The Income Tax is a tax that is determined annually. Its fiscal year begins on January 1 and ends on December 31.
This tax is levied on income from the lease (rental), alienation or other type of transfer of real and personal property, shares and other securities (capital gains) and/or work performed in a dependent and independent manner.
To determine the Income Tax of Natural Persons who do not carry out business activity, income has been separated as follows:
Capital Income – First Category
They are the income generated by leasing, sublease or other type of transfer of real estate and personal property. They are taxed independently and the applicable rate for calculating the Tax is 6.25% on the determined net income.
Capital Income – Second Category
They are taxed independently and the applicable rate for calculating the Tax is 6.25% on the Second Category Net Income originating from the sale of shares and other securities referred to in subsection a) of article 2 of the Law of Income tax. Included in this category is Foreign Source Income obtained from the sale of shares and other securities referred to in subparagraph a) of Article 2 of the Income Tax Law, which meet the assumptions established in the second paragraph of article 51 of the same Law.
Income from Work (Fourth and/or Fifth category) and Income from Foreign Source
Earnings from Work will be charged to the taxable year in which they are received. They will be considered received when they are available to the beneficiary, even when the beneficiary has not collected them in cash or in kind, that is, effective collection is not required, but availability in favor of the taxpayer is sufficient.
They are taxed with cumulative progressive rates of 8%, 14%, 17%, 20% and 30%; that is, the higher the income in the year, the higher the rate that will be applied.
It should be noted that the Income from Foreign Source generated by the domiciled taxpayer will be added to the Labor Income, provided that said income is not found in any of the assumptions of the second paragraph of article 51 of the aforementioned Law.
What is the difference between income tax and income tax caused?
The tax caused is the difference between income and expenses, therefore, income tax is the final result, that is, taking into account deductible expenses, tax credit for withholdings or some tax benefit.
Now that you are clear about what income tax and income tax is, how it is declared and the dates to do it, we invite you not to miss any details, additionally remember the importance of having the accounting of your fiscal year due to that the income statement includes all your income, expenses and withholdings, so having your information in order will allow you to be one step ahead by facilitating the process of filing and paying the tax.
Who must pay income tax?
You must consider the period from January 1 to December 31 of the previous year, the declaration of this tax is mandatory for:
- Natural persons who exceed the base by $11,212 USD. And it must be submitted using the form for the projection of Personal Expenses also known as form 107.
- The national societies and
- Foreign companies, with representation in Ecuador; in these last two it is the Companies Income Form
