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How to Register as a Sole Proprietorship in Ecuador

February 20, 2021
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In northwestern South America is located the Republic of Ecuador. This country leans on commodities such as petroleum and agricultural products. From 2007 to 2012, Ecuador's GDP grew at an annual average of 4.3 percent. The developing economy that Ecuador has brought an enormous surplus of almost $390 million for the first six months of 2012. 

Disclaimer: Be aware that this article is not a substitute for legal advice. Please always check official websites or seek legal advice before you take action.

Sole Proprietorship in Ecuador

A sole proprietorship is the easiest business type one can operate in. This kind of business has its benefits, such as a straightforward establishing process, nominal costs, and the ability to choose whether it will operate under the owner's name or a fictitious name. 

How to register a sole proprietorship in Ecuador

As it was said earlier, establishing a sole proprietorship is a straightforward process. The main thing is to get a Tax Identification number at the Servicio de Rentas Internas del Ecuador. There is no additional fee for this kind of registration, and it is the only legal requirement you have to start a venture as a proprietor. 

On the other hand, if you choose to open a company other than to act as an individual, you should consult a legal representative. There are three types of companies forms: Limited Liability Company, Unlimited Liability, and Simplified Shares Company. You can start this process either online or in-person at the Instituto Ecuatoriano de Social Seguridad. The first step is to reserve a business name. The submitted application must be notarized, and the deed must be signed. 


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Tax registration in Ecuador

After registering for a Tax Number, you will be considered as an active taxpayer. Many kinds of vouchers help you with the transactions you carry out in your business. These vouchers depend on the type of business you have started. 

Once you have issued sales receipts, it is time to file your taxes. The declarations are made according to the type of business and type of taxpayer; the important thing is that you are up to date with your obligations. 

You can pay taxes online by entering your Tax Number and password. 

Vat requirements and Corporate tax

Ecuador's general VAT rate is 12%. The Value-added tax (VAT) is administered by the Ecuadorian Internal Revenue Service (SRI). It is calculated for all goods and services you sell. Ecuadorian companies owned by residents or non-residents located in non-tax-haven jurisdictions are subject to a 22% to 28% CIT rate. The general CIT rate is 25%; however, a 28% rate should apply if non-resident shareholders are located in a tax haven jurisdiction, and additionally, there is an Ecuadorian individual shareholder in the ownership structure. Such an increase is also applicable when the company's ownership structure is not duly disclosed before the Ecuadorian tax authorities.

These are some of the things you must consider when incorporating a company in Ecuador.