Hello everybody,
This is a short sharp announcement to make everyone aware of one thing – the Ecuadorian Government has (almost overnight) implemented a tax increase from 2% to 5% (that’s a 250% increase!) on the exit tax (salida de divisas) on funds leaving Ecuador for a foreign bank account.
Yes folks, you read that right.
The 2% government tax on sending money from an Ecuadorian bank account overseas has just become 5%
Some background:
When introduced, this tax was originally half a percent, then doubled to 1%, then doubled to 2% (earlier this year), and has now increased by two and a half times (250%) to 5%. So the tax is now ten times what it originally was. I am not going to bore you with my opinion of these primitive and debilitating types of capital controls – suffice to say they stifle investment into the country and generally make ex-pats nervous about what else the government might have up its sleeve. But there it is. If you want to send money OUT of Ecuador to any foreign bank account, you will lose 5%.
Ramifications:
- This obviously applies to VREC’s company bank account – SO – it means that there is an implication for both buyers and sellers (only some of which I will cover in this email). The immediate effect is that sellers of land here will price this in to their property’s ‘acceptance price’ – that is to say a property which would have settled at $100,000 yesterday, will settle at $105,000 today.
- It has already affected the prices of imported goods here, which have already gone up by an additional 3% (because buyers paying overseas parties for these goods are now having to absorb the impact of this tax increase – and are in turn passing it on to their customers).
- The other obvious ramification is that you should only really transfer to Ecuador the amount of money you know you are definitely going to spend ‘in country’ (unless of course you don’t care about losing the 5% when you decide to send it out of Ecuador).
- When this tax was 1%, and even 2%, most of our clients more or less thought – ‘It’s not that big a deal … price of doing business in Ecuador’. But at 5%, it has suddenly become a very big deal, and one we have to inform everyone of, as well as work with each deal individually to try to ensure the best result for all parties.
Solutions:
VREC will assess each deal on a case by case basis – and work with the transactional parties to ensure the best result possible. These results may take a little longer than a settlement would have done previously. This is why we are giving everyone a heads-up now. It is in everyone’s interests to be not only aware of this tax, but aware of the need to plan ahead such that any unnecessary impact is minimised.
Conclusion:
I will not be entering into any further dialogue on this matter. I will only be addressing each and every transaction as it transpires.
If you know of anyone else this may affect, please forward them this email, and/or get them to sign up for our newsletters (via our homepage, or simply by emailing me and asking).
Best wishes to all,
Nick Vasey
Founder – Vilcabamba Real Estate Company: (VREC) Properties
Tags: ecuador, vilcabamba properties, Vilcabamba Real Estate, vilcabamba realtor
