Ecuadorian Real Estate Taxes
As with many U.S. locations, taxes in Ecuador are based on the municipal value (assessed value), which tends to be about 2% to 2.5% of the purchase price (market value). This amount depends on the province and canton in which the property is located. (Ecuador is divided into 22 provinces, which are split into 205 cantons). Different levies apply for rural property and urban property. For example, tax records currently show a rural house costing $34,000 that has a municipal value of $250, while an urban home costing $170,000 has a value of $4,250.
Transfer Tax
There is a registration tax levied for recording the transfer of any real property. The amount charged is 1% of the municipal value shown in the deed, and is payable by the buyer.
Sales Tax
VAT is levied on most goods and services at a standard rate of 12%. This does not apply on the transfer of real estate.
Property Tax
Residential property taxes are based on a percentage of the municipal value of the property, with city and rural properties being taxed at different rates. To use the examples above, the $170,000 house is currently on the city of Cuenca’s tax roles for an annual property tax of $110. The $34,000 rural property mentioned is on Loja’s roles for $7.50.
Homeowners over the age of 65 pay less than half of these rates. Commercial property tax is calculated according to a different schedule.
Rental Income
Rental income derived in Ecuador is subject to regular income tax. This is charged at progressive rates, ranging from 0% to 25%.
Capital Gains Tax
Any gain on the sale of property is subject to capital gains tax, up to a maximum of 25% of the net gain in municipal value. For example, if you sold the $170,000 house mentioned above (municipal value $4,250) for $270,000 (estimated municipal value of $6,250), you’d pay tax on the difference in municipal value of $2,000, which would result in a tax of just over $500 on the $100,000 actual gain.
Inheritance/Gift Tax
Inheritance tax is levied on a graduated scale at the regular income tax rate of between 5% and 25%. There is no gift tax, unless the gift requires a legal transfer of property. For example, if you give someone half your house, and go to the city to put it in his name, the recipient will have to pay tax on his portion of the property’s municipal value. Cash or other property gifts are not taxed.
Other Taxes
Alcabalas tax is charged on the transfer of real property at the time of registry. The amount levied depends on the value of the property, and ranges from as little as 10%, up to a maximum of 38% of the municipal value. There is an additional tax charged, which is about 1% of the amount paid for alcabalas tax. Water tax is sometimes collected, and is again 1% of alcabalas tax.
The former financial transactions tax (FTT) levied on many banking transactions has been abolished.