The National Assembly has approved the Organic Law on Social Transparency, introducing changes to tax regulations with the aim of simplifying income tax on dividends, encouraging reinvestment of profits, and improving oversight of tax obligations for specific sectors.
Starting in September 2025, a single 12% tax will be applied to dividend distributions. This amount will be withheld in full at the time profits are paid out. The new law does not create an additional tax but modifies the current system to make it more efficient and transparent.
Tax rates will differ depending on residency status: 10% if the effective beneficiary is a non-resident, 12% for Ecuadorian residents, and 14% when related to tax havens or when there is no disclosure of company ownership structure.
An exemption equivalent to three unified basic salaries per company will apply for natural persons residing in Ecuador who receive dividends.
The law also introduces an advance payment on undistributed profits as of July 31 each fiscal year. Progressive rates range from 0% for amounts under USD 100,000 up to 2.5% for amounts exceeding USD 500 million. This advance can be offset when profits are later distributed or capitalized.
Damián Larco, Director of Servicio de Rentas Internas (SRI), stated that companies in Ecuador have accumulated USD 36 billion in undistributed profits over more than ten years. He said, “This law seeks for companies to reinvest their profits, generate more jobs, more investment and more opportunities for the country.”
Non-profit social organizations must now provide an updated certificate from the Unified Information System for Non-Profit Social Organizations when obtaining or updating their taxpayer registration number (RUC). The SRI will issue further regulations regarding this requirement.
Larco emphasized that “this law does not create new taxes” and described it as “a firm step towards generating more resources for the country’s development in a fair manner.”
