Employer Tax Contributions

Tax Type	Rate	Base
IESS (Social Security)	11.15% (employer)	Employee's gross salary
Reserve Fund	8.33%	Employee's monthly salary (after 1 year of service)
Profit Sharing	15%	Company's annual pre-tax profits

Filing & Compliance

• Monthly IESS contributions and income tax withholdings are due within the first half of the month following the payroll period, based on the employer's RUC (tax identification number).
• Employers must provide an annual summary of withholdings (Form 107) to employees by January 31st.
• Annual corporate income tax filing and payment deadlines are between April 9 and April 28, determined by the ninth digit of the company's RUC.

In Ecuador, employee tax deductions encompass various areas, including income tax, social security contributions, and specific deductions for certain expenses.

Income Tax

• Progressive Rates: Income tax is levied at progressive rates ranging from 5% to 37%. An annual income up to USD 11,902 is tax-exempt. This exemption represents the minimum taxable income according to the current progressive Personal Income Tax (PIT) table.
• Taxable Income: Taxable income includes all forms of remuneration, whether cash or in-kind, such as allowances and services.
• Deductions: Social security contributions and the mandatory 13th and 14th-month salaries are deductible.
• Non-Resident Taxation: Non-residents are taxed on Ecuadorian-sourced income at a flat rate of 25%. Special rules may apply for non-residents working temporarily for foreign entities without a local branch.

Social Security Contributions

• Deductible: Social security contributions made by employees are deductible from their taxable income. Information regarding the specific percentage or amount of the contribution can be obtained from the Ecuadorian Institute of Social Security (IESS).
• Employer Contributions: Employers also make social security contributions, detailed information on which can be found on the IESS website or other official resources.

Other Deductions and Considerations

• Additional Deductions for Employers: Employers are entitled to additional deductions to promote the employment of young people (18 to 29 years old) and women, equal to 50% of the employee's salary. The deduction can increase to 75% if the individual has graduated from a public education institution.
• Tax Residency: Tax residency is determined by physical presence in Ecuador. Residents are taxed on worldwide income, while non-residents are taxed only on Ecuadorian-sourced income.
• Tax Haven Jurisdictions: Ecuador maintains a list of tax haven jurisdictions, impacting the tax rates for certain corporations with connections to those jurisdictions. Up-to-date information about tax haven jurisdictions is available from the Ecuadorian Internal Revenue Service (SRI).
• Temporary Security Contribution: Currently, there are temporary tax contributions based on the 2022 fiscal year profits. These contributions might affect employee tax deductions, especially if part of their compensation is linked to profit-sharing schemes. More details regarding these contributions and their validity period can be obtained through the official SRI publications or bulletins.

Further Information

The information provided here reflects the current understanding as of February 5, 2025, and might be subject to changes due to legal updates and interpretations. You can find more details and updated information on the official website of the Ecuadorian Internal Revenue Service (SRI) or consult with a qualified tax advisor for personalized guidance.