The purpose of this article is to share public information. Anyone can access this information in an Ecuadorian legal library, but we are presenting it here in the most concise and useful way we can.
To receive the following benefits, a person over 65 must carry a cedula or passport justifying legal status in the country. You do not legally need to be a resident to enjoy these benefits, however some organizations will demand a cedula because that is what they are used to, and battling with them over the law can be more exhausting than fruitful. These exceptions are noted below:
IVA – (VAT- Value Added Tax)
This 12% tax is paid by the final consumer of goods and/or services. You may have noticed it on the receipts you receive in restaurants, stores, etc. If you are renting a home you do not need to pay IVA. Youdo need to pay IVA if you rent out a space for commercial use.
Individuals over 65 are eligible to apply for reimbursement of all IVA paid month by month. The reimbursement must be requested at the SRI office with these documents:
a) Proof of a bank account to be credited
b) Application for Reimbursement of IVA
c) Original “facturas” or receipts with your name on them
d) Copy of the Certificate of Visa Registration (Certificado de Empadronamiento)
The application must be submitted monthly, and the reimbursement of the IVA will be credited to the bank account provided within a period of no more than 90 days. You can only be reimbursed for monthly expenditure on goods and services up to $1,590. If you exceed this amount of expenditure you can still be reimbursed up to the limit.
Art. 181 – Regulatory Document for the Application of Internal Tax Law
Publication: Official Register Supplement 209
Date of Publication: 08-Jun-2010, Most Recent Reform: 23-Jan-2013
Art. 2 – National Tax Benefits for Seniors, Executive Order 2823
Publication: Official Register 623
Date of Publication: 22-Jul-2002
INCOME TAX
In relation to payment of income tax in Ecuador, there is something called “Impuesto a la Fracción Excedente” which is a tax paid when an individual’s net yearly income exceeds a certain limit. For people over 65, the income limit is doubled. The standard limit for 2013 is $10,180. Meaning that if a person over 65 has a yearly income under $20,360 he or she will not pay income taxes.
Art. 49 – Regulatory Document for the Application of Internal Tax Law
Publication: Official Register Supplement 209
Date of Publication: 08-Jun-2010, Most Recent Reform: 23-Jan-2013
Art. 2 – National Tax Benefits for Seniors, Executive Order 2823
Publication: Official Register 623
Date of Publication: 22-Jul-2002
MUNICIPAL TAXES
The Senior Citizen Law clearly states that individuals over 65 are exempt from paying all national and municipal taxes on:
Income up to $1,590* per month (5x minimum wage)
Net assets valued under $159,000* (50x minimum wage)
*These values are for the year 2013 only, and are subject to change each year in accordance with minimum wage. If your income or assets exceed these limits you will only pay taxes on the excess.
Art. 14 – Senior Citizen Law
Publication: Official Register 376
Date of Publication: 13-Oct-2006
Art. 32 – Tax Code
Publication: Official Register Supplement 38
Date of Publication:14-Jun-2005, Most Recent Reform 26-Sep-2012
Art. 37 – Constitution of the Republic of Ecuador 2008
Publication: Official Register 449
Date of Publication: 20-Oct-2008, Most Recent Reform: 13-Jul-2011
AN EXAMPLE WORTH NOTING
We have had some clients recently in the following situation: Let’s say a couple buys a house (one spouse over 65 and the other under 65). According to Ecuadorian marriage law, 50% of the house belongs to each spouse and therefore each is responsible for 50% of the “alcabala” or Transfer Tax on the property. However, since the “alcabala” is a municipal tax, only the younger spouse will have to pay his or her portion, meaning the couple will end up paying half the declared tax.
TRANSPORTATION
Fares for bus and airplane travel with transportation companies that have official branches in Ecuador are subject to a 50% discount, with NO exceptions whether or not they are regular or promotional prices to begin with. Most airlines and travel agencies require a cedula (residency) for access to their discounts.
Art. 1 – Civil Aviation Resolution #6
Publication: Official Register 329
Date of Publication: 05-May-2008
UTILITIES
50% discounts on monthly bills:
-Electric on one meter up to 120 kWh
-Water up to 20 cubic meters
-Telephone on one landline
If you exceed any of these limits, you will still receive your discount up to that limit. You will simply have to pay 100% on the excess consumption.
You may receive this benefit as a renter as long as your name is on the utility bills.
When you sign up for these services, make sure you register as a senior citizen with the service providers so that you will be charged accordingly. To sign up in this way a cedula (residency) may be required.
Art. 15 – Senior Citizen Law
Publication: Official Register 376
Date of Publication: 13-Oct-2006
VEHICLES
When buying a motorized vehicle, a senior citizen must pay full price, but can declare an expenditure $8,000 lower when paying taxes on said vehicle. For example, if a person over 65 buys a motorcycle for $20,000, he or she will only pay taxes on a $12,000 motorcycle.
Art. 9 – Tax Reform Law No. 41
Publication: Official Register Supplement 325
Date of Publication: 14-May-2001
Written by Marcos Chiluisa
translated by Kelsey Gottschalk
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