Employer Obligations in Ecuador ​

Sales Tax Overview ​

In Ecuador, the standard Value-Added Tax (VAT) rate stands at 12%, although a 0% rate is applicable for specific types of transactions. The country's Internal Revenue Service oversees the administration of VAT.

Employment Perks Required by Law ​

By legal stipulation, employers in Ecuador must offer a suite of benefits. This package includes:

• Trial period for new hires
• Annual vacation days
• Recognized public holidays
• Paid sick leave
• Parental leaves (both maternity and paternity)
• Additional pay for extra work hours
• Notice period prior to employment termination
• Severance packages and end-of-year bonus
• Social welfare contributions

Tax Compliance and Payment Schedules ​

Employers withhold personal income tax at the source. If an individual's total annual income is entirely from one employer, they may not need to file a tax return. For others, tax filing is due between March 10 and March 28 of the subsequent year, based on the last digit of their taxpayer ID.

Marriage does not result in joint taxation in Ecuador; rather, each person is taxed separately on all types of income. Fiscal years align with the calendar year, from January 1 to December 31. Penalties for late tax filing can reach up to 100% of the owed amount, along with nominal monthly interest.

Employment-Related Financial Obligations in Ecuador ​

• Social Welfare Contributions: Employers are mandated to contribute 12.15% towards social welfare.
• Maternity Benefits: Mothers are entitled to 12 weeks of paid leave, with employers covering 25% of the salary and the remainder paid by social security.
• Year-End Bonus: An annual bonus equivalent to one month's salary is to be disbursed by December 22.
• Vacation Allocations: Employees are granted 15 days of annual leave post one year of employment.
• Overtime Compensation: The rate varies between 150% to 200%, depending on the time the extra work is performed.
• Employment Severance: If employment is terminated, employees may receive severance pay along with a bonus known as "desahucio."

After two years of employment, additional reserves amounting to 8.33% of the monthly gross salary should be deposited into the social security fund. Employees can opt to accumulate this in their social security account or receive it monthly. Overtime is subject to premium rates ranging from 25% to 100%.