If you only have U.S. Social Security income, there’s no double taxation.
Article 10 of the income tax act states that “Any natural person or company resident in Ecuador that obtains income abroad, which has been subject to tax in another State, must register this exempt income in its Income Tax return.” But as many of us have learned, if you ask five professionals about any issue in Ecuador, you’re likely to get five different answers.
Many countries, like the U.S. and Ecuador, require that you report world income annually to the tax authorities. Here in Ecuador, the tax authority is the Servicio de Rentas Internas, or SRI for short. In March of each year the tax return must be filed. In May there is also another return that has to be filed called the Declaration Patrimonial for those holding more than $220,000 in assets.
This reporting requirement is an attempt by the government to give them tools to crack down on those living in Ecuador who receive income but do not report it. This is in no way an attempt to target expats as most of them will not be required to pay taxes. Those who receive an Ecuadorian visa, are considered Ecuadorians, therefore the same reporting requirement apply. It is important to note that this is not a change in the law. It has always been the case but is not enforced.
Article 10 of the income tax act states that “Any natural person or company resident in Ecuador that obtains income abroad, which has been subject to tax in another State, must register this exempt income in its Income Tax return.” In other words, if your income is taxed in another country, you have to report it but it is not subject to Ecuadorian tax.
But as many of us have learned, if you ask five professionals about any issue in Ecuador, you’re likely to get five different answers.
Only those who have been living in Ecuador for more than six months have to file this return.
There are basic exemptions allowed:
- Personal Exemption $11,722.00
- Tercera edad exemption (over 65) $11,989.92
- Personal Expenses deduction $ 5,352.97
Total Personal Exemptions (for those over 65) $29,064.89
There are also other exemptions for families, including for a spouse and children.
It is important to understand that you do not pay a double tax — in other words, if you pay tax in another country you are not taxed again in Ecuador on the same income. Many expats have U.S. Social Security income. Although you should report this as well as other retiree pensions, it is deducted from other income and not taxed.
What do you need to do?
- You need to register with the SRI office and receive a password to file your return. Expats who have an IVA refund filing already have an account and password and do not need to register again. Then you file your return.
