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Taxation in Dominican Republic
 
 
 

Taxable Income

Dominican citizens and residents must pay taxes on the income they generate in the country and on income originating abroad. Foreigners must only pay taxes on income of Dominican origin, and after the third year of residence, also on income of foreign source.

Any person or entity that pays taxable income has the duty to withhold the respective tax amount and pay it to the administration. These withholding agents are liable to the tax office for the payment of the corresponding taxes.

Corporate Tax Rate

The income tax rate for legal persons is currently 25% on the taxable income of each fiscal year. This tax must be withheld at a corporate level from the dividends paid by the company. The remaining balance is not subject to any other tax, whether it is paid to persons or companies.

Payments Abroad

A 25% rate applies to all payments made abroad. This rate does not apply to interests owed to foreign financial institutions, which under Law 92-04 on Bank Risk Prevention are taxed with a lower rate of 15%. In all cases, the Dominican party is obliged to withhold the tax and pay it to the administration.

Income from Business Activities

A 10% tax rate applies to income obtained in the course of business activities, such as fees, commissions, etc., which has to be withheld by the person or company making the payment. A higher rate of 20% applies to income obtained from the lease of property, 15% to income obtained from lottery games, 1.5% to payments made by State agencies for independent services, and 10% to any other income.

National Registry of Taxpayers

Law 53 of 1970 created the National Registry of Taxpayers ("RNC") with the aim to establish a common registration number for determining and paying tax obligations, charges and fees. The RNC number serves as code of identification of taxpayers in their tax activities and as mechanism of control for the Administration to follow up the compliance with tax obligations. All persons and companies are obliged to obtain a RNC registration, which must appear in all of the documents used for their operations.

Taxation of NGO's

On March 2002, DGII (the tax office) issued Norm 1-2002, which by defining the extent of the exemption granted on behalf of non-for-profit organisations in Article 299.b of the Tax Code, provided that these entities will be liable to pay taxes for any business activities that they may perform. The tax exemption will thus only apply to their non-commercial activities. This measure is aimed at preventing that these entities are used to evade taxes.

Tax on Incorporation of Companies

Incorporation taxes amount to 0.5% of authorized capital, which shall not be less than RD$1,000. This tax will also apply to increase of capital, thus conforming a significant raise in relation to the previous rates.

Tax on the Transfer of Industrialised Goods and Services (ITBIS)

ITBIS applies to the following:

• the transfer of industrialised goods, calculated on the net transfer price plus accessory services;
• the import of industrialised goods, calculated on the CIF value of the goods plus custom duties; and
• the provision and lease of services, calculated on the value of service excluding mandatory tips.

As indicated above, the 2004 Tax Reform increased the ITBIS rate to 16%. Advertising services will be taxed with a lower rate of 10% until 31 December 2005. Afterwards, the rate will be 16%.


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