Tax on Social Security?

[Charles Monroe]

I am hearing strong rumors that Ecuador is considering imposing a 21% tax on Ex-Pats Social Security earnings. Is there ANY truth to this possibility. If true there is no incentive to move. Our SS is already taxed in the US.

[COUNTRY EXPERT – WENDY DECHAMBEAU]

I’ve not heard anything along those lines. Can I ask where you’ve heard this?

[Charles Monroe]

It’s on the internet but the figure is wrong. It’s 17.6% for the IESS. This is a new imposition proposed by El Presidente Moreno. I don’t think it’s law yet but I am trying to get to the bottom of this and not getting very far. I have an older friend who is committed to visit, plane ticket and all, to immigrating to Cuenca and is in a total panic after hearing about this. If you can enlighten me I would deeply appreciate any information. My wife and I are also very serious about Ecuador and we are thinking about the end of next summer. We can’t afford large insurance payments if Moreno is serious and the law passes. So we REALLY need info. Thanks so much for any consideration. Charlie Monroe

[Charles Monroe]

Here’s a newspaper article from the cuenca newspaper from this past May that says this new rate will be imposed next month, July 2017. https://www.cuencahighlife.com/expats-will-pay-social-security-benefits-iess-moves-equalize-costs-voluntary-affiliate-members/

[COUNTRY EXPERT – WENDY DECHAMBEAU]

First, let me clarify that participation in the IESS system is completely voluntary for residents of Ecuador. IESS is similar to the social security system in the United States – you pay into it and receive funds back when you retire. The difference here is that IESS also provides health care through the government’s IESS clinics and hospitals.

It has always been a requirement for Ecuadorians to pay 17.6% of their income into IESS, but many expats have been claiming the minimum wage as their income and paying a much lower rate. Now IESS is enforcing proof of income to make things fair. To the best of my knowledge, this was not instigated by Moreno, but rather IESS officials. And again, the IESS system is primarily meant to be a retirement savings plan with health care as an additional service.

There are other health insurance options here in Ecuador which may be more cost effective for you. Definitely shop around and see what you can find.

[Charles Monroe]

Thanks for a timely and concise answer. What happens to people who DON’T voluntarily pay up? And when does an expat get to the point where one is question the fees are imposed? When do we have to present proof of income?

And by the way, my wife and I like your stories. She was particularly struck by your article about your children getting a better education.

[COUNTRY EXPERT – WENDY DECHAMBEAU]

Nothing happens if you don’t pay into IESS. You simply don’t qualify for the benefits. So for health care you’ll need to obtain private health insurance and then use either the private clinics/hospitals or the free government-run facilities (though I don’t recommend those for anything other than minor ailments).

If you do sign up for IESS, then you’ll be required to show proof of income, so they know how much to charge. Otherwise you’re only asked for proof of income when obtaining certain visas that are dependent on you having a stable income to support yourself. But you won’t be charged anything just for getting a visa. You will only be charged the 17.6% if you sign up for IESS.

[Charles Monroe]

Thanks again!! I hope my questions are appropriate for this forum and your talents. May I make a couple of further entreaties? Might you be able to recommend someone or some agency that could assist my wife and me when we land in November for two weeks to “hit the ground running,” so to speak, and help us make the most of our times to cement decisions? We are considering Cuenca and Cotacatchi. We don’t want waste time whilst there.

There is a “gentleman,” named Malcom Reding who has published a second edition of a book about Cuenca recently. I say gentleman in quotes because many expats claim that he is actually a criminal from Miami and that this is not his actual name. I don’t know the truth about him but he DID say that if we lived in Cotacachi we would be 100 kilometers from any decent health care facility if we had an emergency and that we would be better off in Cuenca by a certain age. Any comment on this?

Your IESS information is invaluable and much appreciated. I’m sure it will allay some of the fears of our friend who is already heading your way. A million thanks.

[COUNTRY EXPERT – WENDY DECHAMBEAU]

For exploring Ecuador, you might look at journeymanjack.com. This is a relocation and tour service run by Jack Abercrombie who is a long-time expat and has explored most of the country. I’ve heard good things about his services.

Cotacachi is 100 km/60 mi from Quito where the country’s BEST health care can be found. But if we’re talking decent health care, that can be found in nearby Ibarra (30 min. drive from Cotacachi). Ibarra has several private clinics that I’ve been very happy with. I spent the night in one of the hospitals several years back and found the care and facility to be small, but excellent. I’ve taken my son there for x-rays. And my husband has seen cardiologists at two of the different clinic/hospitals in Ibarra. We’ve never been disappointed with the care.

However, these are small clinics so if you have a major medical issue Quito would probably be the best place to go. Anyone with severe health issues or at high risk for major medical problems should probably consider being in a city near major hospitals. But if you’re comfortable having quality smaller health facilities nearby and state-of-the-art facilities 2 hours away, then Cotacachi is worth considering.

[Charles Monroe]

Thank you so much!! Very very appreciative. Turns out we are now coming in October – the airline prices work out much better. I will definitely look into journeymanjack.com. And keep those entries coming!! My Best, Charlie Monroe

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