The Law of Social Transparency, published in Official Gazette Third Supplement No. 81 on August 28, 2025, establishes the following tax reforms:
- Income Tax on the Distribution of Dividends
The profits or dividends distributed by resident companies or permanent establishments in Ecuador will be subject to a single income tax. This tax will be withheld by the company making the distribution.
The applicable tax rate is 12%; however, it is reduced or increased in the following cases:
- 10% if the distribution is made to individuals and companies that are not residents of Ecuador.
- 14% in the following cases:
- If the distribution is made to non-resident entities when: (i) in the ownership chain, there is a resident in a tax haven or low-tax jurisdiction; and (ii) the beneficial owner is a tax resident in Ecuador.
- If the local entity distributing the dividend fails to comply with the obligation to disclose its ownership structure.
Dividends distributed to another resident company or permanent establishment in Ecuador are not considered taxable income.
If the dividend recipient is an individual resident in Ecuador, the equivalent of 3 unified basic salaries (USD 1,410 for 2025) will be considered exempt with respect to each company distributing dividends, within the same tax period.
Dividends distributed between January 1 and August 28, 2025, will be consolidated with global income and subject to the regular income tax payment.
- Income Tax Advance on Undistributed Profits
Companies and permanent establishments with tax residence in Ecuador that, by July 31 of each tax year, do not distribute accumulated profits from previous years, shall pay on that balance the following rates:
| BRACKET | FROM | TO | RATE |
| 1 | – | $100,000.00 | 0.00% |
| 2 | $100,000.01 | $1,000,000.00 | 0.75% |
| 3 | $1,000,000.01 | $10,000,000.00 | 1.25% |
| 4 | $10,000,000.01 | $100,000,000.00 | 1.75% |
| 5 | $100,000,000.01 | $500,000,000.00 | 2.25% |
| 6 | $500,000,000.01 | Onwards | 2.50% |
In the case of financial and insurance institutions, the amount of profits that cannot be distributed due to orders from the supervisory authority shall not be taken into account.
If the company distributes dividends within the following 2 years, the amount paid may be used as a tax credit for withholding tax applicable to the dividend distribution.
If the company distributes dividends or capitalizes undistributed profits within the following 2 years, the amount may be used as a tax credit for the company’s income tax payment, and the excess may be refunded.
If the entity does not distribute dividends or capitalize its profits within the following 2 years, the amount paid cannot be credited against any tax, will not be refundable, and must be recorded as a non-deductible expense.
Investment funds, trusts, and mixed-economy companies with state participation are not obliged to pay this advance. Companies that have recognized investments in other companies using the equity method are not subject to the advance payment with respect to the undistributed profits of the companies they own.
This advance payment will apply as of the 2025 tax year.
Andrea Moya, Partner at CorralRosales
amoya@corralrosales.com
+593 2 2544144
