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.
Also read about: Reimbursed Child Support.
The second thing the new proposed law will do is really stick it to the wealthy while not effecting much the lower class – both are the Hoyer options of jurisdiction. 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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