As it lays now, folks in Ecuador with inheritances under $66,000USD dont pay any tax. For inheritances valued $100,000, they pay a 5% tax. For $200,000 10%, $300,000 15% and up until the max for inheritances over $796000 you´d pay 35%.
The new law does two things… for one, it creates two separate tables, and distinguishes between indirect heirs who are not direct (spouses, children) and direct heirs.
The second thing the new proposed law will do is really stick it to the wealthy while not effecting much the lower class. Heirs that inherit money or property valued under $35,000 will pay no tax. And, in the same example above, heirs who inherit $100,000 will pay a 7.5% tax, $200,000 a 17.5% tax. But at $300,000 you really start to see the difference, now you´d pay 32.5% tax compared to 15% tax from before.
At fortunes over $566,000 youd pay 47.5% tax if you are a direct heir, 52.5% tax if you re an indirect heir compared to now when you pay 25%.
1. More people will buy property directly in the names of their kids to avoid this tax.
2. High-end properties over $300,000 will sell VERY SLOWLY if they sell at all. Prices will drop for the high-end as they´ll have to offer serious discounts while most of the Ecuador rich will look to move their ´big´ money abroad.
But I think what you really have to worry about is what´s in the silver lining here. If this tax gets approved this could open the door to more tax hikes… particularly for the rich.
But, I´ve always been one Ecuador “analyst” that recommends you only put maximum 10% of your portfolio in Ecuador, with a particular focus on less expensive Ecuador property (usually under $150k) cause I think that´s where the opportunity is in this market.
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