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 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 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.
Alcabalas tax
According to the Municipality of Quito, the alcabala tax is on the transfer(s) of real estate ownership rights.
The aforementioned COOTAD also establishes in its article 527, that 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 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 of 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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La información que aquí se ofrece no debe interpretarse como orientación o asesoramiento formal. Por favor, consulte a un profesional para su situación específica. La información proporcionada tiene únicamente fines informativos y es posible que no recoja todas las leyes, normas y mejores prácticas pertinentes. El panorama normativo está en continua evolución; la información mencionada puede estar obsoleta y/o sufrir cambios. Las interpretaciones presentadas no son oficiales. Algunas secciones se basan en las interpretaciones o puntos de vista de las autoridades pertinentes, pero no podemos garantizar que estas perspectivas se respalden en todos los entornos profesionales.
The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
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Legal Team Ecuador is the Biz Latin Hub leading experts on doing business in Ecuador The Team writes on the news, doing business, law, and changing regulations. The team are experts in corporate law, Administrative law, Employment law, Immigration law and legal advisory services. Read more about them here. You can contact Legal Team Ecuador via our "contact us page".
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