If you want to set up a company in Ecuador, this will tell you about tax laws for a Compañía Limitada which is the most common company type in Ecuador.
Ecuador taxes corporate income on a worldwide basis. The headline standard rate for offshore income, from our research, and these things do change, is 22%. However foreign-income may be tax exempt if the company demonstrates that the income tax was paid abroad. Taxes are reasonable in Ecuador as the income corporate tax rate is 22%. CIT rate may be 25% if the company is owned by a resident of a considered tax heaven. This ranks Ecuador as 89th overall in terms of corp. taxation rate internationally.
The value added tax (VAT) rate in Ecuador is 12.00%, which ranks Ecuador as 61st when compared to VAT taxation rate internationally. In terms of other taxation, an employer will contribute 11.15% to the equivalent of a social security fund and an employee will contribute 9.45%. The overall complexity of the tax system is high. This is measured by average time to comply with a country's labor tax requirements is as it is 306hours. Contributing to this is the number of yearly labor tax payments, which is 13 in EC.
Thin capitalization standards are in effect. Thin capitalisation refers to any sort of restrictions on a business and the debt-to-asset ratios. Dividends received by a resident company from profits previously taxed, are exempt of CIT. A dividend is payments of an earnings of the legal entity, voted on by the board, to shareholders. Dividends can be either shares of stock, cash payments, or other property. Capital Gains are taxed as ordinary income. A capital gains tax is levied on the profits that a corporation or natural person realizes when they sell sells a capital asset for a price that is higher than the purchase price.
Interests are not generally subject to withholding tax. This means that payments to non-residents on interests may not be taxed, unless the interest rate exceeds the rate set by the Central Bank. Any excess is subject to 22% withholding tax, unless reduced by a tax treaty. If interests are paid to a resident of a tax haven, the rate increases up to 25%. Dividends are not generally subject to withholding tax. This means that distribution of dividends to non-residents are not usually subject to tax. If recipient is resident of a tax haven, a dividends withholding tax of 10% may apply. Royalties are subject to a withholding tax of 22%, unless rate is reduced under a tax treaty. Royalties paid to residents of a tax haven may be taxed at an increased rate of 25%.
Municipalities levy net wealth taxes for individuals and corporations. There are transfer and real estate taxes. There are inheritance taxes in EC. We are aware of widely used credits for innovation spend that include tax incentives in Ecuador.
The above is not tax or legal advice for your individual circumstances. We are able to to help you to find an expert in Ecuador who can give you an answer. Contact us today. Click the free consultation button above.
It takes approximately 108 hours to file and prepare documents for a Ecuador Civil Law.
The corporate tax is approximately 22% which is 90 in the world.
Owners of a company in Ecuador are not allowed to carry back a loss and may be allowed to carry forward a loss for 5 years.
The vat rate in Ecuador is 12% which ranks 61 in the world.
When incorporating, you must look at the law in the country, in Ecuador is civil law law. You will want to get some local advice as to how to best structure a company in Ecuador. Electronic signatures are permitted.
The letters EC is for Ecuador and the most common company type structure in Ecuador is a Compañía Limitada.
The average time to incorporate is 56 dAys to put together the paperwork and file a Compañía Limitada in EC. The types of currencies you can use to fund your business is often any legal tender.
To "re-dom" a company is not common, and there are no re-domiciliation laws. One is typically not permitted to change the jurisdiction.
There must be at least This means it is not possible for you to own a Compañía Limitada in Ecuador as a sole shareholder. You must have other shareholders, they can be nominees or de facto shareholders. Corporate Shareholders are encouraged, which means you can have a corporate shareholder. Foreign ownership is encouraged, up to 100% of the total equity of the company.
There is a requirement to have at least 2 directors. Additionally, corporate directors are permitted. Directors can have some expectation of privacy, as they are not disclosed publicly. There is a requirement to have annual meetings of shareholders.
A registered agent is normally required, which means the company will have to pay a fee on a yearly basis, for a legal services company which can receive litigation or other legal process on behalf of the registered legal entity. Furthermore, a corporate secretary is not always necessary, at least not by law.
There is a legal obligation to file accounts on a yearly basis. Furthermore, there is oftentimes a requirement to have these accounts audited.
Thin capitalization rules are in effect. A company is thinly capitalised when there is a greater proportion of debt than equity. The minimum capitalization for a Ecuador Civil Law is 200.
A corporate director is permitted, meaning this country is a good option if you are setting up a structure where you want to protect director liability.
The directors are not disclosed in the public registry of Ecuador, Superintendencia de Companias. Shareholders are disclosed in the Superintendencia de Companias.
Typically companies take 56 days to setup and there are 2 director(s) required and 2 shareholder(s) required at the time of incorporation.
Overall we think Ecuador is a ok option and have given it a score of 62 as an IO score, using the Incorporations.IO proprietary formula.
We can help you form a company in Ecuador. Click the button above for a no-obligation quote. We will provide you with all the necessary documents to open a bank account as well as a registered office in Ecuador, which is required by law.