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VAT refunds for seniors and people with disabilities will only apply to purchases at certain businesses
Seniors and people with disabilities qualify for (limited) VAT refunds.
According to Primicias, the Internal Revenue Service (SRI) has announced that these VAT refunds will only apply to purchases made at establishments authorized by the Internal Revenue Service (SRI). It will publish on its website a list of these authorized establishments. The SRI will only qualify establishments that are up to date with their VAT declarations and payments over the last 12 months.
The legal base for this new policy is the Reglamento General de Aplicación a la Ley Orgánica para el Fortalecimiento de las
Actividades Turísticas y Fomento del Empleo, which came into effect on July 15, 2024.
Note that the SRI is behind on returning VAT. According to the agency, it is now working on refunds for March, but there are also expats who say that they have not yet received any refunds this year.
The rate of the capital outflow tax will remain at 3.50%
On December 29, 2023, President Noboa decreed that the rate of the capital outflow tax won't be lowered until at least December 31, 2024. This means that the tax rate will remain at 3.50%. The president has stated that declining tax collections make it impossible to further lower this tax rate.
The capital outflow tax (impuesto a la salida de divisas - ISD) applies to remittances abroad in cash or by check, transfers, and withdrawals of any kind. You must pay this tax, for example, when you send money from Ecuador to a foreign country. The rate of the capital outflow tax used to be 5%. In 2022, the tax rate was gradually lowered from 5% to 4%. In 2023, the tax was gradually lowered to 3.50% on July 1. Ex-President Lasso planned to reduce the rate to 2% on December 31, 2023, to attract more foreign investments. He originally wanted to abolish this tax, but the Ecuadorian parliament didn't support this plan.
Capital Outflow Tax
The Ecuadorian capital outflow tax (Impuesto a la Salida de Divisas - ISD) is levied on remittances abroad. Ecuador is one of the few countries that has this tax. The capital outflow tax can affect citizens, residents and visitors to Ecuador.
Tax rate
The tax rate of the capital outlow tax is 5% (since April 1, 2024).
Tax base categories and exemptions
Below you can read the situations to which the capital outflow tax applies in the case of natural persons.
Traveling abroad with money
The capital outflow tax is levied on money that a person brings out of Ecuador by leaving the country. The amount of money that is exempted is three basic salaries per year ($1.380 in 2024). If the amount of money that is brought out of Ecuador is higher than that figure, the capital outflow tax will be levied on the excess value.
When a minor travels alone, the exempted amount of money for the minor is three basic salaries (as in the case of an adult). In the case of minors traveling accompanied by an adult, the exempted amounts of money for the minors are reduced to zero and the exempted amount of money for the adult is raised with one basic salary for each minor ($460 in 2024).
Example
A tourist has visited Ecuador and leaves Ecuador from Guayaquil International Airport while carrying $1,200 in cash on April 20, 2024.
| Exempted amount: | $1.200 | ||
| Taxable amount: | $0 | ||
| Tax amount: | $0 | (5% of $0) |
The same tourist visits Ecuador again in June and leaves the country on June 20 while carrying $1,000 in cash.
| Exempted amount: | $180 | ($1,200 had already been applied in January) |
| Taxable amount: | $820 | ($1000 minus $180) |
| Tax amount: | $41 | (5% of $820) |
Purchases abroad with Ecuadorian credit and debit cards
The capital outflow tax is also levied on purchases made with an Ecuadorian credit or debit card while being abroad. $5,109.8 is exempted for purchases in 2023. If the value of the purchases is higher than this figure, the capital outflow tax will be levied on the excess value.
Example
A person purchases a painting for $6,000 with an Ecuadorian credit card at an art gallery in New York City on July 10, 2023.
| Exempted amount: | $5,109.80 | |
| Taxable amount: | $890.20 | |
| Tax amount: | $31.16 | (3.50% of $890.20) |
Purchases from Ecuador
Purchases in Ecuador with a credit or debit card to companies domiciled abroad are taxable for the capital outflow tax for the amount that exceeds three basics salaries per year ($1,380 per year). This group includes purchases in webshops such as Amazon and Alibaba and paying for streaming services such as Netflix, HBO and Spotify.
Sending money abroad
Sending money abroad via bank transfers or with courier companies such as Western Union is also taxable for the capital outflow tax for the amount that exceeds three basic salaries per year ($1,380).
Example
In May 2024, a person sends $1,000 from his Ecuadorian bank account to his US bank account.
| Exempted: | $1,000 | |
| Taxable amount: | $0 | |
| Tax amount: | $0 | (5% of $0) |
In August 2024, the same person sends $5,000 from his Ecuadorian bank account to his sister's bank account in Mexico.
| Exempted: | $380 | |
| Taxable amount: | $4,620 | |
| Tax amount: | $231 | (5% of $4.620) |
Studying abroad
The capital outflow tax doesn’t apply to expenses related to studying abroad if the school or university is approved by the Ecuadorian authorities.
Healthcare expenses
The capital outflow tax doesn’t apply to expenses made because of catastrophic illnesses. Examples of expenses are: hospitalization, surgeries, exams, medical fees, medicines, medical therapies and prepaid plans. The capital outflow tax applies to the amount of expenses that exceeds $5,861 (in 2023).
Background
The Ecuadorian capital outflow tax was introduced in 2007 during the presidency of Rafael Correa to protect the use of the US dollar as national currency in Ecuador. The capital outflow tax is one of the measures to disencourage people and companies to send money abroad. Other measures are import taxes.
Developments
Under president Correa and Moreno, the tax rate was 5%. During the presidential elections in 2021, president Lasso promised to abolish the capital outflow tax to attract more foreign investments. Because the parliament didn't want to abolish the outflow tax, president Lasso decided to gradually lower the tax rate to 2%. The Ley Orgánica de Fomento Productivo from 2018 allowed him to lower the tax rate. In 2022, the tax rate was gradually lowered from 5% to 4%. In 2023, the tax rate was be gradually lowered to 3.50% on July 1. Ecuador's current president, Noboa, decreed on December 29, 2023, that the tax rate won't be lowered further until at least December 31, 2024, because of Ecuador's budget crises. President Noboa has increased the tax rate to 5% since April 1.