ECUADOR Trends and Developments Contributed by: Diego Almeida-Guzmán, Andrés Álvarez-Toapanta, Cesar Molina-Delgado and Ignacio Jijón-Chiriboga, Almeida Guzmán & Asociados
Almeida Guzmán & Asociados Whymper N27-70 y Orellana Edificio Sassari Piso 8 Quito D.M. Ecuador Tel: +59 32 292 8115
Email: law@almeidaguzman.com Web: www.almeidaguzman.com
Prior regime Prior to 2025, the qualification criteria differed between low-tax jurisdictions and tax havens. • Low-tax jurisdiction test (single criterion) – a jurisdiction was deemed a low-tax jurisdiction if its effective income tax rate (or the rate of an analo - gous tax) was less than 60% of the corresponding rate in Ecuador. • Tax haven test (two-of-three criteria) – a jurisdic - tion qualified as a tax haven upon satisfaction of at least two of the following three conditions (plus inclusion in the Ecuadorian IRS’s list): (a) low effective tax rate – the effective income tax rate (or the rate of an analogous tax) is less than 60% of the corresponding rate in Ecuador; (b) substantial benefits – the jurisdiction permits economic and financial activities to benefit from preferential tax treatment notwithstanding that such activities are conducted or have their economic effects elsewhere; and (c) lack of transparency – the jurisdiction lacks effective mechanisms for access to and exchange of information in accordance with international standards concerning company ownership, beneficial ownership, and bank account information. Current regime As of 2025, the qualification standards have been materially amended such that two of the three condi- tions referred to above must be satisfied for a juris - diction to be characterised as either a tax haven or a low-tax jurisdiction. The sole remaining distinction is that tax haven status additionally requires express
Amendments to the Tax Haven and Low-Tax Jurisdiction Regime Modifications to the tax haven list In 2025, the Ecuadorian Internal Revenue Service (IRS) amended its list of jurisdictions deemed to be tax havens. Two exclusions merit particular attention: the Republic of Panama and the United Arab Emir - ates (UAE). Tax treatment of tax havens and low-tax jurisdictions Both tax havens and low-tax jurisdictions are subject to specific and more onerous tax rules under Ecua - dorian law. Overall, payments made from Ecuador to beneficiaries resident in tax havens or low-tax juris - dictions are subject to a 37% income tax withholding rate, representing a 12-percentage point increase over the generally applicable rate of 25%. Moreover, cer - tain exemptions and preferential tax treatments avail - able under Ecuadorian law are expressly inapplicable to transactions involving entities located in tax havens or low-tax jurisdictions. Distinction between tax havens and low-tax jurisdictions The principal distinction between a tax haven and a low-tax jurisdiction lies in the designation mecha - nism: a tax haven requires specific qualification and inclusion on a list published by the Ecuadorian IRS, whereas any jurisdiction may be characterised as a low-tax jurisdiction upon satisfaction of certain statu - tory criteria without the need for express designation. The adverse tax treatment applicable to each catego - ry does not materially differ.
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