Israel – Ecuador Tax Treaty

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Israel – Ecuador Tax Treaty

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UTC -5
Quito
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18.17 million
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+593
.ec

New Deadlines for VAT and Withholding Tax Returns Published

On February 28, 2025, the Ecuadorian Official Gazette published a new Resolution extending the deadline for filing VAT returns and withholding tax declarations for the monthly fiscal periods from January to April 2025. This applies to taxpayers whose main domicile is in the provinces of Guayas, Los Rios, Manabi, El Oro, Esmeraldas, Santa Elena, Loja, and Azuay. The resolution provides a table of deadlines for submitting returns based on the ninth digit of the taxpayer’s Single Taxpayer Registry (RUC). Special taxpayers must submit their returns by April 11, while state institutions and public companies have until April 21. The resolution also clarifies that no refunds will be issued for fines and interest paid before the specified deadlines.

Pet Food Exempted from VAT

On January 30, 2025, the Ecuadorian Internal Revenue Service announced that pet food, including both dry and wet nutritionally balanced options, will be exempt from VAT. This is because pet food is classified as a veterinary product. The announcement also mentioned that the Tax and Customs Agencies will work together to identify products that are not meant for pets' nutritional needs and apply the appropriate VAT rates to those items.

Israel – Ecuador relations

Israel and Ecuador have not signed a Double Tax Agreement. The countries established their diplomatic relations in 1950 and over the years have enjoyed good bilateral ties in a variety of areas, including politics, commerce, cooperation, culture, and defense.

Currently, there are increasing investments by Israeli firms in Ecuador in irrigation, solar energy, and security areas among others. These investments help improve local infrastructure and technology in these fields. In addition, there has been a vibrant exchange between the two countries, culturally and educationally. Delegations of artists, including painters, writers, poets, journalists, musicians, and dance groups, have visited each other.

Simultaneously the collaboration between the countries has been reflected in the trade volumes; during 2022 Israel exported to Ecuador goods and services up to $44.5 million, whereas Ecuador’s exports to Israel amounted to $11.4 million.

Details about Israel’s embassy in Ecuador

Address: Avenida La Coruña & San Ignacio, 170517 Quito, Ecuador
Phone: +593-2 3971-500
Website: Click Here
Email: consul-sec@london.mfa.gov.il

Details about Ecuador Embassy in Israel

Address: HaArbaa St 28 11 floor, Tel Aviv, Israel
Phone: +972 3-695-8764
E-mail: eecuisrael@cancilleria.gob.ec

Business Activity in Ecuador

There are several business venture options in Ecuador, such as agriculture, aquaculture, mining, critical minerals, energy, telecommunications, security, and electricity. Ecuador provides a quality labor force, making it a very attractive country for business investments. The free-trade zones in Ecuador allow duty-free import of raw materials and machinery, and in addition, they also allow export of the finished and semi-finished products without a single tax levied. Moreover, businesses within these areas can gain repatriation of profits with no inhibitions.

Applicability of the MLI

The MLI is a convention that is meant to fix double taxation treaties according to the BEPS framework. Israel signed the MLI on the 7th of July 2017, with its provisions entering into force on the 1st of January 2019. On the other hand, Ecuador has not proceeded with the signature of the convention.

Residency for Tax Purposes in Ecuador

Residence of an Individual

Individuals are qualified as tax residents in Ecuador if they have more than 183 days within one fiscal year or over any 12-month period (even if the days aren’t consecutive or they leave briefly).

To read about how an individual is considered a resident of Israel, click here.

Residency of a Company

A company is considered a resident if it was incorporated (registered) in Ecuador.

A branch of a foreign company is considered a resident based on the address listed in its registration documents (domiciliary deed).

To learn about how a company is considered a resident of Israel, click here.

