, alcoholic beverages, cigarettes and vehicles are subject to the aforementioned tax. ICE is collected by the seller of the goods and paid on a monthly basis. ISD (Capital Remittance Tax) Capital remittance tax is levied at a 5% rate on funds sent abroad by any Ecuadorian entity. It also applies to payment for imports. ISD paid for the execution of the taxpayer’s economic activity may be used as an income tax deductible expense or incorporated into the cost of goods. Exporters that have not depos - ited into an Ecuadorian account the funds received for their exports must also pay the ISD. When certain requirements are met, the payment of dividends and interest may be exempt from ISD. executive decree. ICE (Excise Tax) As of January 2026, differentiated ISD rates apply for certain goods: 0% for specific pharmaceutical prod - ucts and 2.5% for specified productive sectors. 2.9 Other Notable Taxes Tax on Overseas Financial Assets This tax applies to funds held abroad by the following entities: • banks and other entities that perform financing activities; • entities that manage funds and trusts; • securities companies; • insurance and reinsurance companies; and • portfolio managers. The rate of this tax is 0.25% per month on the applica - ble tax base for funds available in foreign entities and
for off-bound investments. This rate could increase to 0.35% whenever certain conditions are met. The rate may be reduced up to 0.1%, pursuant to duly justified economic or social reasons. Tax on Profit Generated on the Sale of Real Estate Profit generated on the sale of real estate is subject to this tax at a rate of 10% and payable to the municipal - ity in which the asset is located. A deduction of 5% of the net profit for each year of ownership is permitted when determining the tax - able base. Once the elapsed time from the date of acquisition by the seller is 20 years, the transfer is tax-exempt. “Alcabala” Tax (Impuesto de Alcabala) The “Alcabala” tax is levied on the transfer of real estate property. Transactions such as donations or transfer of property through inheritance, as well as transfer by the trustee to the trust’s beneficiaries, are levied with this municipal tax. The “Alcabala” tax rate is 1%. Municipal Patent Tax Businesses – whether individual or corporate struc - tures – are also subject to a municipal tax called “Pat - ente Municipal”, which is payable on an annual basis. The rate of the tax is determined by the municipal - ity based on the entity’s equity. However, as of July 2025, a new regime applies to taxpayers not required to keep accounting records: the Municipality estab - lished a single fixed fee of USD15, covering one or more economic activities. In no case will the tax be lower than USD10 or higher than USD25,000. “1.5 Per Thousand Tax” on Assets Businesses are obliged to make an annual tax pay - ment to the municipality of their residence equivalent to 1.5 per thousand (or 0.15%) of their total account - ing assets.
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