Tax incentive for real estate development in Ecuador
In 2024, the Internal Revenue Service (SRI) took a key step to boost the real estate sector in Ecuador by issuing Resolution No. NRO. NAC-DGERCGC24-00000019, which regulated the refund of the Value Added Tax (VAT) paid on the construction of real estate projects. This measure is complemented by Ministerial Agreement No. MIDUVI-MIDUVI-2024-0003-A, issued by the then MIDUVI, which recognizes as real estate projects developments as diverse as housing, offices, commercial premises, parking lots, warehouses, hospitals, and hotels, whether for personal use, rental, or sale. In simple terms, the State recognizes that building is also investing and decides to refund part of the tax paid in this process. The regulation establishes that developers can recover up to 6.5% of the total reference cost of the real estate project, and up to 7% for projects intended for owner-occupied housing. Although the procedure requires compliance with certain technical and administrative requirements, the economic benefit is clear: a significant portion of the VAT paid during construction, including materials and services, even those imported, can be subsequently recovered through resolutions issued periodically by the SRI.
This regulatory framework constitutes a significant incentive for real estate development in Ecuador, as it effectively allows developers to reduce their construction costs, not directly, but through the possibility of recovering, within a defined period, a significant percentage of the total project cost via reimbursement resolutions issued monthly by the SRI. This generates greater financial certainty and improves the profitability of projects. Moreover, by including the importation of construction materials, this mechanism is especially attractive to both national and international developers, who can regard these inputs not only as an expense but also as an investment that can be recouped over time, making Ecuador an appealing destination for investment in the real estate business.
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