Individuals are classified either as resident or non-resident tax payers. Residents are taxed or worldwide income. Non-residents are taxed on Ecuadorian-source income only. Ecuadorian-source income includes income received by Ecuadorians and foreign nationals in respect of work, professional, commercial, industrial, agricultural, mining services, and others of an economic nature carried out in Ecuadorian territory.
Services rendered by foreign non-residents are either temporary or permanent. Permanent services are those undertaken by contracts or agreements with terms longer than six months. Temporary services do not arise from the non-resident status but by the duration of the services rendered.
Income tax is calculated by applying a progressive tax rate schedule, from 5 percent to a maximum of 35 percent of taxable income. In 2008 income greater than USD7,850; in 2009 income greater than USD8,570; in 2010 income greater than USD8,910 and in 2011 income greater than USD11,973 are subject to tax payment. Non-residents performing temporary services are taxed at a flat rate of 24 percent (these percentages are reduced to 23 percent in 2012 and 22 percent in 2013) regardless of where paid. Non-residents performing permanent services are taxed at the progressive tax rates of a resident that is, taxed in the same way as services rendered by an individual residing in the country.
Beginning in 2008, the deduction of expense over the taxable basis of the income tax is permitted for individuals; this deduction corresponds to a maximum of 1.3 over the base in effect or maximum 50 percent of taxable income, whichever is first.
The official currency of Ecuador is the U.S. Dollar (USD).
Herein, the host country refers to the country where the expatriate is going on assignment. The home country refers to the country where the expatriate lives when he/she is not on assignment.