Missionaries

                                                RETIRING MISSIONARIES

On Friday, Sue and I wandered below the clouds to the El Maiz restaurant for our Friday lunch date together.   Immediately, we encountered two lively, lovely, lady retired missionaries from Midland Texas.  Judith and Kay had their first assignment in Quito twenty years ago. Then their ministry took them to India, Indonesia and finally returned to Texas to care for aging family members.

They plan to move to Cuenca in September, so we all enjoyed sharing our pilgrimages and ideas.  We introduced them to “South of Zero” and our eBook,  Thriving in Ecuador. 

Judith, left - Kay, right

On Saturday, they joined us for a snack at our home.  They had many questions about Cuenca real estate and culture.

Meeting them was a fresh reminder of the challenges in moving to Ecuador. Thanks to the many bloggers who generously share their experiences and lessons for the newcomers.

What a joy to have a divine encounter during our slow date day!

                                BIBLE STUDY

As a young Christian 35 years ago, I felt led to read the entire Bible in a year.
       I did not want to miss anything!   ( Start with the New Testiment).
I was intrigued and captured by the clear statement in Hebrews, chapter 11:
  " ...he who comes to the Lord, must believe that He is and that He is a rewarder of
      those who diligently seek Him."

The Bible is the best selling book in history, yet remains a mystery. Sold, rarely read.
              Yet, it remains God's love letter to us.   Not religion, but relationship!
As Jesus said in John 6: "...the words that I have spoken to you are spirit and are life."

We have enjoyed rich fellowship during the last year as we studied Paul's letters to the
Ephesians, Galations, John's first epistle and Hebrews. We also have monthly meals or outings, when we are all in town.

Come join us on Wednesdays at 2pm, as we hear not only the words, but also the music of life!
                 Rejoicing,

                         Gary & Sue

Foreign Earned Income Exclusion

        Foreign Earned Income Exclusion for US taxes

   Some of us living out of the US have earned income which must be reported to the IRS. But there is a way to reduce the amount we pay in income taxes. Let's do it.

   The key is to be out of the US for any 330 days anytime during any twelve month period. IRS Form 2555 is used to compute the exclusion and is filed with our form 1040.
We may exclude the portion representing the time out of US. Earned income usually appears on IRS Schedule C and does not include passive interest, dividends, pensions, etc.

Up to $92,900 may be excluded in 2011. This increases with inflation. Some foreign housing and living expenses may also have favorable tax treatment. Our passport records hold the information on our time out of the US.

Maybe an example will clarify my prose:

   Sue and I moved to Equador in November 2010. We made trips home in April and  October 2011 for 4 weeks each time. So it appears that we were in the US for eight weeks or 56 days. Oops, that's more than the 35 days allowed. But consider the words "any twelve month period." This is not limited to the calendar year. Or to the April 15 tax deadline - extensions are allowed. We filed for the automatic six month extension.

So here is how our time and exclusion worked out:

   Starting the day we returned from our first trip home, April 29, 2011 we added 365 days. We were in the US for 27 days in October and for the last half of April 2012 (another 3 week visit home). That's too many days during twelve months. Try again.
   Let's start April 18, 2011 and end the day we left for the US on April 17, 2012  (arriving April 18). Now we have the last 4 days of our April 2011 trip and none of our April 2012 trip, plus 27 days in October in the US. Total days in US = 31.
   Ignore my confusing math. The point is we may pick our days to find 330 days out of the US. It turns out we were out of the US for about eight months of calendar 2011, so we exclude 8/12 or 67% of earned income.We were able to slide our twelve month computation into the following tax year, even though it resulted in only eight months during 2011.

Yes, I recommend professional tax advice on these issues. Just remember the magic any 330 days out of the US during any 12 month time frame. Oh, and one minute in the US or flying over it counts as a day!

Now, if I could only find a way out of the payroll (social security) taxes...

Taxes in Ecuador

                                             TAXES in ECUADOR

The Cuenca Chamber of Commerce hosted a seminar on Ecuadoran taxes this week. The law firm of Cordero Moreno & Corral graciously simplified this complicated topic for us Gringos. Their English was also excellent. So here is my attempt to simplify their simplification. Oh yes, please check with your own  financial planner and attorney...