The Tax System in Ecuador

Ecuador’s Tax Authority is called Servicio de Rentas Internas – SRI

Income Taxation: 0 to 37%

Taxation of Companies and Branches: 25%

VAT: 15%

Capital Gains Tax: 10%

Withholding Tax

	Ecuador’s Internal Tax Rate	Israel Internal Tax Rate
Personal Income tax (Tax brackets)	0 – 11,902 0% 11,902 – 15,159 5% 15,159 – 19,682 10% 19,682 26,031 12% 26,031 34,255 15% 34,255 45,407 20% 45,407 60,450 25% 60,450 80,605 30% 80,605 107,199 35% Over 107,199 37%	Up to 50%
Corporate Income Tax	25%	23%
Capital Gains Tax Rate	10%	25%-30% (with an additional surtax of 3% applied to high earners)
Branch Tax	Between 22% and 28%	23%
Withholding Tax (Non-Resident) Dividends	10%	25% or 30%
Interest	0 or 25%	15%/25%/23%
Royalties	0, 25, or 37%	23%-40%
VAT	15%	18%

Inheritance Tax in Ecuador

Ecuador charges a tax on gifts, inheritances, and legacies using progressive rates that range from 5% to 35%. However, there is a tax-free limit of $76,558. If the gift is in cash, the person giving the gift must withhold the tax from the amount they give.

Relocation to Ecuador

There are approximately 600 Jews living in Ecuador. Most members of the Jewish community are of German descent, reflecting the heritage of Jewish families who settled in the country. Despite being small, the community remains active and connected, maintaining traditions through synagogues, cultural events, and religious practices.

In Ecuador, the cost of living is relatively low. Housing, local transportation, and other services are generally affordable. According to the Expat Insider 2019 survey, Ecuador ranks third overall in the Cost-of-Living Index and fifth in the Personal Finance Index.

Real Estate Taxation in Ecuador

City governments in Ecuador charge a municipal property tax every year. This tax is calculated based on the commercial value of the property.

The rate can be between 0.025% and 0.5% of the property’s value. Both urban and rural properties are subject to this tax. However, rural properties have a maximum tax rate of 0.3%. An extra tax of 0.2% of the property value is charged on empty properties. In urban areas, there is an additional 0.1% tax on empty lots. If a property is considered obsolete (no longer useful or in poor condition), this tax increases to 0.2%.

Transfer of Funds from Israel to Ecuador

According to section 170(a) of the Israeli Income Tax Ordinance, all payments transferred to non-Israeli residents are subject to a 25% withholding tax. However, this tax can be reduced or even waived if certain conditions are met.

In addition to assisting with withholding tax matters, our firm also helps with other issues related to transferring funds abroad. This includes providing an accountant’s approval regarding the payment of taxes, reviewing additional actions required under the CRS standard, and more.

Moreover, banks often raise many difficulties and charge high fees for converting shekels into other currencies. Therefore, consulting with a specialist before transferring the funds is highly recommended, click here to contact us.

For more information on money transfers abroad, click here.

Types of Business Entities in Ecuador

The most common business entities in Ecuador include:

Sole Proprietorships – Owned and run by a single individual. Common for small businesses, like shops and services.
Partnerships – Formed by two or more individuals who share ownership and responsibilities. Often used for professional services, such as law firms or consultancies.
Corporations – Corporations in Ecuador are intended for larger businesses and are notable for their ability to issue shares to raise capital. Shareholders are not personally liable for the company’s debts. A corporation can have an unlimited number of shareholders, and each shareholder has limited liability.
Limited Liability Companies – Limited Liability Company, is the most known type of business in Ecuador. Composed of a small number of partners with limited liability. The maximum number of partners is fifteen. Popular among small to medium-sized enterprises.
Cooperatives – Owned and operated by members who share profits and decision-making. Often found in agriculture, consumer goods, and services.

Incentive Laws in Ecuador

New productive investments made after the Economic Development Law can get a 3% reduction in the corporate income tax rate for up to 15 years. If the investor signs an Investment Agreement with the government, the reduction can go up to 5%.

The remittance tax paid on imported raw materials and goods, listed by the Tax Policy Board, can be used as a tax credit when calculating corporate income tax (CIT) if these materials are used for production.