ECUADOR Law and Practice Contributed by: Sebastian Corral Guevara, Miguel Pizarro Páez, María Fernanda Mencías Pérez, José Cisneros Pazmiño, Roque Bustamante Espinosa and Jorge Pizarro Páez, Flor Bustamante Pizarro & Hurtado
are elected by the workforce and enjoy legal protec - tion against retaliation arising from the performance of their duties. The committee oversees compliance with occupational health and safety regulations, inves - tigates workplace accidents and occupational diseas - es, promotes preventive measures and recommends corrective actions to improve workplace safety.
• register employees with the IESS and comply with the corresponding payroll reporting obligations; and • comply with all mandatory labour-related payments established by law, including the 13th salary, the 14th salary, annual paid vacation, reserve funds (where applicable) and the statutory 15% employee profit-sharing. Other than the employer’s mandatory social secu - rity contributions and payroll withholding obligations, Ecuador does not impose a specific payroll tax on employers. 5.2 Taxes Applicable to Businesses Companies incorporated in Ecuador are generally subject to taxation on their worldwide income, where - as branches of foreign companies and permanent establishments are taxed only on their Ecuadorian- source income. The principal taxes applicable to companies doing business in Ecuador are the following. Corporate Income Tax As a general rule, Ecuadorian companies are subject to corporate income tax at a rate of 25% on their tax - able profits. The rate may increase by three percent - age points where the company’s ownership structure involves residents of tax havens or low-tax jurisdic - tions in the circumstances established by law, or where the required corporate ownership information is not properly disclosed. Conversely, the rate may be reduced under various investment promotion regimes established by Ecuadorian legislation (see 5.3 Avail- able Tax Credits/Incentives ). VAT VAT is levied on the transfer of goods, the provision of services and imports. The general VAT rate is 15%. Reduced rates also apply in specific cases, including 8% for certain tourism services during public holidays designated by the government, 5% for certain social housing construction services, and 0% for various essential goods and services, including basic food products, healthcare, education, medicines, books and certain transportation services.
5. Tax Law 5.1 Taxes Applicable to Employees/
Employers Employees
Employees who qualify as tax residents in Ecuador are subject to personal income tax on their employment income under a progressive tax system. For the 2026 tax year, the applicable rates range from 0% to 37%, with the first tax bracket remaining exempt up to the statutory threshold established by the SRI. The employer acts as a withholding agent and is responsible for calculating the employee’s estimated annual personal income tax liability and withhold - ing the corresponding amounts from the employee’s remuneration throughout the year. Employees must also contribute 9.45% of their remu - neration to the Ecuadorian Social Security Institute ( Instituto Ecuatoriano de Seguridad Social – IESS). These contributions are withheld by the employer and remitted to the IESS on the employee’s behalf. Employers Employers are not subject to any additional income tax merely as a consequence of employing person - nel. Ecuadorian companies are subject to corporate income tax on their taxable profits under the gener - al tax regime applicable to legal entities. Corporate income tax is therefore separate from, and unrelated to, the existence of an employment relationship. However, employers are required to: • contribute 11.15% of each employee’s remunera - tion to the IESS; • withhold and remit the employee’s personal income tax and employee social security contributions;
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