Here its some very interesting and useful information on income taxes I found in another forum. It pays to do your homework and know what you are doing before you move and specially make sure you do a thorough tax planning or you could end up working just to pay taxes. This is specially inportant in Ecuador that has just passed the law that requires disclosure of your assetts worldwide.
Here it is:
Most countries are relatively tax-friendly when it comes to retirees. That is to say, a foreign resident's pension or Social Security income typically is not taxed anywhere in the world--except, of course, in your home country. In other words, if you retire from the United States to Panama, you pay tax on your pension income only in the United States, not in Panama. If this is the only income you'll have as a retiree overseas, then tax-planning isn’t an issue for you. For you, one jurisdiction is as tax-efficient as another.
Things get more complicated when you have passive (investment) or earned (wages or business, including self-employment) income to report. Unfortunately, tax rules vary greatly jurisdiction to jurisdiction.
A few countries (including the United States) tax residents on their worldwide income. These are places where you want to avoid becoming resident at all costs. Unfortunately, as an American abroad, you can't escape this. You have a U.S. tax obligation based on your worldwide income no matter where you reside. As long as you carry a blue passport with an eagle on the cover, you must file a U.S. tax return every year. This is not to say you will necessarily owe tax. Careful planning often can reduce or even eliminate your U.S. tax on earned income. Still, the filing requirement remains.
Some countries tax on what's called a "remittance basis," meaning they expect their share of any money you bring (remit) into the country. This can work to your advantage if you earn your money outside the country and are able to live on little. In this case, you could earn millions of dollars a year, from either passive or earned income, but, as long as you kept most of your millions outside the jurisdiction where you're residing, you wouldn't owe any tax on it locally.
Again, as an American, you'd still have a tax obligation to Uncle Sam, but that's a separate matter. To the tax collector of the country where you're living, you'd owe tax only on the money you brought into that country each year to cover your living expenses.
Some countries tax foreign residents only on income earned locally. In this case, you could not only earn millions outside the country, you could even bring your millions into the country to spend as you like (theoretically speaking). If you didn't earn it locally, the local tax collector would have no claim. This is as good as it gets from a tax-planning point of view.
Four key jurisdictions where this is the case right now are Panama, Belize, Uruguay, and Malaysia. As a foreign resident in any of these jurisdictions, you won't pay taxes on your pension income (as I said, though, you can take this much for granted most everywhere in the world); however, in these four countries neither will you pay income tax on any income from outside the country, be it passive or earned. If you have a brokerage account in the United States, for example, that earns you US$10,000 a year in interest, you'll pay no tax on that income to these countries' tax collectors.
Working as a consultant in one of these countries, for example, with clients outside the country, you could pay zero local tax. A German fellow I met several years ago had set himself up in Kuala Lumpur, Malaysia. He was an engineering consultant whose clients were various companies in the Middle East. All his income was earned outside Malaysia, meaning he was liable for no income tax in the country. As he was German, living outside Germany, neither did he owe income tax in that country. He was living and working completely income tax-free.
JP
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