Ecuador is one of the world\u2019s premier retirement destinations, on the merits of its biodiversity, largely idyllic climate, sheer bountiful natural beauty and the relatively low cost of living, on a comparable global basis.\u00a0 However, one oft overlooked consideration is the pending implication of tax policy in your newly selected expat home country, which will serve as your final relocation destination of choice.\u00a0 The great news is that Ecuador shines in that arena as well ! Here are some reasons that you should consider retiring in Ecuador.<\/p>\n
In addition to the bevy of retirement benefits that accrue to those entering their retirement years in Ecuador, such as high-quality, low cost healthcare; well-equipped hospitals with bilingual doctors (certain major city-centers only); 50% discounts on public transportation within the country; 50% off tickets for movies, cultural activities and sporting events; free domestic landline local phone service; 50% reduction on international flights offered by select airlines; and the recognizable (for many) USD as the core currency, Ecuador also offers excellent tax benefits to expats from most global nations.<\/p>\n
For example, foreign income is not taxed in Ecuador.\u00a0 So, payments from sources such as social security benefits (USA), IRA payments (USA, but also similar investment options in other countries) and private\/public pension funds are received tax-free, from the Ecuador side of the equation.\u00a0 If you do derive income from sources within Ecuador, as a qualified retiree, you are entitled to tax discounts, as well as discounts on the sales taxes, which serves as the predominant form of taxation in Ecuador.\u00a0 In fact, a simple way to think of this is that about the only way you will incur a tax burden in Ecuador, as a retiree, is if you own and operate your own business within Ecuador and, even then, you will receive a significant tax break as a retiree for doing so!\u00a0 Kind of a sweet deal.<\/p>\n
Reviewing other potential taxes as a retiree, we first come across the already mentioned sales tax.\u00a0 It is a 12% charge on consumption, which is the primary \u201ctax of the realm\u201d for Ecuador.\u00a0 Also, as already mentioned, being a retiree entitles you to enjoy a deep discount on this tax, in the form of a monthly refund of prior tax payments.\u00a0 Every retiree is eligible for a $250 monthly refund allowance.<\/p>\n
With regard to the income tax from earnings within Ecuador, note that the first $8,500 earned is all tax free.\u00a0 This is ideal for those that wish only to establish a side business, aimed at supplementing retirement income, rather than creating a full-blown active business enterprise.<\/p>\n
The well known, certainly to USA residents, capital gains tax has, unfortunately, now also arrived in Ecuador, in terms of a home sale.\u00a0 However, this is triggered mainly upon your choice to resell.\u00a0 The tax is calculated based on the local municipalities assessed property value, when you first purchased the house and, then again, when you are ready to sell it.\u00a0 A benchmark figure is 0.5% of the difference between purchase and sales price.\u00a0 However, depending on the elapsed time between acquisition and sales, that figure can vary.\u00a0 Shorter holding periods generally mean higher capital gains tax percentages.\u00a0 Again, this is only triggered when, and if, you choose to sell your home in Ecuador.<\/p>\n
Warning:<\/b> As a side note to the capital gains tax for the sale of a home, please be advised that certain published sources often erroneously suggest that Ecuador has no capital gains tax, merely because it does not come at the Federal level, but rather at the Local Municipality level.\u00a0 This is simply inaccurate and a throw-back to an era when Ecuadorian buyers\/investors were thusly blessed without any capital gains tax at all.\u00a0 However, the large influx of new retirees, families and investors that have found the genuine marvel that is Ecuador have created infrastructure requirements at the municipality level that could only be addressed by initiating the current capital gains tax, tied to new homeownership.\u00a0 It was, sadly, a necessary evil, as Ecuador\u2019s global popularity has exploded across expat classifications, from locales around the world.<\/p>\n
Speaking of homes, property taxes in Ecuador are exceptionally low.\u00a0 For example, property tax payments of $75 – $100 per year (yes…year…not month) for a more modest condo or house are not unusual.\u00a0 For a more exclusive property, expect to pay between $150 – $300\/year for property taxes.\u00a0 How can this get any better?\u00a0 Well, I have an answer for that.\u00a0 A homeowner 65 and over can request, and often do receive, a discount on their property taxes!\u00a0 Old adage, never hurts to ask.<\/p>\n
Overall, that\u2019s the only tax damage suffered in Ecuador.\u00a0 Living in Ecuador as a retiree on a pension and\/or social security benefits makes for a mostly comfortably life, from a tax perspective.\u00a0 This, however, does not protect you from the rigors of the taxman in your country of origin.\u00a0 If from the USA, remember that the taxman even follows you beyond the grave.\u00a0 The relatively comfortable tax respite within Ecuador will be a much enjoyed and welcomed relief for the retiree, especially given some of the other wonderful retirement benefits enjoyed in Ecuador!<\/p>\n
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