Today is the 3rd installment in the series “Starting a business in Ecuador”.
After defining your business idea, how you plan to fund it, and what type of legal entity your business will be, the next very important step in Ecuador is obtaining your tax ID number, or “RUC”.
If you’re thinking about ever doing any type of business in Ecuador it all starts with obtaining your “RUC”.
To get your RUC as a foreigner you need to be on any type of visa other than the simple automatic 90 day tourist visa stamp you get if you enter Ecuador with just your passport.
Tourists can get a RUC if they are on the 12-IV visa, applied for at an Ecuador consulate before coming to Ecuador.
If in the country on a visa other than the simple passport stamp (12-X) visa, all you have to do is go to your local SRI office in Ecuador (The IRS of Ecuador) and within a few hours you’ll have your RUC for free by taking a few copies of your passport and current visa and a utilities bill of your current residence in Ecuador (doesn’t have to be in your name).
Once you have your RUC you can get official numbered receipts made in your name, called FACTURAS.
Everyone you sell to will ask for a factura, it is the only way they will be able to write the expense off their taxes.
As a business owner in Ecuador its important to know that for most products you are required to collect a 12% sales tax called the IVA.
The good news is that the SRI is not as quite as sofisticated as the IRS in many ways and most people write off EVERYTHING they buy, right down to the KFC chicken for their kids, and in most cases at the end of the month don’t end up paying much IVA.
At the end of the year there is an income tax based on your gross profit on ECUADOR INCOME called the IMPUESTO A LA RENTA an approximate is the scale below:
up to $8910…you pay $0 tax
$8910-11350…you pay 5% tax
$11350-14190…you pay $122+ 10% tax
$14190-17030… you pay $406+ 12% tax
$17030-34060… you pay $747+ 15% tax
$34060-51080… you pay $3301+ 20% tax
$51080-68110… you pay $6705+ 25% tax
$68110-90810… you pay $10963+ 30% tax
$90810-and up… you pay $17773+ 35% tax
Most people, myself included, have an accountant that helps them sort out and minimize their tax liability in Ecuador but its still good to know what you are getting into.
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