Ecuador's tax system is similar to that of the US with required self-reporting and filing of tax returns to SRI (IRS), VAT (think "sales taxes"), property taxes. They also have a 5% expropriation tax on money leaving Ecuador (coming soon to the US) to keep money from leaving the country. Ecuador's inheritance tax takes the form of an income tax paid by the beneficiary.

You may presently carry $10,000 in cash out of the US without reporting it; Ecuador allows only $1,000. Banks may withhold the 5% tax and charge a fee for this "service" on transfers out of Ecuador.

Nearly all income must be reported to the Ecuadoran government on the annual income tax returns due the following March (date based the ninth digit of your cedula). This applies even if you have no tax due! Opps, now we may all have a problema!

Practically speaking, I suspect the government will not waste time auditing gringos with no potential tax liability in order to impose a $40 fine for not reporting.

Most of us will have no income taxes to pay due to the exemptions, deductions and tax rates. Deductions include social security taxes in Ecuador and half of your expenses for food, medical expenses, clothes, housing (rent, mortgage, maintenance only) up to $12,000. Printed facturas (receipts) with your name and cedula number are required. Receipts on thermal paper will self destruct in 90 days as the ink fades. Ask Super Maxi for a receipt on regular paper if you have high income and expect to pay income taxes.

Exemptions from taxation are given on CD's of over year maturity, foreign (US, etc) earned income, and presumably US, Canadian, European social security retirement payments. Taxes start after $9,210 per person income. This amount triples at age 65! So a couple over 65 would have to earn nearly $28,000 each to have income tax due.

Income Tax rates for 2011 started at 10% on over $9,210 in income and increase in brackets to a maximum of 35% on income over $93,890. Estimated taxes are due in July and September. Keep tax records for seven years.

Captial gains on the sale of a house are ten percent. This is reduced by five percent for each year of ownership, so the tax would be half after ten years. Alcabala or transfer tax is 1.2% paid by the buyer on a home purchase.

Suggestions:
    * Avoid large transfers of money in the banking system.
    * Do not transfer money to Ecuador which you will transfer again to another country
    *Be aware that children can not be disinherited. Ecuadoran law protects all children at all ages!
    * For small professional earnings you may obtain a "RUC Rise" at SRI and simply pay a few dollars tax at any bank monthly. No reporting requirements! See my previous blog.
             Maybe I got most of this right. I welcome your comments!

Vilcabamba and Izhcayluma

                                                  Vilcabamba

After a year of curiosity, we finally enjoyed our trip to Vilcabamba.

Joined by our friends Lawrence and Ed, we boarded the 9:30am EliteTours van for the three hour non stop to Loja. The $12 ticket was a bargain! Elite Tours (R.Crespo y Santa Cruz)  was recommended by Hoseria Izhcayluma. We were efficiently delivered just inside the "Castle " gates of Loja.

Just around the corner, toward the gates, we discovered the Continental Hotel and enjoyed a pleasant lunch from an extensive menu. Now, for the $20 taxi down hill to Vilcabamba.

Sunshine welcomed us to the beautiful valley and town square. Yes, we saw a few picturesque farms, villas, and charming octogenerians. By the fabled centigenerians were missing. More recent posts indicate the oldest resident is a mere 96 and the average age in the valley is mid eighties. The myth and charm of this valley attracted many backpackers and hippies a generation ago. Now the culture of this beautiful pueblo appears slanted a bit toward alternative lifestyled Gringo.

We snagged a reluctant four door white pickup taxi for the brief dusty construction-choked ride up to the backpacker resort. The sweeping views over the patchwork valley hinted of the farming in forgotten times. Double rainbows at sunset drew us up the hill for placid photos.  Ahhh...

Izhcayluma's open air restaurant was a joyful slow-motion respite. Their German entres were excellent, while some selections were routine. Generous breakfasts included juice, fruit, cereal, breads with jams and choice of eggs or crepes. Our cabana was comfortable and the porch hammock drew me to an afternoon siesta.Enticing descriptions and photos may be found at www.Izhcayluma.com

Oh, the sunshine and warmer temperatures at five thousand foot elevation were a breather from rainy season in Cuenca, but the bugs were waiting. They too enjoyed their meals as the sun set over the valley and we dallyed over dessert. We forgot our Deet spray.

