This way you can calculate the income tax in Ecuador and know if it applies to a reduction

In 2022, a new income tax (IR) collection scheme came into force, included in the Law for Economic Development and Fiscal Sustainability after the COVID-19 pandemic.

And workers began to see changes in this withholding in their pay roles. since the end of January.

Employees should have made their projection of personal expenses a few weeks ago and delivered the form to their employer.

Workers register double and up to ten times more income tax withholding in January than a year ago

The basic fraction is $11,310 and the limit for personal expenses, which must be taken into account to calculate the reduction in income tax, by means of a tax credit, is $5,037.55. This value corresponds to seven basic family baskets ($719.65).

This ceiling implies a lower deduction and therefore a higher payment of income tax for natural persons.

Taxpayers may make the deduction of 10% or 20% of the $ 5,037.55. This reduction is applied as a tax credit when paying the IR.

Discount for income tax will be seen these days in payment roles

The $5,037.55 limit is for all personal housing, health, food, education, clothing, and tourism expenses.

then the step by step to calculate the IR and know the percentage of discount.

• First, the salary is multiplied by twelve, without counting the tenths. The rest, such as school or seniority bonds, are counted. Example, a person who receives $1,750 a month, a year is $21,000.
• Second, the personal contribution to the IESS, whose percentage is 9.45%, is deducted from the $21,000. The result is $1,984.5.
• Third, this last result is subtracted with the $21,000, which is equal to $19,015.50. It means that this is the tax base to know if I am within the margin to pay income tax. And it obviously exceeds the basic fraction of $11,310.
• Fourth, I check what range of the table I am in. In this case it is in the fourth rank. (Basic fraction of $18,010.01, whose tax falls on $515, which corresponds to 12%).
• Fifth, I subtract the tax base with the basic fraction where it threw me. This is $19,015.50 minus $18,010.01. I get $1,005.50 as a result.
• Sixth, I must remove the excess fraction tax and it is done in the following way: I remove 12% from the excess fraction, which was $1,005.50 and results in $120.66.
• Seventh, to this last value we add the $515 of the tribute that placed me in the table. The total is $635.66. That is the value of the annual IR.

But nevertheless, There is the possibility of reducing this income tax.

• First, we need to list all taxable income. Here we add the tenths that we did not contemplate previously. Remember that your projection of commissions, bonuses, profits and others must be there. Then, following the same case, we will add to the annual salary of $21,000, the $425 of the fourteenth and another $1,750 as the thirteenth salary = $23,175. Also, we are going to add the reserve fund, which is obtained by taking out 8.33% of the annual income of $21,000. It works out at $1,749.
• Second, we add the $1,749 and the $23,175 giving a value of $24,924.24. That means that I exceeded the basic tax-deductible fraction of $24,090.30, which means that the taxpayer can apply for a 10% ($503.76) discount. If a citizen registers less than the indicated figure, the discount is 20% ($ 1,007.51).
• Third, as in this case it is 10% and the taxpayer sustains his expenses. Then, the citizen would no longer pay $635.66, as was calculated at the beginning, but $131.91 a year. This divided by twelve is $10.99. This value would pay monthly.

calculators

The Government maintains a virtual calculator enabled that allows projecting the payment of income tax.

The citizen can place their salary in the box and the calculator gives them the monthly income tax contribution (IR). Here to access.

Two values ​​come out, the first is the additional one to that tax in 2022 due to the validity of the regulations. And below the total to pay. This in order to compare that increase in tribute.

How much will those who earn more than $2,000 per month pay in income tax in Ecuador?

For example, a person who earns $2,000 a month would have to pay an additional $15.86. Which works out to $28.86 a month, according to the official calculator.

However, some accounting service pages have a virtual calculator at your disposal. One of them is Census. There you can enter all your values.

Here you can access to calculate it. (I)