New SRI withholding rule trims earnings on policies and fixed term accounts opened for less than six months.

Ecuadorians placing money in short-term deposit products at banks and cooperatives are now facing a slightly higher tax bite on their returns after the Internal Revenue Service introduced a new withholding rate that took effect at the start of March.

Under a resolution issued on February 27, 2026, the SRI raised the income tax withholding on interest and other financial returns from 2% to 3%. The change applies to earnings generated by a wide range of savings and investment products, including current accounts, financial certificates, accumulation policies, time deposits, investment certificates, and similar instruments offered by financial institutions.

The withholding is not taken from the original amount invested, but from the profit earned. That means savers will not lose part of their principal when a policy matures, but they will see a small reduction in the return they receive if the investment does not qualify for an exemption.

Who will pay and who will not

The new withholding is carried out directly by the bank or cooperative where the client opens the policy or fixed-term deposit. In practice, the institution acts as a collection agent, retaining the tax amount and passing it on to the SRI.

But not every saver will be affected.

Tax lawyer Javier Bustos noted that Ecuador’s Internal Tax Regime Law provides an exemption for investments and policies opened for 180 days or more. In other words, people who lock in their funds for six months or longer can avoid the withholding entirely, while those who choose shorter terms will be subject to the deduction.

That distinction could make a difference for people who prefer liquidity over yield. A client who opens a deposit for five months or less may now have to weigh the convenience of faster access to cash against the slightly lower net return that comes with the tax retention.

A simple example shows how the rule works. If a person places $5,000 into a four-month policy with an annual interest rate of 4.75%, the return would be $80.50. From that amount, the financial institution would withhold $2.41, leaving the saver with $78.09 in earnings when the policy expires.

Advance payment, not a final loss

Although the withholding reduces the amount the customer receives at maturity, it is not necessarily money lost forever. Bustos said the retained amount is treated as an advance payment on the saver’s income tax, not as a permanent charge kept by the financial institution.

That matters because taxpayers may later recover the money, depending on their annual tax situation. If, when filing the 2026 income tax return in March 2027, a person’s final tax bill is zero or below the amount already withheld, the taxpayer may ask for a refund or apply the balance as a tax credit for the following year.

This means the impact of the rule will vary from one person to another. Savers with low taxable income or enough personal expense deductions may be able to claw back what was withheld. Others may simply see it counted against what they already owe.

For 2026, individuals with annual income above $12,208, or roughly $1,017.33 per month, will be required to file an income tax return. For those affected by the new withholding, the timing is also important: any request to recover the retained amount would come only after the tax declaration is filed in 2027, based on the ninth digit of the person’s cédula or RUC.

Why fixed-term deposits matter so much

The measure lands in a country where fixed-term deposits are one of the main pillars of household saving.

In January 2026, deposits in Ecuador’s private banks reached $60.112 billion, and 42.2% of that total was held in fixed-term deposits. In the country’s largest savings and credit cooperatives, those in segments 1 and 2, deposits reached $23.59 billion, with 72.4% concentrated in fixed-term accounts.

Those figures show why even a modest tax adjustment could draw attention. Fixed-term deposits are not a niche product in Ecuador’s financial system. They are a central tool for both savers seeking returns and institutions seeking funding.

Economist Ángel Maridueña, who specializes in the financial system, said the strong role of fixed-term deposits reflects a basic reality in Ecuador: profitability remains one of the main factors people consider when deciding where to place their money.

Cooperatives, he explained, often offer better rates because they rely more heavily on attracting local deposits in order to finance lending. Private banks, by contrast, have broader access to funding sources, including options abroad, which can reduce the pressure to compete as aggressively on rates.

Higher rates, but different perceptions of safety

Even though cooperatives usually offer stronger returns, many Ecuadorians still keep large sums in banks, and not only because of habit. Security, liquidity, and institutional stability also weigh heavily in the decision.

Maridueña said depositors want confidence that the institution holding their money is stable and liquid enough to return it when needed. Private banks continue to attract savers for that reason, even when their rates are slightly lower than those paid by cooperatives.

That balance between return and security helps explain why fixed-term policies remain among the most popular financial products in the country. For some clients, the extra yield offered by a cooperative may justify the choice. For others, the reputation and perceived strength of a bank may matter more than squeezing out a slightly better rate.

Either way, the new withholding rule adds another variable to a decision that many households already make carefully.

What savers should look at before investing

Anyone preparing to open a policy or fixed-term deposit now has more reason to examine the details before signing.

The first issue is the interest rate, which generally rises with longer terms. In March 2026, the average annual interest rate paid by banks and cooperatives on fixed-term deposits stood at 5.54%, according to Central Bank figures. For terms longer than 180 days, the average edged up to 5.56%, while for periods of more than one year it climbed to 6.80%.

That structure creates a clear incentive: longer commitments not only avoid the new withholding, they also tend to earn better rates.

The second issue is risk. Maridueña said that instruments involving greater risk can produce higher returns. Investments in the stock market or in government bonds, for example, may yield between 7% and 10% annually, but they do not offer the same simplicity or certainty that many depositors seek in a traditional policy.

The third factor is the minimum amount and term required by each institution. Some entities allow clients to open a fixed-term product with as little as $200, while others may require $500 or more. Terms can begin at one month and extend much longer, and institutions differ on when they pay interest. Some deliver earnings only at the end of the savings period, while others pay monthly.

The backstop behind deposits

Deposit insurance also remains an important part of the equation. Savings placed in banks and cooperatives are backed by the Deposit Insurance Corporation, Liquidity Fund and Private Insurance Fund, known as Cosede. The coverage does not carry an extra cost for the customer because it is provided through a public entity.

Coverage levels, however, are not identical across the financial system. Deposits in banks are insured up to $32,000. In cooperatives, protection ranges from $1,000 to $32,000, depending on the segment to which the institution belongs.

That means savers comparing rates between banks and cooperatives may also want to compare protection levels, especially if they are placing larger sums.

With the new 3% withholding now in force, Ecuadorians shopping for a fixed-term deposit are no longer just comparing rates and minimums. They are also deciding how long they can afford to leave their money untouched, and whether a shorter investment horizon is worth accepting a smaller payout at maturity.