Ecuador
Ecuador is made up of 24 provinces. They are Azuay, Bolivar, Canar, Carchi, Chimborazo, Cotopaxi, El Oro, Esmeraldas, Galapagos, Guayas, Imbabura, Loja, Los Rios, Manabi, Morona-Santiago, Napo, Orellana, Pastaza, Pichincha, Santa Elena, Santo Domingo de los Tsachilas, Sucumbios, Tungurahua, and Zamora-Chinchipe.
In April 2016, the Ecuadorian coast suffered an earthquake that measured 7.8 on the Richter scale. Damage to infrastructure hurt several industries, including tourism and shrimp farms. The total cost of the recovery has been close to $2 billion. To pay for this, the government imposed additional inheritance, capital gains, and production (VAT) taxes. GDP growth from 2015 to 2016 was -1.6%, mostly due to the devastating earthquake.
In April of 2017, Lenin Moreno was elected President of Ecuador by popular vote. His immediate challenge was to reengage the private sector to improve cash flow in the country. Ecuador’s economy returned to positive, but sluggish, growth.
In early 2018, the Moreno administration held a public referendum on seven economic and political issues in a move counter to Correa-administration policies, reduce corruption, strengthen democracy, and revive employment and the economy. The referendum resulted in the repeal of the taxes associated with the earthquake recovery and reduced restrictions on metal mining in the Yasuni Intangible Zone, a protected area, as well as several political reforms.
Thank you to contributors to the Ecuador WikiFleet page: BDO
Chapter 1: Economic and business environment
| Demographics | 18 million people (2022) Nearly half of Ecuador's population is concentrated in the interior in the Andean intermontane basins and valleys, with large concentrations also found along the western coastal strip; the rainforests of the east remain sparsely populated. |
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| Capital | Quito (population of 1.9 million in 2021) |
| Major cities | 1. Guayaquil (2.28 million in 2010) |
| Languages | Spanish (Castilian) 93% (official), |
| GDP | 2022 |
| Unemployment rate | 6.6% (December 2021) |
| Main industries | petroleum, food processing, textiles, wood products, chemicals Agriculture |
| Currency | U.S. dollar |
| Interest rate | 7.1% (May 2022) |
| Fleet Maturity Index (scaling) |
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| Political key info | Although Ecuador marked 30 years of civilian governance in 2004, the period was marred by political instability. Protests in Quito contributed to the mid-term ouster of three of Ecuador's last four democratically elected presidents. In late 2008, voters approved a new constitution, Ecuador's 20th since gaining independence. Guillermo Lasso has been president since 24 May 2021. |
| Inflation | 3.38% (May 2022) |
Chapter 2 : Automotive market, segments & sales
| Total Car park | 2020 Pricing You’ll find prices for new cars to be about 20%-30% higher than in the U.S. For used cars, the markup is can be even higher, since most Ecuadorians can’t afford new cars. Also, we’ve observed that Ecuadorians buy cars, same as they do real estate, for investment purposes; they’d rather own a car than keep money in the bank as cars tend to hold their value in the country. |
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| New vehicle registrations (Cars, LCV, Trucks) | 2022 source: OICA 2021 was up more than 20% y-o-y |
| Top 5 brands (total market) | 2021 1. Chevrolet Some of the best-selling luxury brands in Ecuador are Mercedes, BMW, Audi, and Volvo. |
| Model preference top 5 (total market) | 2021 Chevrolet rules in Ecuador with the D-Max, Captiva, and Spark |
| Used car market/renewal cycle | The average age of a vehicle in Ecuador is 16.2 years |
Chapter 3: Company car market
| Evolution fleet sales (last 5 years) | In 2021, LCV sales rose 40% to 22,967 units from 16,441 (source: OICA) |
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Chapter 4: Taxation & legislation
| Ecuador | |
| The basis of company car taxation in Ecuador is reflected in this overview. Different types of taxes are considered here: taxes related to the registration of the vehicle, income taxes and VAT aspects. Expected future developments are also briefly listed, if any. | |
| 1. Car taxation | |
| 1.1. Annual circulation tax | |
| Taxable event
Taxable person
Tax due
Taxable period | Ownership of a vehicle
The owner of the vehicle
The amount of the tax due depends on the purchase price of the vehicle.
The annual circulation tax is due on a yearly basis |
| 1.2. Contamination tax | |
| Taxable event
Taxable person
Tax due
Taxable period | Ownership of a vehicle
The owner of the vehicle
The contamination tax is calculated based on the CO2 emission and the cylinder capacity of the vehicle.
The contamination tax is due on a yearly basis |
| 2. Income taxes | |
| For income tax purposes, following costs are deductible: depreciation, fuel, maintenance, spare parts, insurances of the vehicle, as long as the vehicle is used to carry out activities charged with income tax. Depreciation must be calculated considering the useful life of the vehicle. | |
| 3. VAT 12% VAT must be charged on each transfer of property of a vehicle. | |
| 3.1. Deduction | |
| ü VAT can be used as a tax credit if the vehicle is used in the production and commercialization of other products and services charged with VAT. ü For income tax purposes, the input VAT is deductible incurred on the costs of vehicles insofar these vehicles are used for the performance of taxable activities and if it was not used as tax credit. | |
| 3.2. Hire purchase | |
| ü Hire purchase is charged with 12% VAT | |
| 3.3. Leasing | |
| ü Leasing must be charged with 12% VAT. Leasing expenses are deductible for income tax purposes with as a maximum amount, the amount of depreciation of the vehicle. | |
| 4. Company car | |
| 4.1. VAT due on private use of company cars | |
| ü Not applicable. VAT is only due on the purchase/rent price in case of a supply or lease of the vehicle . | |
| 4.2. Company car in personal tax returns – benefit in kind | |
| ü It must be considered as a taxable income in the hands of the person who receives the car. | |
| 5. Income taxes – drivers’ personal taxation | |
| 5.1. Private car in the personal tax return | |
| 5.1.1. Private use | |
| ü Expenses related to the professional use of the vehicle are deductible on the condition that these expenses are related to activities that result in taxable income. For example depreciation, fuel, maintenance, spare parts. etc. ü Any income gained from the supply or lease of a car must be taxable as income tax | |
| 6. Special schemes (if any) | |
| 6.1. Tax exemptions | |
| ü Vehicles for disabled people are tax exempt according to the degree of disability | |
| 7. Electric vehicles | |
| ü Electric vehicles are charged with 0% VAT when the purchase price does not exceed US$ 35.000 ü Custom duties are not due on electric vehicles , when the purchase price does not exceed US$ 40.000
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Source: BDO (2018)
In terms of import tariffis, cars coming from Colombia already benefit from a 0% import tarriff, while Europe has a gradual tarriff reduction scheme which started on January 1, 2017, set to reach 0% by 2023.
Chapter 5: Car policies
First of all, Ecuador tends to be harder on cars than North America or Europe. For example, due to the poor grade of gasoline, catalytic converters burn out sooner. And because of the rougher roads, shocks and suspension parts wear out faster, so prepare your policy accordingly.
In Cunca, you’ll see signs with a big white E on a blue background. These serve to tell you that you’re in a paid parking zone and must put a parking card on your dashboard properly marked for the period to plan to be there up to the limit of two hours.
Paid parking spaces are identified by dashed white-painted lines. Don’t park outside these lines or where the lines are yellow. You can also park in parqueaderos (private parking lots) for about the same price in most neighborhoods. In general, they’re safer than the street, but sometimes a bit difficult to get in to and out of.
