Ecuador

Corporate - Withholding taxes

Last reviewed - 10 February 2020

Dividends paid to non-resident entities are generally subject to WHT.

The WHT rate upon dividend distribution is 25% over 40% of the distributed amount, or 35% if the Ecuadorian company has not duly disclosed its ownership structure before the Ecuadorian tax authorities.

Revenues from occasional services provided by non-resident individuals are levied at 25% WHT. Payments made abroad to non-resident individuals and companies are subject to a 25% WHT. Other payments made abroad, other than dividends or profits to neutral jurisdictions, are subject to a 25% WHT.

The Internal Revenue Service of Ecuador establishes WHT percentages on local payments, which are not greater than 10%. Current rates are 1%, 2%, 8%, and 10% withholding. Specifically:

  • Dividend payments to resident companies are subject to a 0% WHT.
  • Dividend payments to resident individuals are subject to WHT up to 25%.
  • Interest payments to resident companies are subject to a 0% to 2% WHT.
  • Interest payments to resident individuals are subject to a 2% WHT.
  • Royalty payments to resident companies are subject to an 8% WHT.
  • Royalty payments to resident individuals are subject to an 8% WHT.

The Law for Tax Simplification and Progressivity, enacted on December 31, 2019, established that the Tax Administration will appoint the taxpayers that must act as Income Tax Withholding agents.

Tax treaties

There are limitations to the application of tax treaties up to USD 565,750. The excess will be subject to tax withholding, with further refund by the tax authorities.

As a member of the Andean Community, Ecuador has adopted Decision 578, which provides relief from double taxation for individual or company members. Furthermore, Ecuador has similar tax treaties with the countries provided in the table below.

Recipient WHT (%)
Dividends Interest Royalties
Resident corporations 0 0 to 2 8
Resident individuals 25 2 8
       
Non-resident corporations and individuals:      
Non-treaty 10 0/25 0/25/35 (1)
       
Treaty:      
Andean Community 10 25 25
Belarus 5/10 (7) 10 10
Belgium 10 10 10
Brazil 10 15 15/25 (2)
Canada 5/10 (7) 15 10/15 (3)
Chile 5/10 (7) 15 10/15 (3)
China 5/10 (8) 10 10
France 10 10/15 (5) 15
Germany 10 10/15 (5) 15
Italy 10 10 5
Japan 5/10 (8) 10 10
Korea 5/10 (9) 12 5/12 (3)
Mexico 5/10 (10) 10/15 (6) 10
Qatar 5/10 (9) 10 10
Romania 10 10 10
Russia 5/10 (7) 10 10/15 (3)
Singapore 5/10 (8) 10 10
Spain 10 5/10 (5) 5/10 (4)
Switzerland 10 10 10
Uruguay 10 15 10/15 (3)

Notes:

  1. 35% WHT may be applied where the payment’s beneficiary is domiciled in a tax haven jurisdiction.
  2. The higher rate is applicable to payments for the use of or right to use trademarks.
  3. The lower rate is applicable to payments for the use of or right to use industrial, commercial, or scientific equipment.
  4. The lower rate is applicable to payments made for copyrights.
  5. The lower rate is applicable to interests derived from loans granted for the sale of industrial, commercial, or scientific equipment.
  6. The lower rate is applicable to interest payments made to banks.
  7. The lower rate is applicable when the beneficial owner of the dividends is a company (other than a partnership) which holds at least a 25% participation on the company that distributes the dividends.
  8. The lower rate is applicable if the beneficial owner of the dividends is a resident of the other Contracting State.
  9. The lower rate is applicable when the beneficial owner of the dividends is a company (other than a partnership) which holds at least a 10 participation on the company that distributes the dividends.
  10. The lower rate is applicable when the beneficial owner is the recipient of the dividends.