Navigating Ecuador's RIMPE: An Expert Guide for Entrepreneurs

The Ecuadorian bureaucracy can be complex, but specific regimes are designed to simplify obligations for small businesses. The most important of these is the Régimen Simplificado para Emprendedores y Negocios Populares (RIMPE). This guide provides an authoritative, detailed breakdown of the RIMPE framework, equipping you with the expert knowledge needed to operate confidently.

What is RIMPE?

The RIMPE was established by the Ley Orgánica para el Desarrollo Económico y Sostenibilidad Fiscal tras la Pandemia COVID-19, enacted in November 2021. This law fundamentally reformed the Ley de Régimen Tributario Interno (LRTI), replacing previous simplified regimes. Its purpose is to streamline tax obligations for small-scale entrepreneurs and popular businesses, primarily by consolidating Income Tax and Value-Added Tax (VAT) into a more manageable structure.

The RIMPE is divided into two distinct categories, and correctly identifying yours is the first critical step:

1. RIMPE – Negocios Populares (Popular Businesses): Applies to individuals with gross annual income up to $20,000 USD.
2. RIMPE – Emprendedores (Entrepreneurs): Applies to individuals and companies with gross annual income from $20,001 up to $300,000 USD.

Taxpayers remain in the RIMPE Emprendedor category for a maximum of three years, after which they must transition to the general tax regime (régimen general).

Who Qualifies for RIMPE?

Eligibility hinges on your annual gross income and the nature of your economic activity.

• Annual Gross Income: Your classification is determined by the gross income declared in the previous fiscal year. New businesses project their estimated income for their first year.
• Exclusions: A significant number of activities are explicitly excluded from RIMPE, as detailed in Artículo 97.4 of the LRTI. It is imperative to review this list. Key exclusions include:
  • Activities related to construction, urbanization, and land development.
  • Professional services requiring a university degree (título profesional), such as those provided by lawyers, doctors, architects, and accountants. Expert Tip: While a doctor cannot bill for their medical consultations under RIMPE, if they also operate a small, separate business selling medical supplies, that specific activity could potentially qualify.
  • Activities under special regimes, such as those in the hydrocarbon, mining, or financial sectors.
  • Income received as an employee (relación de dependencia).
  • Capital gains (e.g., selling property or investments).
  • Income from foreign sources or generated in tax havens.

Failure to verify your eligibility against the official list published by the Servicio de Rentas Internas (SRI), Ecuador's tax authority, can lead to incorrect filings and severe penalties.

Understanding Your Tax Obligations Under RIMPE

The primary benefit of RIMPE is its simplified tax payment structure, but the obligations for each category are profoundly different.

RIMPE – Negocios Populares

This is the most simplified category.

• Tax Payment: Instead of a percentage, taxpayers pay a single, fixed annual fee of $60.00 USD. This payment covers your entire annual income tax obligation.
• Invoicing: You are only permitted to issue notas de venta. You are not required to charge or declare VAT. It is a common and serious mistake for a Negocio Popular to issue a factura (invoice) or add VAT to their sales.
• VAT Declaration: You are not required to file VAT declarations.
• Expert Insight: If your client is a company that needs to claim your expense for tax credit (crédito tributario), they are legally required to issue a document called a liquidación de compra de bienes y prestación de servicios on your behalf and withhold the corresponding tax. This is their responsibility, not yours, but it's crucial to understand the process.

RIMPE – Emprendedores

This category operates under a progressive tax table.

• Tax Payment: The annual income tax is calculated based on a progressive table. The rate ranges from 1% to 2% of gross income, depending on the income bracket.
  • Example Bracket (from official SRI table):
    • $20,001 to $50,000: $60 (base fee) + 1.00% on the income exceeding $20,001.
• Invoicing: You are mandated to issue facturas electrónicas (electronic invoices). These must be authorized and processed through the SRI's online system.
• VAT Declaration: You must file semi-annual VAT declarations (declaración semestral de IVA), regardless of whether you had sales. This declaration details the VAT you've collected (12% or 0%) and paid on your business purchases.

All RIMPE taxpayers make their annual income tax payment using the Formulario 125.

How to Register for RIMPE

For most taxpayers, the SRI performs an automatic classification (catastro) at the beginning of the year based on previous activity. It is your responsibility to verify your status.

1. Obtain your RUC (Registro Único de Contribuyentes): This is your unique taxpayer ID and is the first step for any economic activity. This requires your cédula, passport with visa, and a utility bill for address verification.
2. Verify Your Regime: Log in to the SRI en Línea portal. Your most important action is to download an updated Certificado de RUC. This official document will explicitly state which tax regime you have been assigned to ("RIMPE NEGOCIO POPULAR" or "RIMPE EMPRENDEDOR"). Do not assume; always verify.
3. Update Your Activities: If you are starting a new business, you will register your economic activities with the SRI, which will then classify you into the appropriate regime based on your income projection and activity type.

Common Expat Pitfalls and How to Avoid Them

• Confusing Notas de Venta with Facturas: This is the single most common error. Issuing the wrong type of sales document for your RIMPE category is a serious compliance violation.
• Ignoring the Municipal Patente: Your SRI obligations are federal. You also have a municipal obligation. In Cuenca, you must register for and pay the annual Patente Municipal. This is a separate tax based on your business's assets, handled by the GAD Municipal de Cuenca, with deadlines typically in May or June—completely separate from SRI deadlines. Forgetting this leads to accumulating local fines.
• Assuming RIMPE Covers IESS: The RIMPE tax payment has nothing to do with social security contributions. If you have employees, you have separate and mandatory obligations to the Instituto Ecuatoriano de Seguridad Social (IESS).
• Incorrect VAT Handling (Emprendedores): Entrepreneurs must declare VAT semi-annually even if all their sales were at a 0% rate. Failure to file a "nil" declaration on time still results in a penalty, currently around $30 per late declaration.

Legal Checklist for Cuenca Expats Operating Under RIMPE

• [ ] Verify Your Regime: Have you downloaded your updated Certificado de RUC from the SRI portal to confirm your exact RIMPE classification?
• [ ] Correct Invoicing: Are you set up to issue the correct sales document: notas de venta (for Negocios Populares) or facturas electrónicas (for Emprendedores)?
• [ ] Municipal Compliance: Have you registered for the Patente Municipal at the Cuenca municipal offices and are you aware of its separate annual declaration and payment deadline?
• [ ] Declaration Deadlines: Have you calendared your specific tax deadlines? (e.g., Annual Formulario 125 in March, semi-annual VAT for Emprendedores in July/January).
• [ ] Record Keeping: Are you maintaining diligent records of all income and expenses, supported by valid notas de venta or facturas, for at least seven years as required by law?

⚠️ Legal Alert: When to Stop and Consult an Attorney

Immediately consult an Ecuadorian attorney specializing in tax law if:

• You receive any notification, audit, or request for information (requerimiento) from the SRI.
• You discover you have been operating under the wrong RIMPE category or issuing incorrect sales documents.
• Your business involves a mix of qualifying and excluded activities (e.g., professional services plus retail sales).
• You plan to exceed the $300,000 income threshold, which will require a planned transition to the régimen general.
• You engage in import/export activities, which have distinct customs and tax implications.

The RIMPE regime is a powerful tool for simplifying tax compliance in Ecuador. By understanding these expert-level details and adhering strictly to the requirements for your specific category, you can ensure your venture remains in good legal standing and is positioned for success.