The town may be toured in an hour or two, but the Mexican "Secret Garden" restaurant is a must. Amazing burritos! Around the corner, downhill from the square, is a surprisingly delicious eight dollar buffet at La Roca. Don't miss it.

Ed managed a two hour challenging horse ride from town. We all enjoyed a custom two hour farming tour through the valley with our driver Rafael.

It was an obstacle course in a couple of spots. Ecuador is concreting the road all the way to Peru! Probably for the large copper mining industry.

Relocation to Vilcabamba remains doubtful, yet a visit is irresistable. Ecuador is  a gorgeous country!   

RUC-Rise...We are in business!

                            SRI (IRS in Ecuador)

If you are a law abiding residente de Ecuador, but want to minimize income taxes, there is a solution for you!

A RUC or Registro Unico de Contribuyentes registers you for business without a trip to Quito. If you earn under $10,000 a year, you pay no income tax to Ecuador. And you qualify for the Rise ("re-say"), or small potatoes personal business registration.

Our monthly taxes of $3.50 must be paid at any bank. We simply provide our 13 digit Rise number and make the payment. Best of all, there are no tax forms to be filed. Can there be anything that simple from the government? Imagine that in USA or Canada!

We are teaching English part time, so our friends at Arco Language Institute walked us through the process. We visited the SRI (think IRS) on Remigio Crespo Avenue, waited in a short line to "take a number" and took a seat. Shortly later, we were beeped to line 17, where an attractive and efficient young lady assisted us. We provided color copies (and displayed originals) of our passport, Cedula and Censo. No cash needed.

The only delay was for our electric bill to prove we were living here. Oops, we had to make a separate trip to get a factura of our paid bill at the Max Uhle utility office. Since our gas and water bills are paid with our apartment dues, nothing else would do!

So now we can bill you for our services, but only in small amounts! Don't ask us for free English lessons ... we may be tempted.

ARCO Language Institute

ARCO Language Institute

Life is full of surprises.   Our latest resulted when we received an email that English teachers were being sought.  VERBO was beginning a language institute teaching English, but with a phonics methodology originated in the United States.

Gina Ugalde, the Director of the Institute, invited us to come to her office to learn more about it.  After one conversation with her, we were hooked.

Next was a two day seminar with Gina’s cousin-in-law, Steve Nine, an American.  He married an Ecuadorian and has lived in on the coast for the past 8 years.  His mother has taught in the US school system for over 25 years.  She developed this methodology years ago and it is widely used in the States.

ARCO hosted an inauguration at Verbo church.  250 interested persons appeared to hear more about ARCO and learning English.

Approximately 100 students signed up and ARCO was launched on February 7, 2012.  Gary and I teach on Tuesday and Thursday evenings from 4 to6 p.m.  Gary has a class of 5 and Sue has a class of 6.   Then we team teach a class from 7:00 to 9:00 p.m. with 14 students.

Maria Elisa, daughter of Margarita Toral (an editor of El Tiempo) spent some time in the United States.  Although an Ecuadorian, she speaks excellent English.  She is a part of the staff, working with many children who have elected to take English.

The English classes are very well organized – every teacher follows the detailed class plan.  The structure includes 70 phonograms, dialogs, poetry, songs. Teachers are allowed to be creative and bonding with the students is a top priority.

Phonograms are an essential element of the system.  If you have had Spanish lessons, you understand that all the vowels are pronounced the same way ALL the time.  An “a” always has an “ah” sound, etc.  Yet in English, an “a” can have three sounds, making it difficult for Ecuadorians to speak in a way where their words are understood.  They are learning ALL the sounds of the English language, pronouncing them and learning to recognize them in words.  There are 44 sounds in English and only 24 in Spanish.  And 70 ways to spell our 44 sounds!

One way we all decided to “bond” together was to write a song, combining Gary’s, Elisa’s, and Sue’s class to learn and sing it.  The song consisted of words we were learning and a flare of fun!  Now “hams” exist just as much in Ecuador as they do in the United States. 

Next week we embark on our 15^th lesson.   ARCO is a road we are glad we went down.