Acquiring real estate generally entails the disbursement of a considerable amount of money. As such, be sure to know what your tax requirements are and how to buy property in Ecuador. Purchasing property in Ecuador involves other costs beyond the asset itself.
The following taxes must be paid in Ecuador while buying property, such as taxes on profits and capital gains and those to be settled in the different provincial or municipal councils.
Tax on profits and capital gains
In accordance with the provisions of the Article 556 of the Organic Code of Territorial Organization Decentralized Autonomy (COOTAD), there is a 10% tax on the profits and capital gains that come from the transfer of the urban real estate. This percentage can only be modified by ordinance.
There are different aspects to take into consideration when making the tax calculation. These include the age of the property, that is, if it is new or used; if improvements or adjustments have been made that may increase its value or if warehouses and parking lots are included.
According to the Municipality of Quito, the alcabala tax is on the transfer(s) real estate ownership rights.
The aforementioned COOTAD also establishes in its article 527, which legal acts that contain the transfer of ownership of real estate are subject to the alcabala tax.
Among the main ones are the following:
- Acquisition of real estate ownership through the acquisitive prescription of ownership and bequests to those who are not legitimizing them.
- Constitution or transfer, usufruct, use and habitation, relative to said assets.
Furthermore, in the Article 528, other adjudications causing alcabalas are determined.
Tax to pay in provincial councils
According to the location of the real estate, different provincial councils or municipalities require the payment of different taxes when you buy property in Ecuador.
Let’s take the city of Quito for example, the capital of Ecuador and where the largest companies in the country are located. The tax paid in Quito is called the “Special Improvement Contribution”, a value calculated by the added benefit on the property for the construction of public works.
To estimate the tax to be paid, the Municipality of Quito developed a tax calculator.
Engage with a local expert to buy property in Ecuador
We are here to support the expansion of companies in Latin America. At Biz Latin Hub, our team local and expatriate professionals offer support and advice as you buy property in Ecuador. We can improve your company’s corporate compliance, increase its value, and manage its risks.
Through our set of multilingual market entry and back-office services, we can assist you in the property acquisition process for individuals and companies that are interested in all Latin American countries.
Contact us if you are interested in learning more about this topic and are seeking personalized advice according to your needs and expectations.
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