Overview

Johan Klok |

Key Points

  • Essential items like basic food, public transport, and education are VAT-free, helping to keep costs low.
  • If you’re importing goods or services, be prepared to pay 15% VAT.
  • Running a business? Stay informed about VAT crediting and withholding rules to avoid surprises.
  • Planning construction or home renovations? The reduced 5% VAT for materials can help save money.

As an expat or traveler in Ecuador, it's important to understand how Value-Added Tax (VAT) works, as it affects everyday purchases, services, and even certain transactions you may be involved in.

Value-Added Tax (VAT) is a consumption tax applied to the value added at each stage of production or distribution of goods and services. It is typically included in the price you pay as a consumer and varies depending on the type of product or service.

VAT Rates in Ecuador

  • 15% Standard Rate: Applied to most goods, imports, and services.
  • 0% Rate: Essential goods and specific services.
  • 5% Rate: Local sales of construction materials.

Everyday Items with 0% VAT

Many essential goods are exempt from the standard 15% VAT. These include:

  • Basic food items in their natural state, such as milk, meat, bread, sugar, salt, butter, and cooking oil.
  • Medicines, medical supplies (e.g., masks, antibacterial gel, oximeters), and raw materials for their production.
  • Fertilizers, animal feed, and agricultural machinery.
  • Books and printing paper.
  • Sanitary products like tampons, menstrual cups, and disposable diapers.

If you’re purchasing these items, they should be VAT-free.

Services Without VAT

Several essential services are VAT-free, including:

  • Public transportation (except for air travel).
  • Rental housing.
  • Public utilities like water, electricity, garbage collection, and sewage services.
  • Educational services across all levels.
  • Services exported from Ecuador.

VAT on Imports

When importing goods or services, you may encounter the standard 15% VAT. This also applies to digital services, such as streaming platforms or other online subscriptions used in Ecuador.

For services imported into Ecuador, the local recipient must self-assess the 15% VAT, which is usually creditable against other VAT liabilities.

Special Considerations for Businesses

If you’re running a business in Ecuador, here are a few key points:

  • VAT paid on business-related purchases (for example raw materials, equipment) can be deducted from the VAT you collect on sales or services.
  • If your business provides 0% VAT services or goods (such as basic foods), VAT paid on inputs cannot be credited and is added to costs.

Sales tax

Value-Added Tax (VAT) is similar to a sales tax, but instead of being charged only at the point of sale to the final consumer, it’s applied at every stage of the supply chain—whenever value is added to a product or service. Unlike sales tax, VAT is included in the price you see, so you won’t see it listed as a separate charge at checkout.